As a first-time buyer, upgrader, or savvy property investor, one of the most crucial decisions you’ll face before making any investment is choosing what type of property to invest in.
Once you know what kind of home you want and where it should be, the next decision will either make or break your investment decision:
"Should I buy a subsale or brand new property?"
Understanding the difference between these two types of properties is key to maximizing returns and minimizing risks.
What’s the Difference Between Subsale and Brand New Property?
Subsale Property: Purchased from an existing owner. These properties are often located in mature areas and have established communities and infrastructure.
New Launch Property: Newly introduced to the market, sometimes under construction or recently completed, and sold directly by the developer.
Each option presents unique opportunities and challenges, particularly from an investment perspective. It is essential to ensure your financial position, including your credit score, is strong to secure favorable financing and enhance profitability.
Pros, Cons, and Costs of a Subsale Property
Pros:
Established Location: Often in mature, central areas with stable property values.
Immediate Revenue: Can be rented out immediately, generating cash flow.
Market Insights: You can assess the neighborhood, amenities, and potential rental income before purchasing.
Cons:
Limited Flexibility: Older properties may have fewer customization options and restricted availability.
Maintenance Costs: Renovation and repairs may be necessary, adding to expenses.
Research-Intensive: Requires thorough due diligence to avoid hidden defects or liabilities.
Costs Involved:
Valuation Fees: Depends on property value.
Property Agent Fees: Typically 2-3% of the purchase price.
Downpayment: Usually 10% of the property price, with an additional 20% recommended for reserves.
Sale and Purchase Agreement (SPA) Fees: Varies by property price.
Memorandum of Transfer Fees: Stamp duty charges apply.
Legal Fees: Includes stamp duty and document preparation.
Miscellaneous Costs: Includes mortgage insurance, utility deposits, maintenance fees, etc.
Pros, Cons, and Costs of a Brand New Property
Pros:
Attractive Pricing: Developers offer rebates, discounts, and incentives like stamp duty exemptions.
Flexibility: Buyers can choose unit type, floor plan, and facing direction.
Modern Appeal: New facilities and designs attract higher rental rates.
Defect Liability Period: Developers provide a 24-month warranty for construction defects.
Cons:
Delayed ROI: Rental income can only be generated upon completion.
Time-Consuming: Construction delays or project abandonment risks exist.
Market Uncertainty: Supply-demand imbalances in new developments may impact future value.
Community Development: Newly developed areas take time to establish rental demand.
Costs Involved:
Downpayment: Minimum 10%, but developers may offer special schemes.
SPA Fees: Based on property price tier.
Legal Fees: Includes stamp duty, government tax, and disbursement charges.
Memorandum of Transfer Fees: Ownership transfer occurs 6 months post-completion.
Miscellaneous Costs: Includes mortgage insurance, utility deposits, maintenance fees, etc.
Key Considerations Before Investing
ROI/Capital Appreciation
Subsale Property | Brand New Property |
Offers stable ROI in established locations but may have slower appreciation. | Potential for higher capital appreciation in developing areas. |
Immediate rental income potential. | Lower maintenance costs and developer warranties in early years. |
Located in mature neighborhoods with steady demand. | Features modern amenities, attracting middle-class tenants. |
Rental Yield
Subsale Property | Brand New Property |
Located in mature neighborhoods with stable rental demand. | Rental yield may be uncertain initially but can rise with area development. |
Immediate rental potential. | Lower initial rental yields due to higher purchase price. |
Example: RM600,000 property generating RM1,800/month yields 3.6% annually. | Example: RM600,000 property generating RM1,200/month yields 2.4% annually. |
Market Trends and Demand
Subsale Property | Brand New Property |
Proven demand in areas with minimal supply growth. | High-growth corridors with new infrastructure can boost demand. |
Buyers have more negotiation power in the subsale market. | New launches in prime areas attract buyers due to limited supply. |
Financial Considerations
Subsale Property | Brand New Property |
Requires a higher upfront investment, including renovation costs. | Developers offer financing incentives, reducing initial financial burden. |
More diverse financing options due to established value. | Higher initial price but with long-term value potential. |
Conclusion
Both subsale and new properties have their advantages and challenges. If you prefer an immediate investment return and a stable rental market, a subsale property might be your best bet. However, if you are looking for potential appreciation, developer incentives, and a modern living space, a brand new property could be the way to go.
Carefully assess your financial position, market trends, and investment goals before making your decision to maximize returns and minimize risks.