Working in SG. Buying in JB? Considerations.

My sister’s college friend who’s working in Singapore asked me if he should buy a certain ‘luxury’ condo in Johor Bahru. The price starts from below RM1 million to over RM1 million but there are now rebates being given. Completion is a few years away and it’s a 99-year leasehold property. Total car parks given is 2. As he is working in Singapore, he earns a currency which is 3x higher and he is now thinking of buying a property for investment. What’s the right answer? Actually, there’s no such thing as the right answer. Everyone’s different. My question and answer to him as follows:

#1 – Buying this condo so that one can stay in the condo when it’s completed?  If this is the actual reason, then it is okay to buy as long as you love the condo, love the area and have already accepted a lifestyle change because staying in JB and travelling into Singapore on weekdays is not something easily adaptable yeah. That’s the reason why many Malaysians working in Singapore are renting rooms inside Singapore. They prefer the convenience even if their rental would have sufficed for mortgage payment to a decent place in JB. 

#2 -Thinking to sell the condo as soon as it’s completed?  If this is the reason, then better pray that the property market is booming when one gets the key. Else, just be reminded that during a slow market and a few hundred new owners thinking to sell at the same time will mean a hard time for everyone to get a good price. Secondly, what if the developer still have unsold units and they offer free MOT, lawyer’s fee and even throw in some other extras? So, I will not use this reason if I am buying a condo unit unless the price is just too attractive. (20 percent below the typical market price of all the units in the same area)

#3 – Thinking to buy and rent it out?  If this is the reason, a much better choice is to buy the currently completed units / from secondary property market and start renting out instead. This makes your investment returns much faster than paying for a new home and waiting for the next 3-4 years for it. Perhaps can even focus in AirBnB type of rental. There are today quite a number of agents doing that for owners in JB. If needed, I can recommend you to such AirBnB agents who will make it hassle free for you. Of course, in order to make it a positive cashflow, the price of the unit should be as low as possible yeah. 

#4 – Thinking to buy so that one stays in JB and stops paying SGD rental now? I think this advantage is available only for stay @ JB – work @ SG combination. It is certainly a good time because the property market is slow. In other words, there are more opportunities to get below market value properties. Many owners are also more willing to negotiate unlike during boom times when owners will not consider any price down offers. One can also supplement the mortgage payments by renting out the extra rooms in the property. This builds wealth and perhaps 5 years later, one can buy another unit?

On a longer term, say 10 years, the property price appreciation is likely to be significant. Well, unless of course the Johor-Singapore combination loses to Batam-Singapore combination or somehow Singapore and Malaysia become ‘enemies.’  Calculation wise, a RM500,000 property @ 3 percent price appreciation per annum is RM15,000. Over 10 years on a simple calculation, that’s RM150,000. I think this calculation is conservative enough. Oh yeah, there’s also the extra rental income for the last 10 years. As for which condo to buy, happy choosing one that meets most of your expectations yeah. Perhaps one that has all the things you like. The catalyst is definitely when the RTS JB – SG is fully operational because that will help in the lifestyle part tremendously. Latest news here. Happy believing.

written on 1 Sept 2018

Next suggested article:   Iskandar needs more homes yea. Hundreds of thousands more.

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