As we enter the Full Movement Control Order (FMCO) on the 1st of June 2021 due to an unprecedented increase of COVID-19 cases in Malaysia, many are fearing the repercussions of this move. Although scheduled to end on 14th June 2021, there is a possibility that the lockdown may further extend if the case numbers do not reduce. While we may be more prepared for a complete lockdown this time, there are nevertheless fears for job security especially among those who depend on daily wages.
However, on the other side of the coin, the cash-rich are finding this period of time to be an ideal opportunity for investment. This comes about as the prices of properties stagnate across the country due to the economic slowdown, where developers and sellers are more open to providing incentives to boost sales.
These incentives are reasons why the COVID-19 pandemic is a great time to buy a property for those who can afford it.
Home Ownership Campaign (HOC) Extended to 31st December 2021
The Home Ownership Campaign (HOC) was originally launched in the year 2019 to reduce the property overhang in the market. Under-construction as well as completed property projects under the HOC program were discounted a minimum of 10%.
These properties were also subject to Stamp Duty exemption on their sales & purchase agreements (SPA), loan agreements, and instruments of transfer, for properties priced from RM300,000 up to RM2.5 million.
The program was supposed to end in the year 2019. However, due to the massive economic slowdown when the pandemic hit, especially in the real estate sector, the government brought the program back in the year 2020 to help boost property sales.
This has helped kickstart the property market sales again amid a turbulent year, as many aspiring home buyers have taken this opportunity to purchase their first home. The program has continued to run to this day and has been further extended to the 31st of December 2021.
Many Great Deals in the Property Subsale Market
Image source: imoney.my
The subsale market has always been largely unpopular among home buyers as they will need to pay the upfront 10% booking fees, as well as the lawyer fees which can range approximately between 2%-4% of the property’s price. On top of that, there are renovation costs to take into consideration.
The renovation costs for a home can range up to 10% or more of a property’s price tag, depending on how the buyer wishes to renovate their house. Subsale homes are also more liable to have maintenance issues, such as leaky pipes, ill-fitting windows, malfunctioning built-in electronics, and the like.
When compared to the cost of renovating and fixing up a brand new developer unit home, the cost is usually much lower, as the majority of the new homes now come with basic interior designing. The units are also under developer warranty should the buyer find any defects which the developer is obliged to fix for the buyer for free.
During the non-pandemic period, if a property buyer chooses to buy their home in a popular or matured area, there will be issues of inflated price tags attached to the house. However, during the pandemic period, many property investors who are not prepared for rainy days have had to release their investment properties at up to 50% below the market price.
Hence for the cash-rich, the COVID-19 period is a great time to buy subsale properties as they hold the bargaining power. Depending on how eager the seller is to let go of his unit, a buyer can at this point of time easily get a 20% to 50% off the asking price.
Withdraw From Your EPF Account 2 to Pay for Your Down Payment/Monthly Repayments
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If you are an EPF member, you will know that your employer contributes 13% of your salary to your EPF monthly while you have the option of contributing 9% or 11% of your salary to your retirement funds. Seventy percent of the total monthly contributions will go into your Account 1, while 30% will go into your Account 2.
While this amount does not look like much if you look at them monthly, they do snowball over the years. This is especially true as EPF has always given very fair annual interest rates of at least approximately 6% no matter the economic situation.
In this situation, should you choose to purchase a home but are unsure of whether you can afford it, register for an i-Akaun on the EPF website and check how much balance you have in your Account 2. Should you have a minimum of RM500 inside you are eligible to withdraw the money to pay for your home.
There is however a clause. As this benefit exists to help those purchase their first home, you cannot own a property at the time of the requested withdrawal unless you have already disposed of it. The second clause is that you have to present your SPA to them before you can make the withdrawal – this means that you will need to pay the 10% downpayment and the lawyer fees yourself first before you are able to make the withdrawal.
In worst case scenarios, many aspiring homebuyers have borrowed money from friends and relatives first in order to afford their first home, and then withdraw the money from their EPF Account 2 once they get the SPA and return the money to their friends and family.
Once the purchase is done, you also have the option of making monthly withdrawals from your Account 2 to help subsidise your home loan repayments. While this is not advisable as it takes away from your retirement fund, the money is there if you truly need it.
Buying a Home During COVID-19
Times are hard, everyone is getting extremely frustrated at being locked indoors and we truly wish that this pandemic never existed. There are however little silver linings behind every cloud, even if we need to look really hard. For first-time homebuyers who have the luxury of secured funds and job security, enjoying the many benefits of buying a home during the pandemic is their silver lining.
Should you be one of the lucky ones, check out all the new properties for sale on PropSocial!
(Written by Isabelle, 3rd June 2021)