4 Creative Tactics That Developers Are Using To Sell Properties
With the economy in its doldrums and an overall soft property market in 2016, more and more developers are seeking new ways to sell their property units.
As the Ringgit slides and rejection rates soar, many of these initiatives aim to provide a wider range of financial options with more flexible terms to make purchasing property more feasible for potential home buyers.
Here are some creative ways that Malaysian developers are currently employing to sell off their property units:
Down payment instalment plans
Most of us have enough trouble paying bills and managing our debts, let alone to even start thinking of buying a house.
With so much already on our plates, raising enough for a down payment can be a challenge in itself!
In Malaysia, most banks offer up to 90% of the property’s price (margin of financing) for your first two home loans in Malaysia for residential properties. If you receive 90% margin of financing, you will need 10% in cash for the upfront payment of the property.
So for example, if you have your sights set on that RM400,000 studio lot in Damansara Perdana, then you must fork out at least RM40,000 for the property’s down payment.
There are also miscellaneous fees and charges to consider, which could add up to another RM20,000 on top of the upfront payment.
Given these terms, many people do not have the financial capacity to even start buying property. That’s where these monthly instalment plans can come in to assist buyers to purchase property without first having to struggle to come up with a hefty sum for the down payment.
To encourage sales, some developers are offering down payment instalment plans for potential buyers.
For example, in 2014, Mah Sing Group was offering down payment instalment plans of up to 12 months, at 0% interest for its executive suites at Southville City, KL South. The suites ranged between RM300,000 and RM500,000.This will make the buying process a lot more financially manageable for the buyer. The 0% interest rate is also geared to the buyer’s favour.
However, Mah Sing did require buyers to place a RM3,000 booking fee, though this is a small amount compared to an initial upfront down payment.
Financing options for homebuyers
Some developers are going as far as to offer facilities such as loans and deferred payment options to potential home buyers.
For example, Sunway Bhd caused quite a stir in late March 2016 when it announced that it was offering up to 88% financing to home buyers under a unique ownership campaign.
Sarena Cheah, who is Sunway’s managing director for its Malaysia and Singapore property development division, had said that the company would offer financing from internally generated funds as an option for buyers who are unable to secure financing from banks.
Under the scheme, buyers will have the option to apply for loans with commercial banks or with Sunway.
Sunway is offering the financing options under three packages. They include: guaranteed loan, deferred payment and voluntary exit plan.
At the campaign’s launch in March, Cheah emphasised that the initiative was aimed at helping potential buyers during uncertain economic times.
“We are still seeing demand for good and well-located properties in the market, but stricter lending (policies) imposed by banks meant that some buyers were unable to obtain the financing needed to complete their home purchases,” she was quoted saying.The campaign will end on 30 September this year.
While the campaign does present a viable option for home buyers to obtain financing, it does come with some pretty major setbacks as well.
For instance, under guaranteed loan, buyers will have to pay a heftier minimum upfront payment at 12%, compared to just 10% if they were to take up a loan from a bank.
Further, buyers will also have to pay about 1% to 2% more interest compared to commercial loans under the campaign. The financing option also comes with a maximum loan tenure of just 15 years, a campaign sales staff told iMoney when contacted.
So besides having to fork out a heftier down payment, buyers will also have to make higher monthly instalment payments and obviously, pay more in overall interest in the long run.
Fancy name for developments
A rose by any other name would smell as sweet, unless we’re talking about clever real estate branding designed to draw your attention. Then you might just be in for a deal that isn’t quite as sweet as it sounds…
While it is common for property developers to promise certain community lifestyles surrounding their developments, not all of these developments are quite like what they are made up to be.
For example, developments that are purportedly located in “KL South” in promotional brochures may in fact be located in Bangi. Of course, Bangi does indeed sit at the south of Kuala Lumpur, but then so does Johor.
According to Google Maps, Bangi is located at least 32km away from the city centre, or about 40 to 45 minutes’ drive away during non-peak hours, so it is by no means close in terms of proximity.
Source: Google Maps
Of course, there is nothing wrong with buying property further away from the city centre, as they tend to be cheaper and are also less congested compared to areas in the city. Such developments are also on the rise.
However, if you would prefer to live in a more central location, then make sure you make the effort to pinpoint the exact whereabouts of the property you intend to purchase before you proceed further.
Per unit instead of en bloc for commercial properties
Commercial and industrial developments are similarly impacted by the sluggish economy. The softer market, coupled with the current oversupply of office space in the Klang Valley meant that some developers had had to get creative when selling their buildings.
For example, Oxley (Malaysia) Sdn Bhd, a subsidiary of Singapore developer Oxley Holdings Ltd, will be selling its office space in Oxley Towers KLCC on individual unit basis instead of en bloc (the sale of ALL the units in a strata to a purchaser), as planned initially.
Oxley Malaysia CEO Datuk Othman Omar told The Star that the general weak sentiment in the oil and gas (O&G) sector and softer property market had prompted the company to opt for the strata route.
“The absolute price of the smaller units of 645 sq ft will be slightly above the RM1 million range. That will be an attractive proposition for this address,” he said.
Had the company opted to sell the 29-storey office block (with a gross floor area of 346,000 sq ft) en bloc, the price would be cheaper on a per-sq-ft basis, but the outlay would be higher, he explained.