Is buying a fixer-upper in Malaysia worth the risk or is it a recipe for financial disaster?
In today’s property market, a high percentage of Malaysians are experiencing themselves getting priced out of owning even a simple home. High prices and stagnating incomes all contribute to the low property ownership rate among Malaysians, with many opting to rent a home instead of purchasing one.
This has led to them looking for alternatives and fixer-upper homes are one such idea. But before you plunge headfirst into this do-it-yourself (DIY) renovation dream, let's take a reality check from a property perspective. Is buying a fixer-upper in Malaysia worth the risk or is it a recipe for financial disaster?
Affordable, but at what cost?
Fixer-uppers seem to offer the opportunity to own a home for a fraction of the price. In an ideal situation, imagine finding a large bungalow, that with some work, costs the same as a small generic shoebox apartment today. This cost-cutting appeal is especially strong in a market where many people are priced out of the dream home equation due to exorbitant prices. For financially strapped families and young professionals, fixer-uppers present an alluring shortcut to real estate ownership.
However, buried beneath the tempting price tag could be a chasm of unstated expenses. Renovations can quickly become uncontrollable projects that can easily turn into a money pit due to unanticipated structural problems, spikes in material costs and the persistent ghosts of subpar work previously done. All of a sudden, that sweet deal turns into an endless abyss that devours both money and sanity.
A possible dump
If a professional renovation company is not employed, one should always prepare for the worst. Getting through Malaysia's renovation maze requires perseverance and fortitude. Even the most seasoned DIY enthusiasts may find their patience tested when it comes to finding trustworthy contractors, overcoming permit delays and comprehending confusing building codes. The fixer-upper dream begins to take on the emotional toll of living surrounded by dust, noise and constant disruption when other factors are taken into account.
There are differences amongst fixer-uppers. One cannot argue that a run-down dump in a seedy neighbourhood is worth the effort, even though a charming fixer-upper in a desirable neighbourhood might be. Location is a major factor in calculating potential return on investment. Moreover, picking the incorrect fixer-upper can leave you with a property that is only worth the paint job done to make it look nicer.
Better options out there
As the saying goes, there are plenty of fish out in the sea. Burdening oneself with the inevitable renovation costs would not be a smart move when one is already struggling to afford a simple home. Government initiatives like PR1MA and MyHome offer great starter homes posing low entry barriers. They may not be in the most ideal locations, some can even be really far, but at least there will be a roof overhead.
To paint the picture of the affordability crisis in Malaysia, international real estate technology group Juwai IQI’s Malaysia Home Rental Index saw a high-rise home rental growth averaging 5.5% year-on-year (YOY) in the fourth quarter of 2023.
Bank Negara Malaysia stated in their annual report that total market transactions continued to hover above the pre-pandemic average, driven by the mass market segment. Houses priced RM500,000 and below accounted for close to 80% of total transactions in the first half of 2023. House prices in all states in Malaysia remain well above the affordability levels of most households, with the median house price relative to median income continuing to fall within the ‘seriously unaffordable’ range.
According to Juwai IQI co-founder and group chief executive officer Kashif Ansari in a statement last year, a survey they conducted found residential prices were expected to rise even further by 9.95% and rentals by 9.57%. With so many Malaysians already struggling to afford a basic necessity such as a place to call home, other options have to be considered.
One man’s treasure
Some people may see value in fixer-uppers, while some may not. Whether a fixer-upper is worthwhile in Malaysia ultimately depends on one’s own personal situation, level of risk tolerance, and ability to renovate. An experienced DIY enthusiast with a healthy budget and a taste for surprises will probably enjoy the challenge, while normal Joes would likely prefer a move-in ready, well-kept home providing a less stressful and safer route to homeownership.
The Malaysian real estate market can be quick and complex. What appears to be a goldmine for fixers-uppers one day could become a financial disaster the next. Before committing, proceed cautiously, do homework and consider the risks. A house should be a safe haven, not a place where leaky pipes and mouldy floors thrive.
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