The state of the Malaysian real estate market affects property decisions significantly.

Life does not always go as planned and sometimes a series of unfortunate events may prompt a home owner to need extra cash. A lot of it. Their thought process then drifts towards the painted walls of their home. They had already been planning to downsize anyway. Cleaning every square foot of the glossy marble tiles causes painful backaches, while the cost of maintaining the property just makes them want to curl into a ball and cry. Maybe they should just sell it, done and dusted.

But then, realisation hits them again. This is their home, their asset among other vacant homes struggling to get a new owner due to inflating home prices. The property was bought as a developer unit and was miles cheaper than how much they are going for now. For many, the security of owning a good, equitable asset is already a sign to not sell. Not right now anyway. To reinforce their decision not to sell, some other tell-tale signs should be considered too.

Buyer’s market

More homes means more options. Putting a property up for sale when it is the buyer’s market is like placing another loaf of bread on a rack. People will choose the nicest and fluffiest one while disregarding the mishappen and deflated ones. What this essentially means is that buyers will have plenty of options to choose from. 

During the negotiation process, a seller will be at a stark disadvantage because the buyer will inwardly be comparing the property to countless others just like it. At that point, all a seller can do is set the best price and bite back the need to maximise their profits if they even want to make a sale.

On the other hand, sometimes there could be the issue of limited buyer demand as well. A lack of buyer demand can make an already difficult situation harder, prolonging the selling process and potentially leading to lower offers. Plenty of factors affect this occurrence, including current economic conditions, fluctuating interest rates that shake buyer confidence and even demographic changes happening the surrounding neighbourhood. 

Several ways to know for sure is if there is a notable decrease in the number of potential buyers, fewer agent calls or a property remaining listed on the market for a long time. These would be signs of limited demand and economic uncertainty.

Unstable economic conditions

In terms of economic uncertainty, otherwise known as recession or slowdown of economic growth, the results of it stir a feeling of instability among potential buyers. It makes buyers more wary and hesitant to make large and significant financial commitments like buying a home. This too leads to a decrease in demand, affecting features such as property prices and challenging the overall selling process.

If there are economic indicators like declining gross domestic product (GDP) growth alongside rising interest rates and unemployment rates, it could be a sign not to sell your home. Higher interest rates will inevitably deter potential buyers because of the higher cost, decreasing demand for properties. Waiting for a more favourable market before selling a home will be the next best step. It will also be a good idea to keep track of Bank Negara Malaysia’s rates to gain valuable insights into the economic climate.

Transaction costs

Everything is a business and while a seller may be selling off their home, some costs come with it selling too. Lawyer fees are usually the first to come to mind because they are highly experienced in combing through sales and purchase agreements (SPA) among other documents. Every home, high or low price-wise should go through the process of conveyancing.

There are also taxes involved such as the real property gain tax (RPGT), which is a form of capital gains tax in Malaysia levied by the Inland Revenue (LHDN). Fortunately, if a seller makes no profit selling their property, the RPGT will not apply. If a seller made a loss instead, it would be qualified as an allowable loss and can roll over into coming tax years to offset the loss against any profits made on future property sales.

As for real estate agent commissions, their services usually require 3% of the selling price. If these costs are high compared to the potential selling price, it might not be financially viable to sell at that time. Consider waiting for market conditions to improve or exploring alternative options like renting out the property.

If the residing property was purchased with a bank loan, there are a few formalities that will need to be handled first. For example, getting the original title deed transferred to the new buyer and obtaining a no objection certificate (NOC) from the lending bank. It would not be a good idea to sell the home before meeting all the requirements and paying all the taxes. 

Aside from that, the seller will have to pay the short-term capital gains (STCG) tax, which is the tax on investments sold within a year and whose percentage can range from 10% to 30% if the home was sold within a year of borrowing money to buy it.

Although there might be situations in which selling a house is inevitable, the state of the Malaysian real estate market at the moment suggests that it might not be the best time to do so. The overabundance of properties, rising interest rates, economic uncertainty and a softening market may have an effect on selling prices and the time it takes to sell a house. 

According to a recent study, 50% of respondents who planned to buy a house after a year or those who had no intention of buying are planning to rent instead.

With that information in play, it further perpetuates that a seller should make an informed choice by carefully weighing these factors and keeping an eye on market trends.

It is crucial to remember that the real estate market is dynamic and that things can change quickly. If selling a house is in the cards, it is best to speak with a real estate agent who can offer tailored guidance based on your unique situation and the state of the market.

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