How do you save hundreds and thousands of dollars, as well as time, sweat, stress and heartache, when buying property?  

First, don’t buy investment properties. The past ~10 years’ subpar performance in Malaysia will likely continue for the next 10-20 years. 

Second, don’t buy. Rent. It’s “cheaper”. Even after the mortgage is paid off. 

Third (and the point of this post), if you are going to buy a place to call home, the better option is to purchase a subsale property, meaning a property that has already been built. You might prefer off-the-plan (undercon) because it’s new and shiny, but subsale is less risky and better value.  

What’s wrong with purchasing off-the-plan? 

Let me ask you a question: How comfortable are you to pay hundreds of thousands to millions for something that 

• you cannot see or touch,  
• you start paying for it even if it’s not built, 
• you may not eventually own (abandoned projects),  
• you may have to spend more money and time to fix (defects and issues, chasing the developers, pursuing legal options) 

Let me explain why in more detail.

You will lack enough data to make an informed decision and manage your expectations 

It’s like watching a McDonald’s ad, where the burger looks “perfect” in the advertisement, but you end up with something that only half looks like what you imagined. You’re making a purchasing decision of something a salesperson with glossy brochures is trying to earn a commission. 

• Whatever information you research is conceptual, based on drawings, floor plans, and “promises”. You will always have insufficient information required to have a high level of confidence in your purchase. Even with sufficient data, chances are low that you know how to conduct detailed due diligence and identify problems 
• There is no guarantee that the finished product is anything like the brochures or showrooms, or what you imagined. Your own implicit biases, combined with jazzy marketing and slick graphic designs will cloud your judgment. Stop looking at the pretty kitchen taps, bathroom sinks, marble tiles, etc, because they don’t really matter.  
• You will likely have to deal with defects and issues. Sure, there’s a warranty period, but it’s still a constant pain to deal with. Chances are that many defects will only appear outside the warranty period, and some developers may try to avoid fixing them, leading to lengthy legal court battles. More money and time spent. 
• No one knows how the property will evolve and who are the residents/neighbours/ community as the property matures. This is especially important for condos and apartments, where a key consideration in purchasing a condo should be the owner profiles and quality of management. There’s no way to predict this until the development matures over 3-5 years or even longer. 
• You have no idea what living there will be like until you actually live in the property. What if you start a family and realise you need more space for a helper, or for kids, or a dependant (parent) in the future? What if you find it takes too long to commute to work or visit family/friends? This happens a lot with new townships further away purchased by many to get an affordable landed home. Most people only find out about gaps or different housing needs only after they’ve moved into a new place, or have life-changing circumstances.  
• Anecdotally, I’ve seen many situations where the property value when completed is less than the purchase price. At times by quite a substantial amount. Even if it’s not an investment property, as a home buyer it would still be extremely stressful to be in that situation. 

You pay more for increased risks and artificially inflated prices due to the Sell-Then-Build model, which disadvantages property purchasers  

The Sell-Then-Build (STB) model is where the purchaser arranges financing (loan) with a bank before the property is built. That means you start paying the loan and interest payments whilst it is being built, even though a legal asset does not exist. 

I think that is just crazy. However, the large majority of residential property developments in Malaysia are sold under the STB model. 

• With the STB model, the consumer/purchaser assumes all the financial risk. Read the definition of Sell-Then-Build again. The property developer is not financing the development of the property. It is the property purchasers who are actually financing the construction of the property. It’s just being arranged through a bank.  
• You start making payments for something that you don’t legally own (yet), for many years. Even if the completion date is delayed. You’re stuck. I don’t know about you, but I’m not paying for something I don’t own, and there is no guarantee that I will own it. And even if I do eventually own it, I still have to make payments if they are not complying with the legal agreement. Quoted from a Khazanah Research Institute (KRI) paper “It should be noted that under the current practice, purchasers do not have the right to withdraw from the SPA even though developers fail to deliver the agreed house.” 
• You may end up paying for something that you may never own. Heard of abandoned projects? There are projects where the developer may not continue the project due to numerous issues and challenges. Out of all open projects, 23% of new property buyers are affected. The latest statistics according to Khazanah Research Institute, as of December 2023 were:

• If the developer is officially considered insolvent/bankrupt, property purchasers are unsecured creditors. That means you are at the back of the line. The banks and other secured creditors get all proceeds from selling any residual assets the developer has. Unsecured creditors almost always get nothing. 
• The STB model allows “anyone” with zero experience to become a developer. It’s easy for companies with no experience whatsoever to pivot into property development. Because they don’t assume the financial risk. There is a famous insurance company that launched an overly ambitious high-end luxury development in KL city centre, which is now delayed and is “financially struggling”, and all development halted. Many so-called developers have no business entering the industry. 
• Prices of off-the-plan properties are usually artificially inflated due to hidden / embedded costs. To close more sales, developers provide rebates and discounts to help offset much of the upfront costs, such as downpayment, legal fees, stamp duty, etc. This helps reduce the initial amount of capital purchasers need to make, but you pay for it in the long run. It’s always “included” in the form of a higher purchase price of the property which results in more mortgage/interest payments. Don’t fall prey to these marketing gimmicks.

Did you know that Malaysia is the only country in the world that develops property with the Sell-Then-Build (STB) model as the “standard”? (Technically, Singapore does it too, but only for HDBs, which are government projects which means “no risk”). In other countries, developers do the Build-Then-Sell model. You can read more about the problems in Khazanah Research Institute’s report. 

The government tried to change it to make the Build-Then-Sell (BTS) model mandatory, but the property developers “complained & resisted”, with poor excuses. Read more poorly formed excuses from developers and the rebuttals from the National Home Buyers Association here. There just isn’t enough political capital and motivation to enforce the change to a BTS model. But you as a purchaser should not settle for a system which is designed to disadvantage you. Play a different game and buy subsale.  

There are a few rare projects in Malaysia that were done with the Build-Then-Sell model. For example, Bandar Utama, which was a highly successful project. I’d put a lot more faith in the quality and confidence the developer has in their development if they implement the BTS model. 

Why buy subsale? 

I hope it’s pretty clear by now. But to summarise and add more points to justify buying subsale: 

• There is a physical property to see and touch. You’re able to inspect the physical property yourself. You can do real due diligence and additional research to have confidence in what you’re buying (interrogate neighbours, see reviews, etc). Even if you don’t know how to evaluate a property, you can bring along an inspector to do a proper assessment of the place 
• The property and its surroundings have already matured. The more mature the property, the fewer “changes” and aging that will happen in the future. That means you will likely have less “shiny sparkling syndrome” bias. Will the look and quality of the development stand the test of time? Also as the community and surroundings have evolved and matured, you will know who are your neighbours, the community, the quality of strata management, traffic during peak periods, and so on 
• You can negotiate and get more value for your money. In Malaysia, there is an oversupply of condo units, and even many landed houses in mature areas around Klang Valley are unoccupied or abandoned. You have more leverage and can negotiate better prices. If you do your research and be patient, you can identify who are the desperate owners who need to sell urgently 
• You don’t have to wait. When you buy, you get the keys when you pay. No waiting for years (or potentially indefinitely) for your property. 
• You can rent first to ensure you are happy with the development/area/community. This is the ideal test to assess if it would be a good purchase for you, especially if you manage to rent the exact property that you will eventually own (very rare)  

Typical counterarguments against subsale 

• Buying off-the-plan is cheaper because I need less money upfront. You’re spending hundreds of thousands. Do you want to risk that on marketing gimmicks? If you can only afford off-the-plan because of the rebates, then you can’t afford to buy a property in that price range. Go cheaper or hold off until your financial position is better. Also, there’s no shame in renting which is also the cheaper option 
• Subsale properties are old and need a lot of money for renovation. You’re likely going to renovate even if it’s a new property. Might as well get a cheaper, older unit which you can spend the extra money to renovate to your tastes. Also, the more mature the property, the more structural defects and issues have already been identified and addressed.  
• There is no warranty period for subsale. This is offset by the ability to perform inspections and perform extensive research on an existing property. I have more confidence in properties that I or a professional can inspect versus a developer agreeing to fix issues on something that isn’t even built.

A practical guide to buying subsale 

• Start with the usual steps like identifying your budget, shortlisting the location and type of property you’re looking for (size, number of rooms, landed/condo, etc), and so on. These are the basics which you can find easily online so I won’t cover it here 
• Visit properties and take notes. Just go window shopping on weekends and visit as many properties as possible. Visiting 3-4 properties is not enough. Think ~15 or more if possible. Log your visits, and take detailed notes in your spreadsheet / Notion / OneNote / physical notebook. On top of basic notes like property size, rooms, etc., capture additional details like when it was first listed, owner profile and reason for selling, resident profile, sun exposure/direction facing, observed defects, potential costs to renovate/fix, etc.  
• Use brickz.my to analyse transacted prices. Actual sold prices can go for a lot lower than what they’re advertised at. Don’t be fooled by sticker prices listed by property agents 
• Repeat over months and maybe years, depending on when you plan to purchase. You’ll see many listings get “refreshed”. This is because many listings have been stuck on the market for many months to many years 
• Rent in the same development/township that you wish to purchase, 1 year in advance. This is like test driving the car. Do you like the commute to work, social visits, etc? What did you miss and not notice when you were just inspecting vs living there? Like how crazy traffic can be during peak hours? Or how noisy the shopping strip down the road is? How well is the condo management running things? How much corruption, embezzlement and drama is happening in the condo? 
• Do even more research. As you rent there, make friends with your neighbours. Find out the good and bad of staying in that development or area. In condos, speak to the convenience store or other commercial businesses inside the condo. These people are the local gossip queens and kings and can be a valuable source of information. Look up what people say about the development on Lowyat.net. Also, grab copies of previous management or community meeting minutes and read through them for any issues. For example, owners rejecting legitimate maintenance increases might be a red flag of lack of investment in the quality of the property.  
• Whilst you’re renting, start shopping, inspecting and making offers. Look at your log of property visits. Which ones did you like? Are they still on the market? Are the owners getting desperate to sell? Now you have negotiating power. If you can’t find bargains or any opportunities, no worries. Just keep on renting and scouting. You live there. It’s easy for you to capture the best opportunities for properties you like in that development. And no one can screw you over as you know what to look out for. You live there and know the ins and outs and nuances of the properties. 
• Bring an independent property inspector. It’s just a few hundred dollars. Let an expert do the due diligence, he/she will do a better job than you. If the owner objects think about walking away.  
• Depending on how much you want to negotiate and get good deals, be prepared to walk away. There are so many unoccupied properties in Malaysia, and people holding out because they don’t want to “sell at a loss”. Unoccupied and vacant homes represent about 20% of residential properties in Malaysia. It’s a big issue, especially for landlords/owners but may benefit you with more subsale options to choose from and negotiate prices.

Final thoughts

What I suggest sounds like a lot of time, effort and money invested into the decision. But it’s likely going to be the biggest purchase of your life. You’re also going to live there for years or decades. Shouldn’t this be the one thing you spend most of your time on, instead of looking for the best credit card, FD rate or e-wallet?