Buying property is a pipedream for many

irfanismail,•personalinvestment
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Let me preface by saying I am strongly against using property as an investment vehicle.

Therefore, my arguments in this article may target:

PS. The milk is in the fridge

Problem #1: Fool’s Tycoon Dream

For many, a house will be the single most expensive thing they buy.

Yet many dream, if given the chance, to be a mini ‘real estate tycoon’ and live off rent from their tenants. Not only that, they even strategize how their tenants rent will help finance their next property, so they can 10x the passive income. These are the same people that will proudly come out and say,

I am a proud owner of 10 properties which are now worth RM 5M

when in fact, they are nett RM -10M in debt, excluding inflation for the next 30 years.

This is how I beat the system; by getting the tenants to pay for the mortgage

but frowns when the tenants leave and have to pay the mortgage themselves.

When their property can’t get tenants, they will say,

It’s ok, my son/daughter can live or inherit the property when I pass.

Guess what happened when their parents passed. Are they living back in the kampung?

To them, banks are their best friends, for giving them the facility to buy property after property, and will be on top of the world if given <3% (❤️) interest rate. To the banks, they are no more than money trees, generating interests for their FDs.

Let me tell those of you who have the same idea, this is nothing but a fool’s dream. The only winner out of this real estate tycoon dream are none other than; the bank & the developer.

Problem #2: Developer’s Greed

Housing developers, just like in any business, are in the business of making money, and the most ‘money-packed-to-effort ratio’ product in their lineup is the: high rise residential.

Of course, they will market it like crazy, and will do whatever it takes to influence the public by saying this is the product that the public wants & paint a posh lifestyle to woo the buyers.

Or you know what else the developers can do? Starve the other housing market.

Notice how these developers no longer build landed property, and if they do, it’s stupidly expensive like RM 700k for a shoebox terrace?

Going back 10 years ago, new terraces are only RM 200K on average. Guess how much that same terrace appreciates after 10 years? RM 300K at best. Most old properties remain stagnant! That is the reality for "property investment"

The truth is, the cost between a “luxury” high rise residence compared to a low cost housing is minimal. I mean, what’s the difference? Both use the same cement, the same bricks, same pipes. Building materials are very regulated and are standard (workmanship is different story)

How about facilities?

Facilities like the gym, swimming pool, security guard are mostly one-off purchases, or taken from the maintenance fees. It is a SHARED facility some more.

Maybe better material, like tiles, marble?

Think again, the marble is only in the lobby area and probably covers a few pillars. For a RM 500K+ home, the least I expect to see is a toilet bowl made of marble, out of the 800 sq ft of space in the air..

Funny enough, these same developers came to the government asking for bailouts & assistance when COVID happened in 2020 – when their inventory was not selling. How ironic, no business when everyone stays at home! Cry me a river.

Problem #3: ‘Cartel-like’ practices

In the last few years, there have been a rise of property gurus running a business purchasing properties in bulk from developers at discounted price. They will amass a group of buyers and leverage on their loan facility from the banks to purchase the property at wholesale price. I do not know whether the discounted prices get reflected on their SPA, but if it doesn’t, you know the drill: cashbacks (aka “Duit bayar hutang jahat”, “Duit buat renovation”)

But why would developers sell their property at discounted price? Simple,

I am not saying what they’re doing is illegal, but their modus operandi promotes the very problem the average Malaysian faces; being unable to afford a home. I cannot understand how we have to resort to their service in order to get a good deal, where there are only a few who benefit. The majority are stuck with showroom prices. That shows how f-ed up the listed price to begin with. We should not normalise RM 500K home as "normal", when the population's median income does not warrant for it. So, ask again, "normal" to whom?

Once again, these bulk purchases may not be a problem in practice (because willing buyer, willing seller), but they sure do enable developers to get away with selling houses at stupidly marked up prices.

To crash or not to crash?

The property market has been due for a correction for a very long time. COVID was the perfect time to reset & even the playing field. It will weed out the weak players and ‘insaf’kan the big ones. However, the government stepped in & gave stimulus packages; by relieving stamp duties and fees. They could’ve let it run its natural course and pin the blame on the pandemic. Who in the right mind would be thinking about buying property in the middle of a pandemic anyway?

I once read that the government will never allow the property market to go through a correction. Maybe it involves their own personal interest, or has it become a bubble to the point where it becomes too big to fail, who knows.

What can be done?

If I am the government, I will look at policies to:

On a personal level, as a Muslim, I’m very steadfast on staying away from riba, and I call on others to do the same.

While many may have given in the towel, and get a hire-purchase loan from the bank to buy a property, I plan to save & invest all the way to buy in cash, insyaAllah. Sounds crazy to hear in this day and age, but the opposite is even worse for a Muslim (opens in a new tab). May Allah accept this as a form of struggle from me & a good deed.

In the meantime, Wahed and stock market it is!

Š Irfan Ismail.RSS