Developers fine-tune strategies to attract buyers
Zero/low down payments, rebates among incentives offered
DURING these challenging times of the coronavirus, developers have fine-tuned their marketing strategies in ways that can be very tempting for the potential house buyer.
It is no longer as straightforward as, say, a decade ago where this is the price, this is down payment, and here is the loan amount.
Over this 10-year period, the Malaysian property saw the entrance of developers’ interest bearing schemes, then came rebates and discounts, free legal fees.
Then came the free gifts like holiday tickets for two, or a car for a lucky winner. Then came cash-back offers where buyers actually get cash for buying a house.
Due to concerns about travelling, gifts like mobile phones and cars have taken the place of holidays and plane tickets. But it is not one car, but a car for every buyer.
Today, because of the movement control order (MCO) and later the conditional MCO, some developers have gone a step further by not charging a down payment, and absorbing the stamp duty for memorandum of transfer.
It is the down payment, which is 10% of the house price on signing the Sales and Purchase Agreement (SPA), that buyers have difficulties forking out. Hence, said a marketing personnel of a housing developer, during this MCO period, this is being done away with. The other alternative is to give a 10% rebate, which was the trend even before the Covid-19 outbreak. The new perk is the minimum, or zero down payment. Developers handle this differently. Some may require a buyer to pay upfront a minimum amount, only to return it once the deal is formalised.
After all the deductions, the actual price of a house can be a lot lower than the overall headline price.
Malaysians are comfortable with paying booking fees. Having selected a unit and prior to getting a loan, they pay a booking fee and then go about seeking a loan.
Developers have, during this MCO period, made it as minimal as possible. A check shows that developers are asking less then than RM100, others have capped booking fees at about RM188, or RM1,000.
An agent representing a developer reasoned it out this way, “if you fail to get the loan you need, you only lose RM100.00.”
Use of agents
In order to cut operating costs, many developers have outsourced their marketing to agents, who may be representing several developers.
They are paid a commission and many of them come across as very efficient and helpful, guiding the potential buyer throughout the entire loan journey until the loan application is approved. In one instance, they help to outline ways how the potential buyer can get as close to the loan level being sought.
As for property consultants themselves, those who own or are founders of real estate companies, from the Klang Valley to Johor to Penang, they are of the view that if one has been shopping around and has built up enough savings, this year may be the time to buy.
But just as the property market does not exist by itself, neither does the decision to buy or not to buy, exist by itself. Other factors need to be taken into consideration other than the price and the long list of incentives given.
Johor-based property consultancy KGV International managing director Samuel Tan says some of these MCO deals can be very attractive.
His rationale is that a developer needs to sell, whether there is a pandemic or not. These deals, says Tan, are a special kind of promotion, of a limited period and with limited units.
A substantial number of the perks may have already been factored into the price, he says.
It is not necessary whether this is a good or that a bad one. During the slow market and we have had a few years of that, buyers have enjoyed quite a number of perks. Today, judging from these MCO deals, developers come across as even generous than before Covid19, he says.
“But what is paramount is the potential buyer. He must assess each of these offers individually,” he says.
VPC Alliance in the Klang Valley James Wong is incredulous about free cars for every unit in one offer.
“It is unlikely a free car will be given to all buyers. There has to be a catch somewhere,” he says.
To this the agent offering free cars to all buyers say: “We used this strategy with a Proton model with another project. The units sold very well.”
He clarified the car is not part of the MCO deal; the car has always been part of the deal,
Covid-19 or otherwise.
The only MCO perk, he says, is the RM500 down payment versus a few thousand ringgit, if not for the MCO period.
Raine & Horne senior partner Michael Geh in Penang, having been in the real estate practice for 25 years, says he has never come across a scenario such as today where so many incentives are given.
“We are going through troubled and interesting times, and developers have gone into very innovative strategies to sell and market their properties.
“Many of these very special deals are done via the social media, on a one-to-one basis. A buyer will not know what the next buyer is getting, or what the buyer before him has received,” he says.
As for the various perks given during this MCO period, he says: “I believe this will not be forever.”
Geh says there are international buyers who are looking around. “We are engaged with some of them on video communications to buy and we know of some who have bought via this application,” Geh says.
He decline to say how many his company is negotiating with but says they are from Hong Kong.
The threshold or cap for foreign buyers are RM800,000 for strata high-rise in Penang, he says.
International threshold was lowered to RM600,000 by the Federal Government in 2019 but the Penang state government is holding that cap at RM800,000, Geh says.
What is the SPA price?
Deploying perks to sell will tend to drive house prices down. It is not a direct way of reducing prices but the effect is the same. The question is, what is the price stated in the SPA?
Agents say the SPA will list the overall headline price, despite the actual price being lower.
It is this divergence between the actual property price shouldered by the buyer.
This difference in pricing has grown over the years and during this MCO period, the gap is likely to grow further.