Buying a piece of income-generating property requires a lot of research. In Singapore, where I am from, it is fairly easy to know where the hot property spots are. Being a small island, properties in Singapore tend to appreciate over time due to the “island effects”. Island effects refer to a phenomenon where constant demand for property where land is scarce results in an increase in property prices. In addition, property-related information such as the future masterplan and price trends are readily available on our government websites or our property investment website.
Nevertheless, Malaysians are very creative when it comes to the different property types – even more so than Singaporeans, I’d say. You have SOVOs, SOFOS, SOHOs, and so on. Therefore, it can be a disorienting experience for those wanting to invest in property, especially for newbies.
If you are thinking of buying but unsure how to go about it, fret not. There are basic rules that you can apply to your purchases. Whether you are a first-time homeowner or a seasoned investor, this book will cover the different types of property across Malaysia in incredibly sought-after locations among local and foreign investors.
Before buying property, you must understand some of the basic property types in the market. There are two categories that are generally popular among investors: residential and commercial.
Residential properties refer to properties that are used for your own stay. In Malaysia, residential property is categorised as “housing development” under the Housing Development (Control and Licensing) (Amendment) Act 2007 (HDA). This property type is a basic human need, generally for long-term occupation. Under the HDA 2007, owners are protected to use the property for “human habitation”. Types of residences include landed homes, apartments or condominiums.
While a residential property is usually used for your own stay, you can generate income from it if you were to sell the property or rent it out.
Commercial properties are generally used to generate income. They include office, retail, shoplots, hotels and shophouses. As an investor, commercial properties enable you to collect rent, either on a monthly or quarterly basis. Some business owners buy a commercial property as it protects them from rising rental costs.
This enables them to manage their cost more effectively.
The following are among some of the most common types of commercial property in Malaysia:
These are used for the day-to-day operations of a company. Typically, office lots are located in a financial district or the city centre. In Malaysia, Kuala Lumpur is the centre of business and commerce. Many of the offices are located in the Klang Valley. However, of late, small office blocks are mushrooming in areas away from the city centre (see SOVO/SOFO/SOHO).
Short for small office versatile office/small office flexible office/small office home office, these properties are essentially offices for emerging enterprises, very much suited for those in the creative and start-up industries where the lines between life, work and play are often blurred. Typically, such entrepreneurs use these properties as their home and office space. Such properties often come equipped with high-speed Internet connection, electricity and water – all the necessities required to run a business. Note that, when used as a living space, you will be charged higher rates for your utilities.
These are typically located in shopping centres. In some cases, the developer will prefer to lease out the retail space rather than sell it. The developer might also sell each individual unit to investors. Depending on the arrangements, the units can be either managed by the developer or the owner. In the former, you will get a return on your investment on a monthly or quarterly basis while the latter means you have to manage the property on your own. When sold to investors, the developer may or may not control the types of businesses that are allowed to operate in the retail unit.
These refer to stand-alone properties designated for commercial use. They are typically three to four storeys in height. Investors will usually buy an individual unit that can be subsequently rented out on a floor-by-floor basis.
These generally refer to pre-war buildings used for running a business and for the entire family to stay. In some areas, such as George Town in Penang, shophouses have historical value and are preserved as part of heritage conservation efforts. Due to their intricate architecture, history and limited numbers, shophouses are valued among astute investors who would usually convert such buildings to boutique hotels, retaining much of their architecture.
Hotel suites are located near major tourism landmarks. Such properties are only for investment, meaning you get rental income on a quarterly basis. Typically, investors can get up to 21 days of stay, depending on the developer. The developer will either manage this property via its property management arm or will ask you to manage it on your own. When buying this type of property, you must understand the location and area well to see whether demand for it is high enough.
Leasehold or Freehold?
These properties can be either freehold or leasehold. Both refer to how long you can hold or own the property. In Malaysia, the most common mode of holding is via freehold, meaning you can own the property forever. However, of late, leasehold is becoming more common. Leasehold gives you a limited period to own the property, which is usually 99 years or 129 years.