Buying property: Is it always a good debt or asset?

There is a marked difference between property investment and property speculation, and no one should ever resort to using whatever means available to buy one or more properties beyond what their salaries can afford.

Let’s revisit the mindset that buying property is good because it is considered “good debt” and property will always be regarded as an “asset”.

Well, if we ask property owners who bought a few units during the good times, received the keys last year or this year and are now struggling to pay their mortgages, they will tell you that they now regard those few properties as liabilities as it’s likely they may go bankrupt because of it.

However, are there many Malaysians who have gone bankrupt due to property investment? Earlier article here.

1. Property is not regarded as an asset at the start, simply because it actually “belongs” to the bank.

We may have paid 10% as is common or enjoyed rebates or cash back in the beginning. However, the property is still not ours.

If we fail to pay the monthly mortgages, very soon the bank will auction off that property that we paid a 10% downpayment for and we lose everything and more.

2. Property is not considered an asset if it does not increase in price. This is the main issue everyone worries about. What if the property’s price stays almost the same after a few years?

This is the reason why the first purchase should usually be the one we stay in. When we do this, we do not need to pay rental which essentially 100% goes to the owner.

If it’s our own home, some portion of the mortgage belongs to us; forced savings.

3. Property is not an asset if it’s overvalued in the beginning. If you did not check the typical prices around the area or nearby areas before you bought the property, and you’ve paid an extra 30% for it for example, you will realise this only a few years later when it’s completed.

As soon as you get the keys and try to sell it, you are no longer competing against other owners within the same project but all owners with similar properties everywhere. for example will be a good place to start.

Every time you invest your money, you hope for good returns. However, what is considered “good” is different for everyone.

With property investment, the increase is “pretty slow”. At the very least, the property should appreciate based on just 2-3% per year. (Must buy the right property).

Imagine a RM400,000 property appreciating at just 3% per year – that’s RM12,000 a year or RM1,000 per month, although you do not technically own that property yet until you’re done with paying for it in full.

Well, no one should be investing in property thinking that it will suddenly gain 10% every month, right?

This article first appeared in

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.