Initially, as with most people – our first glance at their building facades, functions and exterior designs did not reveal any differences between Serviced Apartments and Condominiums.
Both Condominiums and Serviced Apartments have multiple stories, facilities, functions and even entire design layouts, leading to confusion among buyers, especially those who are unfamiliar with real estate.
However, Condominiums and Serviced Apartments differ in many ways. In order to make a wise investment or buying decision, you need to understand the critical differences between the two.
This article aims to offer you the most holistic comparison guide for serviced apartments and condominiums.
What is a Serviced Apartment?
The best part about staying in a serviced apartment is that it usually comes with all five-star hotel facilities for a more affordable price. Serviced apartments possess luxurious amenities and are mostly located on busy commercial streets in urban areas.
Thus, some serviced apartments belong to property corporations entitled to manage the property for property investors or developers.
Serviced apartments often are part of integrated projects in Malaysia. It is usually located nearby a shopping mall or an office building. So, it is a prevalent option for travelers who want to stay at a comfortable location and enjoy the luxuries and services of a hotel. Thus, most homestays (Airbnb) or short-term rental units in Kuala Lumpur are usually serviced apartments.
Living in a serviced apartment is a very good option for a long-term living arrangement if you want the freedom to enjoy a lifestyle that involves less commute time to your office or other daily obligations. Serviced apartments are an excellent choice if you value conveniences, such as access to a shopping mall, restaurants, and public transportation.
What is a Condominium?
A condominium is typically considered to be a luxury high-rise with an extensive range of high-quality amenities. Typically, each owner of the condo has at least one private parking space and 24-hour security.
Most condominiums have swimming pools, gymnasiums, and playgrounds, which are taken care of by the joint management body (JMB) or Management Corporation (MC). Many condominiums have special services for residents, like resident clubs and daycare centers.
Serviced Apartment Market in 2021 Malaysia
In 2021, Malaysian serviced apartments had 4,359 transactions that were totally worth RM2.82 billion. Serviced Apartments formed 19.4% of the commercial property transactions volume and 10.1% of the value. The market performance recorded a 12.7% increase in volume and an 11.1% increase in transactions compared to 2020. Kuala Lumpur and Selangor contributed a higher proportion to the national total, each with 41.2% and 25.2%. (National Property Information Centre, 2022)
The number of serviced apartments overhang was slightly down to 24,295 units in the fourth quarter of 2021 compared to 24,050 units during the first quarter of 2021. But, the total value of serviced apartment overhang stayed at RM20.45 billion. Johor had the highest number of overhang serviced apartments and had 16,425 units. Kuala Lumpur and Selangor had 4,459 and 2,337 overhang units. (National Property Information Centre, 2022)
The Serviced Apartments priced between RM500,000 and RM 1 million accounted for 64.4% of total overhang serviced apartment units. Followed by the serviced apartments were priced from RM300,000 to RM500,000, which accounted for 9.3%, and those under RM300,000 only accounted for 2.5%. (National Property Information Centre, 2022)
Condominium vs. Serviced Apartment
In condominiums, individual units are owned by different people, whilst the condominium itself is a registered residential development. Serviced apartments are similar to hotels in both appearance and operation; they are constructed on land that has been approved for commercial use. In most cases, a single individual owns the entire building and all of its individual units.
Utility Charges and Assessment Tax
Because serviced apartments follow commercial rates for utilities, the energy, sewage, and water tariffs or bills that you pay as a resident of a serviced apartment will be significantly greater than the residential rates that are paid for condominiums. On the other hand, serviced apartments are classified as low-voltage commercial buildings, which fall under Tariff B; Low Voltage Commercial Tariff. As opposed to condominiums, which are considered to be private residential spaces and as such are considered to fall under Tariff A; Domestic Tariff.
As a result of the fact that serviced apartments are located on commercial land, the owners are required to pay greater sums for expenses such as quit rent, the costs of electricity and water, and the monthly maintenance fees.
For instance, the minimum water cost in Malaysia for residential consumption in Kuala Lumpur is RM6. This applies to the entire nation. This amount is RM36, which is larger if it is used for serviced apartments. The lowest possible rate for residential electricity consumption in Malaysia is RM3, whereas the lowest possible rate for low-voltage business use is RM7.20.
For calculating the difference in monthly power costs between a condo and a serviced apartment, the following table presents the tariff rate for electricity provided by Tenaga Nasional Berhad (TNB).
Because of this, the Assessment Tax is determined by the yearly rental value of your property, which is roughly between 2% and 7% of the total value. The amount of this tax will also change depending on the size and classification of the property. The assessment tax for condos are lower because serviced apartments submit to commercial rates.
However, you shouldn’t let the high fees that must be paid for serviced apartments deter you from considering them because they typically provide a wider variety of amenities and conveniences than the condominiums that are available in the same price range. In addition, some property developers do make an effort to reduce the amount of money they have to pay in Parcel Rent and Assessment Tax for serviced apartments if they can find a legal loophole in the zoning regulations that would allow them to be reclassified.
Governed by Different Laws
In order to safeguard those looking to purchase homes, the Housing Development Act (HDA) imposes stringent regulations on developers of residences.Serviced apartments are constructed on commercial land, but they can also be categorized as residential properties. Hence, serviced apartment buyers are protected by the HDA.
However, HDA may not provide coverage for developers of certain types of residential properties constructed on commercial lands, such as SOFOs, SOVOs, or Flexi/Designer Suites. These facilities are located on the commercial ground.
Although these may be promoted as residential combined office spaces, they may be legally categorized as an office or commercial properties, which are exempt from the HDA’s regulations. Check the status of these properties before buying them to know exactly what kind of property you are getting.
Buyers of condominiums or serviced apartments that the HDA covers can seek assistance from the Ministry of Housing and Local Government if they experience issues with the developer. On the other hand, it’s possible that the Ministry won’t be able to assist buyers of houses that the HDA doesn’t cover. If any of the difficulties above arise with the developers of office or commercial units, the typical solution is to seek the assistance of attorneys or the judicial system.
The vast majority of condominiums are exclusive living quarters that are protected by a security system that keeps track of everyone who enters and exits the premises.
Concerning serviced apartments, given that most of them are connected to shopping malls or retail businesses, there is no way to prevent unwelcome visitors from entering the properties’ grounds because entry is unlimited. However, to ensure that tenants enjoy at least some degree of privacy, most serviced houses include multiple entrances that are kept entirely distinct from one another.
Residents of serviced apartments have no say in the establishments that choose to set up shop within the development area, nor do they influence the individuals that enter and exit the property. On the other hand, the occupants of condos have more of a voice in the subject, given that condos and other residential strata properties are their primary usage.
When you live in a serviced apartment, you have the advantage of convenient access to various amenities, including nice restaurants, laundromats, convenience stores, and movie theatres. Conversely, condos may or may not provide residents with access to the conveniences above.
You may also seek serviced apartments that are not tied to any shopping malls if you want to live in an apartment but still want peace and quiet. These could be difficult to find, however, it is not impossible to locate them.
Condominiums are often constructed according to population density rather than land area. Meanwhile, the construction of serviced apartments is based on plot ratio, which may be defined as the total built-up area divided by the land area. Compared to condominiums, this allows builders to construct a greater number of units within a given area.
In the case of population density, let’s say the developer gets permission to build a condominium based upon the population density limit of 500 people per acre. Assuming on average 4 people are living in 750 sqft units, the developer can construct 125 units per acre of land.
In the plot ratio scenario, if the approved ratio by the council is 1:4, then 1 acre of land can be used to construct a service apartment with 4 acres ( 174,240 sqft ) of build up area. Assuming the average size of the units is around 750 sqft, the developer can build about 232 units on the said 1 acre land.
Consequently, the population size of condos is often smaller than serviced apartments, providing occupants with more room and a higher level of comfort.
Investing in Serviced Apartments.
When it comes to location, serviced apartments are often situated in some of the most desirable parts of town. Amenities are an extremely important factor in serviced apartments and it doesn’t matter whether the apartments are located in the centre of a tourist area or smack-dab in the centre of a business zone.
Integrated complexes sometimes include serviced apartments as a component and these flats are conveniently connected to public transportation hubs, shopping malls, and food chain stores.
Compared to hotels or condos, serviced apartments must place a greater emphasis on being located near a variety of facilities since they must accommodate business travellers, vacationers and ex-pats who are still searching for permanent homes.
The Housing Development Act (HDA) safeguards your property’s warranty or defect liability term (DLP). In addition to this, they offer protection to prospective homeowners from shady builders and developers.
Some types of commercial property like Small Office Home Offices (often abbreviated as SOHOs) are now considered under the purview of the HDA’s protection. This is because these properties are utilized either entirely or partially for residential use.
Because of this, developers are needed to go through the process of obtaining an Advertising Permit and Developer’s License (APDL), which gives them the authority to market and sell serviced apartments.
As soon as the time comes to sign Purchase and Sale Agreements, buyers of serviced apartments won’t have to worry about being vulnerable (SPA). Everyone will use a standardized SPA template and homebuyers will be entitled to the protections that come with it.
So, let’s talk about serviced apartments. Not surprisingly, serviced apartments are famous as investment properties given their many desirable selling factors, including a great location, easy accessibility, and abundant facilities.
The location of serviced apartments makes them ideal for both short-term and long-term rentals. The serviced apartments often come completely furnished and include standard hotel amenities such as housekeeping. When you factor in their immediate access to various amenities and public transportation, it becomes immediately apparent why these properties are ideal investment properties.
Investing in Condominiums
When you purchase a unit in a condominium, you are investing in a residential property. The commercial land-titled properties safeguarded by the Housing Development Act are the sole exemption to this general norm (HDA). Because of the Act, even though these properties may have commercial titles, the HDA treats them as though they have residential titles.
Compared to investing in serviced apartments, purchasing a condominium often involves a cheaper initial investment cost and allows investors and home buyers to qualify for higher loan margins (up to 90%).
However, the amount of investment return that can be expected from a particular investment depends on some factors, the most important of which is the property’s location.
Thorough research must be conducted because it is possible that the rental income received will not be sufficient to cover the loan instalments and interest if the location that you obtain is not in high demand or is not located in a desirable location. This would mean that the sale prices would not be optimized.
When renting out their homes, homeowners are typically responsible for all associated expenses, such as maintenance fees, sinking fees, assessment fees and sewerage fees.
With increased monthly maintenance costs, this property investment might become a burden and a loss for the investor if the amount of rental income generated is less than the amount needed to cover the monthly instalment and the upkeep cost.
Is Serviced Apartment worth it?
It all comes down to how you want to live and what you hope to achieve by buying a house.
If you’re looking for an option in Seri Hartamas, consider none other than D’Immersione, which has a well-designed SoHo and an extensive list of facilities. Additionally, it is conveniently situated near the Pusat Bandar Damansara MRT station. D’Immersione is located close to the 4 major expressways, such as NKVE, PLUS, SPRINT, and DUKE.
In general, serviced apartments have their closeness to the town as well as dining and lifestyle hotspots along with public transit hubs, these properties are highly desired by renters. On the other hand, it provides a sense of security.
In contrast, as a condominium owner, you don’t have to pay higher quit rent or assessment fees, you can save money on utilities since condominiums is a residential properties in general. However, residential property in and near city centres tends to be pricey. Even if you’re looking at properties close to MRT lines, you should ask yourself if the time and money you’ll spend travelling to and from work or other destinations is worth the hassle.
Regarding commuting and accessibility, serviced apartments and SoHos are enticing because they are often located in commercial districts. You should always do your homework before purchasing, no matter what you decide. In addition to the monthly mortgage payment, the first thing you need to take into account is your financial responsibility.
Having read the small print and understood everything, serviced-apartment owners may have avoided the gripes they have.
No matter what you are looking to invest in, home or real estate, you must do your research before taking the plunge. Irrespective of whether you plan to invest in your first condo or you are on the hunt for a single-family house, there are some important things you need to keep in mind prior to making a decision. These include property taxes, vacancy rates, construction costs, and mortgage rates. The research, however, is what makes the difference. Find out everything you can about your dream property, including crime stats, schools, transportation, and more. Make a list of pros and cons, and see if your city is a good fit.
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