6 signs you may be overpaying for a property (and how to avoid costly mistakes)

Picture this.

An investor is sitting in a hotel ballroom in Singapore, Hong Kong, or perhaps Dubai. The presenter on stage is charismatic, walking the audience through slides of a gleaming new residential tower in Kuala Lumpur.

“Golden Triangle location,” he says. “RTS just minutes to Singapore. Freehold. Guaranteed rental returns of 5–6%. Only RM1,400 psf—a bargain compared to prices back home. Just an hour away from home, and 70% cheaper.”

The investor signs the cheque, confident they have secured a slice of luxury in one of Southeast Asia’s most affordable property markets.

Fast forward three years.

Keys are collected in KL. The building is new and visually impressive. However, actual rental demand falls short of the projections shown earlier. When the owner explores selling, the bank valuation comes in 30–40% below the original purchase price.

Attempts to rent out the unit prove equally challenging. With hundreds of similar units in the same development competing for a limited tenant pool, rental expectations have to be adjusted downwards.

For many investors, this raises an uncomfortable question. Malaysian residential property has recorded strong long-term growth over the past two decades, yet some individual purchases struggle to perform.

According to property investment consultancy FAR Capital, the issue is rarely the country or the market—but the price paid relative to local fundamentals.

“Malaysia remains one of the most attractively-priced property markets in the region,” says FAR Capital CEO Faizul Ridzuan. “But affordability at a national level does not mean every project represents value. Selectivity is what separates strong investments from disappointing ones.”

Malaysia can be a sound destination for capital preservation and growth. The challenge is avoiding common pricing traps. Below are six indicators FAR Capital encourages investors to examine closely before committing.

“If you are looking to park your capital in Malaysia, you are making a great choice, but we hate seeing people lose money on ‘stupidity tax’. If you see any of these red flags, walk away immediately,” he cautioned.

1. Paying above the median price

This is the number one sin of property investment. If you are paying RM700 psf for a new launch, but the transaction data from EdgeProp or the Malaysian Valuation and Property Services Department (JPPH) show that the subsale market next door is transacting at RM500 psf, you are already losing money.

The reality check is that you are paying a 40% premium for "new smell". When you try to sell later, the bank will value your property based on the neighbourhood’s transaction data, not your developer’s brochure. If you are not buying below median price, you are the sucker at the table.

2. Buying future prices today

"Don't worry, by the time it completes in 2028, the market value will catch up!"

We hear this lie every day. Developers often price their units based on what they hope the value will be in four years. They are selling you 2030 prices in 2026.

The sign: If the price psf is significantly higher than completed units in the same radius right now, you are paying for future growth that hasn't happened yet. You take all the risk; they take all the profit.

3. The GRR trap

Guaranteed rental return (GRR) schemes can be attractive, particularly to overseas buyers seeking income certainty.

However, Faizul cautions that such incentives should be examined carefully. “In many cases, the cost of the guarantee is embedded into the purchase price,” he says. “Once the guarantee period ends, the property still needs to perform in the open rental market.”

Read also:
The truth about GRR: Why you should run away from buying that “promised income” property

4. Paying premiums for unconfirmed infrastructure

You bought because the agent said, "Rumour has it an MRT station is coming here."

The sign: You are paying a premium for infrastructure that does not exist on a government blueprint.

The FAR Capital rule: If it is not gazetted (officially confirmed by the government), it does not exist. Far Capital only buys properties with confirmed boosters like a station under construction, a mall with signed tenants, or a new highway exit that is already in the master plan. Buying on rumours is gambling, not investing.

5. Overpaying for fully furnished packages

"Free kitchen cabinet! Free aircond! Interior design package included!"

The sign: The bare unit costs RM500,000, but the "fully-furnished" unit is RM600,000.

The truth: You are paying RM100,000 for furniture that is worth RM30,000 at IKEA. Even worse, you are paying interest on that furniture for 35 years because it is baked into your loan. Smart investors buy bare or semi-furnished, and renovate cost-effectively to maximise yield.

6. Failing the cashflow stress test

You calculated your repayment based on the current promotional interest rate of 3.8%.

The sign: You can barely afford the instalment now.

The reality: What happens if the overnight policy rate (OPR) goes up? What happens if you can't find a tenant for three months? If the property requires you to bleed cash every month just to hold it, you have overpaid. A good property should be cashflow positive or at least neutral from Day One of renting. If you need to top up RM1,500 a month just to keep the bank happy, you have bought a liability.

Affordability should be tested beyond current promotional interest rates.

“A property should be evaluated under less favourable conditions,” says Faizul. “Higher interest rates, vacancy periods, and maintenance costs should all be factored in. If a property consistently requires monthly top-ups, it may not be investment-grade.”

Ideally, a rental property should be cashflow neutral, or close to it, under conservative assumptions.

Let facts, not feelings be your guide

The Malaysian property market offers both opportunities and complexities. According to FAR Capital, disciplined analysis—rather than emotion or headline yields—is what ultimately protects investors.

If a property triggers any of these six signs, kill the deal. As a professional advisory, Far Capital only lets you sign if the property passes its 8Filter Method to ensure you never overpay, and buy bad investments.

“If a deal fails our internal filters, we advise clients to walk away,” Faizul says. “Our role is not to push transactions, but to ensure long-term outcomes remain sound.

“For investors, the most costly lesson is often realised several years too late. Careful pricing analysis at the point of entry remains one of the most effective safeguards.

Smart investors rely on data. The rest learn through experience.

Don't be the victim who realises you have overpaid three years too late.

Click here to get access to Far Capital’s 8Filter Method today.