With the role technology plays in fostering the creation of new business models and sources of revenue in the real estate industry, and the increasing demand for better infrastructure in a development, the old adage “Location, location, location” no longer reflects the most important aspect to consider when purchasing a property. According to experts, be it a township or a pocket development, what constitutes a good buy is the information you gather based on your familiarity of that area.
Shan Saeed, a Chief Economist /Investment Strategist at IQI Group Holdings says there are three new variables that can help identify a good investment: property type (whether it is an apartment, industrial or office space), geography (if there is a potential for growth and development) and property life cycle (development, stabilisation or rehabilitation phase).
One particularly important variable is geography. Selecting the right geography will determine the type of people living in your surrounding and will ensure that the impending infrastructure—such as schools and commercial buildings—will meet the level of service required by its residents. And since infrastructure investment has a strong correlation with GDP growth rate, says Saeed, savvy property investors who use geography to their advantage and will continue to benefit from the area’s economic growth.
Knowing your hotspots
While traditionally property hotspots are described as areas within /on the fringes of the city with potential for growth and development, Tan Hwa Chuan Director of B.I.G Group of Companies, describes a hotspot as an area that you’re already familiar with. First time investors particularly should purchase a property in the part of town or area they are already living in for two reasons—first you’re familiar with the existing provisions and future developments that might be taking place, and secondly you’re familiar with your buyer/tenant demographic prior to making the purchase.
For more seasoned investors, Tan describes two characteristics that make an area a hot spot: (1) A mature/old neighbourhood (e.g. Setapak and Kepong) and (2) traffic congestion. “Traffic congestion almost always boosts property prices—which is why at RM7,300 per sq ft, the land where Pavilion is located is the most expensive land in Malaysia, “ Tan added.
However, no matter how familiar you are with an area— even if you’ve lived there all your life—do not neglect doing your due diligence before deciding on a project, reminds Rozalina Rahim, Founder/Chief Operating Executive of Reconsult Plt, “Analyse the rental and price appreciation of the properties surrounding it, you will see the trend from there.”
“The worst thing you can do is to make an emotional purchase,” she warns. “When you see a queue it doesn’t necessarily mean that the property is located in a hotspot, sometimes it’s a genuine queue and sometimes it’s faked to create buying urgency.”
Know your developer
Since building townships as compared to one-off projects generate the opportunity of offering various sectors and segments in the real estate market, a developer’s ability to build a successful township automatically garners buyers’ confidence. Land banks will always be property developers’ biggest asset against all odds—having a stockpile of future property development sites at previous/the current price has helped many developers make profit despite the challenging market.
“Which is why apart from the big players—such as Tropicana Corporation Berhad, Sunway Property, UMLand and EcoWorld Development Sdn Bhd to name a few—not many developers can afford to create such a large scale product—so most developers are pocket kind of developers,” shares Tan.
The award-winning Desa ParkCity according to Tan, is an example of how strategic infrastructural planning can turn a township self-sustaining and promote price appreciation. The 470 acres township that was priced at RM9.70 per sq ft 15 years ago, now values at RM600 per sq ft.
“It is important that you study the developer’s background first,” Rozalina advices. “Do your homework well because the bigger the investment, the risk increases in tandem.”
“A really good developer will follow through and create good infrastructure because it adds value to their product. If they have developed a successful pocket development in a mature area or created a township that strived, then it should be safe,” she adds. “Be particularly careful if you’re thinking of investing in a new area and there is no infrastructure in place yet—it can either turn into a gold mine or a ghost town.”
DISCLAIMER: The opinions stated in the article are solely of Shan Saeed, Tan Hwa Chuan and Rozalina Rahim and are not in any form an endorsement or recommendation by iProperty.com. Readers are encouraged to seek independent advice prior to making any investments.