Property is the best and safest asset for medium long term investment. Real Estate is a kind of asset which will appreciate during boom times and safely maintain its value during the doom ones. Of course there are properties which are delivering capital gains above average, others are fulfilling a good ROI (return on investment), special ones that are granting both positive effects and of course some that are poorly performing. There are no secret rules or special tricks to apply in having good and profitable property investment; it’s mostly a matter of using a lot of “common sense” and few basic golden rules or, in other words, applying the fundamentals of Propernomy.
Rule 1 – Perception and Reality
We can surely say that buying a property is an important decision that a person will take in his life. One should do a complete due diligence on the proposed property and its surroundings before putting down any kind of money. In development projects, there must always be a good demand driver that will help the future appreciation of your investment. A university, public transportation nearby, good accessibility, wide choice of amenities, and future developments in the proximity will surely help raise the values above average. In other words always check facts and numbers!
Rule 2 – Fully Understand Current and Future Market Situation
Everybody is now shouting that we are on the verge of a property bubble with an overwhelming supply flooding the market. Facts and numbers, again, are actually telling us the exact opposite. There has been an oversupply of high-end properties which will be absorbed by the market in the medium term. However, the supply of affordable homes has been for years and still is far behind the actual demand. Recent studies and elaboration of the property 2014 Market Report, released earlier this year by NAPIC, is clearly showing how supply of new affordable homes is and will remain for a long time unable to catch up with the demand. Affordable homes have very different values throughout Malaysia and are nowadays a highly hunted product.
Considering that 60% of the Malaysian population or 18,000,000 Malaysians are the core of the middle class, controlling a good 55% of the Malaysian wealth, we can determine that properties priced between RM200 to RM700 psf will be a target by their purchasing appetites now and for the next several years.
Published few weeks ago, the table below indicates the average values of affordable homes all around Malaysia. Concentrating our attention on the more sustainable property market, Greater KL and Klang Valley, we can say that residential properties priced between RM250,000 and RM850,000 (according to different areas of course) will remain a very good product for investors and will guarantee a good capital appreciation. Going a bit deeper into this analysis we can also estimate values and percentage of supply for the three main categories of homes offered to the 60% middle income earners. Following the numbers below, an investor can be rest reassured that his property will always have a good demand in terms of both purchasing and rental.
Rule 3 – Look for Demand Drivers
I always recommend our developer clients to build according to demand as purchasers would always ask, (before confirming their purchase) what the demand factors are and where they come from. The rule no. 2 is already elaborating on this point, but to give some specific examples I would suggest to carefully study the future alignment of MRT Line 2, LRT Line 3 and all the proposed corridors of 12 BRT lines proposed by SPAD in 2014.
We also need to look at the incoming High Speed Rail which will have one stop over in Putrajaya Sentral before hitting its final destination in Bandar Malaysia. Putrajaya Sentral, located almost in the middle of the Southern Corridor of Klang Valley, is poised to become an intermodal monster transportation nod with MRT Line 2 terminal station, KLIA transit and HSR stop over without mentioning the bus station which will serve local and regional routes. Demand will be there for long and for sure property values will go sky high with a good peace of mind in terms of purchasers and tenants for all kind of property investors.
In the next issue we will go through the second set of golden rules for property investors. If you have any queries or would like to comment and ask for further information, kindly contact Dr. Daniele Gambero, at: [email protected]