Location, location, location
COMMENT By TAY HAN CHONG
I was recently in Penang, and as usual, admired the colonial houses which look so majestic after being restored to their former glory. Of course, I also felt a sense of regret to see some of these houses in a dilapidated state.
Beyond these colonial houses, Penang properties are thriving, be it landed properties or condominiums. Just like Penang, some good localities in Malaysia have continued to see strong property demand despite the global recession.
It could be a result of low interest rates but certainly the demand is also driven by buyers who are looking for good bargains. I understand that some buyers are bold enough to book many units within the same development, presumably, for rental or sale at a profit when the project is completed.
Is location still the conventional wisdom for buying a property, regardless of whether the property is meant for owner-occupation or investments? The answer is unequivocally, “Yes!”
So how does location affect property purchase?
I was told that a new feng shui cycle started in 2000. According to feng shui experts, the auspicious direction has shifted and for those who believe in feng shui (and many do), this played a significant role in their decision to purchase a property.
I had a neighbour whose house is a corner lot with a sizeable land area. The main gate faces the west, and the perimeter fence goes round to the north. The perimeter fence that faces the east and south borders with other houses.
When he could not get the permit to shift the main gate to face the northern direction, he stopped the renovation and put the house up for sale. Believe it or not, this was how location (or in this case, feng shui directions) affected his decision.
A less radical but equally interesting point to note on property location is the proximity of a property to amenities available in the neighbourhood. In Singapore, if you live within a one-kilometre radius from a primary school, your child will have priority to enrol in that primary school.
Therefore, it is not surprising that sellers capitalise on this and ask for a premium for these properties. Of course, there are willing buyers for these costlier properties, particularly when they are near reputable schools.
These stories are real experiences shared by many property sellers and buyers.
These days, many Malaysian buyers are capitalising on the low interest-rate environment to tap the recovering real estate market.
Whether it is meant for owner-occupation or investments, location of the property is an important consideration.
·Accessibility to amenities and connectivity to public transport and highways. Convenience is the key consideration when it comes to daily routines. You really do not want to be stuck in a traffic jam from the moment you exit from your car park.
·Proximity to schools. I understand from some developers that properties in localities with good schools would be better priced and more sought after.
It is the convenience of sending your children to school or the ease of renting your property that result in better property value.
Similarly, apartments with proximity to tertiary institutions also fetch reasonably good rental.
·Security and safety around the estate. Interestingly, this has made condominiums with Gurkha security guards a definite premium compared to sprawling houses with a big garden.
Landlords can attest to good rental and high occupancy due to the security feature. Property agents have also affirmed that these properties are generally easier to sell and at a premium too.
·Size of the property. This is a definite consideration, be it for owner-occupation or investments. For owner-occupation, it depends on the size of the family.
I generally find a three-bedroom house or condominium more attractive for a family with two to three children. These properties also appeal to expatriate families whose company is willing to pay a decent rent.
For large properties, the market is usually more limited and it may take longer to find suitable tenants or potential buyers.
·Cost of the property. This can determine the minimum rental you need, if you want a rental yield of about 5% or more.
So if the cost is higher, such as those near the Kuala Lumpur City Centre, you will need a higher rental rate to get the required yield. Naturally, the higher the rent, the smaller the market.
·Developer selection. It is interesting to note that many property buyers have some “loyalty” element towards certain developers because of the brand names that have been built over the years. Some relevant considerations include the quality of the building materials and finishes, and standards of maintenance which has a bearing on the re-sale value.
Even with a good location, personally, I am not sure if buying many units within the same development makes financial sense. Generally, investing in properties must also follow some common principles of investing, such as diversification to spread risks.
Since such investments usually come with loans and the ability to keep up with mortgage repayment becomes an important consideration. This is more so as interest rates are expected to rise when economies start to firmly recover.
(Tay is senior vice-president and senior head of UOB’s personal financial services division)
Published in the
star online, 7 November 2009
