I attended a short property talk by a renowned speaker a few weeks ago, at a Hotel in the KLCC area. Though the talk was very short, it was quite insightful. The speaker introduced “Location, Timing, and Branding” as the new property mantra, replacing the current mantra of “Location, Location, Location”.
Whatever it is, “Location” is still key; just that it has to share the throne with “Timing and Branding”. He also said that when it comes to determining which location is good for investment, it is best to follow the infrastructure.
1. Location
For property investors, location is very important. The goal for any investor is to make a profit through the appreciation of the property value over a period of time. Appreciation in the value of property is determined by a number of factors, number one among them being the concentration of population in the area. The denser the population in an area, the greater the spending. This in turn, increases the demand and the price or value of the property in the area. Therefore, population growth is an important consideration.
For example, in 2015, it was recorded that Kuala Lumpur had a land size of 243 km², with a population of 1.80 million people and the GDP of around RM190 billion. Compare that with the state of Perlis which had a recorded land size of 821 km², a population of around 253,100 people and a GDP of only 5.6 billion in 2015.
A property of the same make and design in downtown KL will be more expensive than one in downtown Kangar. Likewise, the property price per square feet in Bukit Bintang greatly differs from the price per square feet of a property in Kelana Jaya, because of the differences in demand and supply, as well as the earnings of the two communities.
The other important consideration is the social and physical infrastructure of the areas. This refers to the availability of high-quality infrastructure to allow people to move easily, i.e. to socialize and to work. For example, in Bukit Bintang, the availability of regional Malls such as Pavilion Mall, and grade A office facilities such as the TRX Tower and Bandar Malaysia makes it a high demand area. It is also very well served by good public transport connectivity, namely MRT Line 1 & 2 as well as the LRT. All these attract tourists and locals, as well as incentivizing foreign and local corporations to set up their offices in this area, and thus, boost the economy of the area further. This is also what the renowned speaker that I listened to meant by “follow the infrastructure.”
As such, in deciding to purchase a property for investment, the location of the property plays an important role. A wrong choice of the location can result in poor rental yield, slow and a less than satisfactory value appreciation of the property. Worst, it may result in negative cashflow and depreciation in the value of the property. Hence, the decision of location should be driven by the desire to maximize the value of the ringgit invested.
2. Timing
Everyone knows that the property market is cyclical. There are times when the property market is in the bust, subsequently followed by a boom. Today we hear of news about property overhang, signaling that the market is in a downturn as it has been for the last couple of years. We also hear developers offering various incentives and discounts to entice the public to invest in their properties. One would argue that since the market is down, now is the best time to buy or invest in properties because the prices are relatively lower. Consequently, during the downturn, it is not the time to sell but it is the time to hold.
Hong Thang, the author of the book titled “Property Millionaires Secret Clock,” talks about the Malaysian property market in an 18-year cycle which has three phases. The first phase, which takes about 7 years, is the recovery phase. The second phase is the explosive phase, which takes about another 7 years. Finally, the third phase is the recession phase, which takes about 4 years.
The last market upswing for the Malaysian property market, as everyone would agree, was during 2010 to 2014. Based on the 18 years cycle model, now we should be at the end of the recession cycle and should be on the way towards the recovery cycle. Hence, based on this model, now is the best time to buy. When the cycle peaks, that is usually when everyone starts to buy property, because they believe that the property market is good. However, that is also when the property prices are peaking. It should be the time for selling and reaping the gains.
Another interesting point to note is that according to the news article by the Malaysia Reserve, titled “The promise of Klang Valley’s southern expansion,” published on 3rd April, 2017, property prices in Malaysia can appreciate by at least 50% in a 10-year cycle, based on historical records. The article quoted an example where in less than 2 decades starting from 2001, the price of an average terraced house in Puchong had appreciated by about 250%. As a result, those who bought the property in Puchong at the time when the area was being opened up, now enjoy the appreciation in the value of their property.
Therefore, knowing when to buy is important, because in property investment, the goal is to maximize the value of the return on the ringgit invested to acquire the property. Understanding the property market cycle is crucial to know when to enter, hold or exit.
3. Branding
In a crowded market space, branding helps products and services get the attention of the crowd. Branding is the communication of trustworthiness, quality, reputation, excellent track-records and the ability to deliver promises. In the high-end real estate market, developers are harnessing the power of branding to attract the attention of buyers to the properties they are selling. There are a few reasons for this.
First and foremost, for reputable developers, branding gives assurance that the project development will be completed on time. This assurance is very important for buyers because there are ample examples of delayed or uncompleted projects. Buyers lose lots of money because of this. Knowing that the project is developed by financially sound branded developers gives buyers confidence on the completion of the project and a timely return on investments.
Second, branding or property development projects by branded developers, assure buyers a high-quality design and workmanship of their project. Most developers have their own concept of development and also the quality of their workmanship. For the buyers, this is essential because it hints to them what they can expect as the final outcome of the projects.
Thirdly, branding assures the buyers the reliable after-sales service that brand is known to provide. We often hear about buyers of newly completed projects complaining in the media or social media, about their disappointment with defects in the work quality. Often these bad experiences are aggravated further by the non-action of the property developer. Branded developers are more sensitive to buyers’ complaints because they want them to be return buyers. These branded developers normally give special discounts to return buyers.
Fourth, it would be relatively easier to sell-off branded property. Property investors may hold their property for a while and sell it when they figure that the property has appreciated sufficiently. It would be easier for them to sell high branded property because of the reputation in quality. Furthermore, they may be able to sell such property at a much higher value appreciation, because of the property concept, design and workmanship.
Locate a Future Hot-Spot
Based on the discussion above, one of the things a property investor could do now is to identify a future hot-spot. A future property hot-spot is dependent on where the population growth area will be. The main drivers of these hot-spots are the locations of infrastructure developments. Examples of these infrastructure developments are the cluster of commercial buildings connected to other locations via expressways and LRT/MRT lines. These clusters of commercial buildings, if located in relatively cheaper areas such as in Cyberjaya, often become the preferred alternative to the more expensive grade A offices in the city center.
The younger generations would like to live in the urban areas because they would like to have easy access to their offices. Those who can afford it would stay close to their office location. However, the prices of properties close to these commercial locations are expensive, driven by demand and supply. Those who cannot afford these properties would choose to reside in locations that will give them easy and quick access to their office location via the expressway, or the LRT/MRT lines.
Hence, for property investors, knowing where the future hot spot will be, is very important. It helps them invest in the right property in the right location, especially if they are to maximize the return of value of their ringgit.
An example of a future hot spot is Mossaz Tower at Empire City.
Mossaz at Empire City
Mossaz Tower is a commercial property that is being developed by the Exsim Group, and is expected to be completed in 2023. It will be located at the Empire City situated within the golden triangle of PJ, Bandar Utama, Mutiara Damansara and Damansara Perdana. With a new investment by the Exsim Group, Empire City Mall will be completed in 2020-21. It will be the biggest Mall in the Klang Valley, surrounded by local, regional and MNCs corporate offices. The Mall, which is designated as a new international tourist destination, was designed with inspiration from distinctive European architecture, and will house the biggest ice-skating rink in Malaysia. Upon its completion, the Empire Mall will invigorate the PJ Golden Triangle to a new level. It is expected to have a positive impact on the valuation of Mossaz Tower.
Mossaz Tower at Empire City has direct access to 7 highways namely DASH, DUKE1 and DUKE2, LDP, NKVE, PLUS, and SPRINT. It is located at a very busy highway interchange area, and therefore, it brings people from all directions. SPRINT highway has an elevated lane to go directly into Empire City. The DASH elevated highway will start from Puncak Perdana in Shah Alam. The expressway will end at Empire City, connecting the area directly with the massive population of Shah Alam, the new El Mina City, Setia Alam, the expanded Subang Airport and the surrounding areas.
Conclusion
When investing in a property, start with the end in mind. The questions one should ask oneself are:
(1) How easy will it be to find a tenant?
(2) How much will the property appreciate over a period of time?
(3) How easy will it be to monetize the value of the appreciated property in the future?
To be confident of the answers to these questions, an investor must be satisfied that the property is in the right location, and this is the right time to acquire it, and the branding of the property is right. Mossaz Tower at Empire City in Perdana Damansara currently suits these criteria perfectly. Don’t miss this great investment opportunity.
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This article is written by Steve Ancheh
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