Property Valuation In Malaysia Can Be Impacted By These 10 Factors
Have you ever looked at a property for sale in Malaysia and wondered about the price? Property value isn’t always obvious when you’re looking from the outside in.
The backdrop to any market value: the eternal question of supply and demand! The greater the demand and smaller the supply, the higher price a property will have.
In times of high supply and low demand, property values are likely to fall. But it’s all a little more complicated on the ground.
When viewing a 15-bed bungalow with 3 jacuzzis and its own helipad, it’s pretty clear what’s influenced that RM50 million price tag.
But how about a standard two-bedroom condo that seems to fluctuate in price, from one street to the next?
We’re here to tackle that challenge, so next time you can understand what it is that’s influencing the value of properties in Malaysia.
Here’s a simple, step-by-step guide to the more common factors which impact the value of a property:
When it comes to property – size really matters. The bigger the property, the more it’s likely to cost.
Obviously this is impacted by other factors noted below, but it’s an obvious and yet important starting point of any discussion about cost.
We often use ‘price per square foot’ to explore costs in real estate. Roughly speaking, this represents the total cost divided by the total size of a property.
As you might expect, different areas experience different trends in price per square foot of property.
This figure provides a better oversight of changes and trends rather than a direct reference point to check if a property is considered good value in any given area.
A well-maintained house commands a premium over one which is in a state of disrepair.
That includes factors such as land movement or obvious structural faults, as well as poorly maintained internal features such as broken taps or mouldy walls.
This is a factor with particular impact in the secondary market, as newly developed properties are less likely to show signs of wear and tear.
Also, mould can prove to be more dangerous than you thought, causing health problems in people with an allergic reaction, such as sneezing, red eyes, and skin rash.
3) Time On Lease
Secondary markets may see property value impacted by the time on lease in certain circumstances of a leasehold property.
Market analysis indicates that a leasehold property will experience property price stagnation or decline beyond 25-30 years of its original lease period.
Some developers have better reputations than others.
Just like maintenance can impact property valuation, the expectation of quality delivered by some developers can provide peace of mind that commands a premium.
If a developer has a poor reputation, it’s likely to negatively impact the price at which they can sell their properties.
Privacy commands a premium, for obvious reasons.
A residential unit with exactly the same specifications is likely to enjoy a higher value if it benefits from improved privacy or enhanced low-density living.
Upmarket developments often leverage this factor to provide a range of exclusive properties within low-density living conditions.
The neighbourhood in which a property is located is one of the most important factors for property valuation.
A suburb with low crime rates and a reputation for a safe, secure community is going to provide a substantial boost to property prices over a high-crime neighbourhood with a poor reputation.
Factors such as eco-design and integrated townships with attractive outdoor spaces are another example of this positive impact of neighbourhood on house value.
It’s easy to think of the kind of suburbs and townships designed to benefit from this positive neighbourhood feel.
Bukit Indah in Iskandar Puteri or Setia Eco Park in Shah Alam provide perfect examples of townships designed to boost that desirability, built around a close-knit community.
7) Public Transport
Public transport links can provide a significant boost to property prices, especially links to major routes such as the MRT or LRT in Kuala Lumpur.
Close proximity to public transport hubs provides a substantial premium to property prices, as well as making them far more resilient to pricing downtrends.
That means if you’re lucky enough to own a property near a newly announced MRT line, there’s a good chance you’re set to enjoy a substantial house price windfall.
8) Educational Institutions
Outstanding local schools can provide some outstanding impacts on property prices.
Properties located within convenient travelling distance of public schools with good records benefit from increased demand, and thus increased valuations.
Proximity to respected international or private schools can provide a similar benefit, especially in key areas that target affluent expat populations.
On the other hand, while student-focused areas aren’t always attractive for homeowners, they’re an awesome investment opportunity for some buyers.
Educational hubs with major universities can provide a rich opportunity for buy-to-let investment in an area with a strong rental potential, potentially pushing up valuations in key locations.
People love to shop (with some even claiming it’s a form of therapy), which makes retail hubs a real benefit for house prices.
Good access to large and iconic malls or substantial hypermarkets can make a property more attractive to potential homebuyers, and thus positively impact the value of a property.
However, it always pays to visit the local mall and confirm if it’s a popular place with a steady stream of visitors, or just another unsuccessful project.
Local amenities go far beyond public transport or the nearest mall, and include other key elements such as local parks, restaurants, sports centres, and just about any desirable local amenity you might imagine.
They all add to popularity with homebuyers, which adds to property value. Popular areas such as Bangsar in Kuala Lumpur provide a good example of this:
- Close proximity to major malls.
- An excellent range of food and beverage establishments.
- A vibrant nightlife making the area a popular place for those seeking property in a dynamic part of downtown KL.
10) Economic Conditions
Property valuations are impacted by far more than just the facts on the ground. It’s important not to overlook wider economic conditions when it comes to understanding the value of a property.
A badly performing economy or economic uncertainty reduces demand in the property market, which results in reduced house prices.
Interest rates are another piece of this economic puzzle. High interest rates make home loan repayments less affordable for borrowers.
That means the higher the interest rate, the less demand there is for property, which can lead to decreasing prices.
Lower interest rates mean more affordable lending, which in turn can result in growing demand and house prices.
Bonus Round – Cultural Beliefs!
It’s hard to call this a definitive factor in property prices, but it’s certainly something to consider. Superstitions and cultural beliefs can be a powerful influence in decision making.
If you’re selling property in an area with a strong ethnic Chinese demographic for example, properties with the unlucky number 4 (its pronunciation sounds like ‘death’) could be considered less desirable.
That’s why most high-rise developments avoid having a floor numbered as 4.
On the other hand, properties with a lucky number like 8 or 9 (their pronunciations sound like ‘prosperity’ and ‘everlasting’ respectively) might result in slightly increased prices from this demographic.
Different ethnicities, cultures, and backgrounds may be influenced by different beliefs. Not something you can bank on, but definitely something to keep in mind!