By Dr. Daniele Gambero
Property has always been looked upon as the one of the safest assets for medium long term investment. Real Estate is that kind of asset which will appreciate during the boom times and safely maintain its value during the doom ones.
Of course, there are properties which are delivering capital gain above average, others that 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 is mostly a matter of using a lot of “common sense” and few basic golden rules or, in other words, apply the fundamentals of Propenomy.
Rule 1 – Perception and reality
We can surely say that buying a property is one of the most important decision that a person will take in his life.
Taking this decision based on perceptions is not advisable, and what everybody should do is to complete a proper due diligence on the proposed property and its surroundings before putting down any kind of money.
For development projects, there must always be a good demand driver that will help the future appreciation of your investment.
Education institute(s), nearby public transportation, excellent accessibility, an array of amenities, as well as upcoming future developments within short proximity will surely help to increase the value above average. In other words, always check facts and numbers!
Rule 2 – Fully understand the 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 Market Report 2014 released earlier this year by NAPIC clearly shows how the supply of the new affordable homes is still unable to catch up with the demand, and will remain such way for a very long time.
Affordable homes have different values throughout the country and are a highly hunted product in Malaysia.
Considering that 60% of the Malaysian population or 18,000,000 Malaysians are the core middle class who controls a good 55% of the Malaysian wealth, we can determine that properties priced between RM200 to RM700 psf will be targeted by them now and for the next several years.
Published few weeks ago, the table below indicates the average value 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 the values and percentage of supply for three main categories of homes offered to the 60% middle-income earners.
In regards to the numbers below, an investor can be assured that his property will always have a good demand in terms of both purchase and rental.
Rule 3 – Look for demand drivers
I always advise our developer clients to build according to demand, as purchasers should always ask about the demand factors and its roots, before confirming their purchase.
Example of demands which should be analysed before purchasing a home includes investigating the future alignment of MRT Line 2, LRT Line 3 and all the corridors of the 12 BRT lines proposed by SPAD in 2014.
On top of that, we need to look at the incoming High Speed Rail (HSR) which will have a 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 a central transportation hub with MRT Line 2 terminal station, KLIA transit and HSR stop over; not forgetting to mention the bus station which will serve local and regional routes.
This will create a long-lasting demand and eventually the property values in that vicinity will shoot sky high. This will create a sense of peace for the property investors and buyers.
If you have any queries or you would like to comment and ask for further information, the author, Dr Daniele Gambero, welcomes feedback and questions at: daniele.g@reigroup.com.my
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Dr. Daniele Gambero is the CEO and co-founder of a strategic marketing consultancy firm, REI Group of Companies. He provides strategic marketing consultancies, investment studies, researches, property market reports and business valuation all around the world.
Dr. Daniele Gambero has been engaged as a speaker in REHDA KL, REHDA Johor, The Star Property Fair, iProperty, Wealth Mastery Academy, Comfori, ASLI, PIHex and Mastery Asia. Through his ability in structuring local and global macro / micro economic indicators to look into the Malaysian Property Market, he centers his speeches on the rightness of property investment based on current and future market values, location, future infrastructures and their impact on the market trend.
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