This article was first published in Property Insight July 2018 edition.
Title: Deciding to buy a property? Think of the 4Ps.
The first question that comes to mind before anyone buys their very first property is where to buy. That’s the reason why the mantra has always been location, location and location. One strongest reason for thinking location first would be familiarity. We already know enough about the neighbourhood to be able to make an objective assessment. Have we however wondered about they ‘why’ for the location? What was it which attracted us in the first place? If the answer is that we want to stay close to our parents and they love the neighbourhood, then there’s no need for any other reason. In fact, even if we have to pay a premium, we should stay as close as possible to them. They have worked their whole lives for us and have spent their time, effort and money for us. The least that we can do would be to be there when they need us. Location is thus one way to ensure we are closer to them. For any other reasons, perhaps it’s worth a little more time for some research. The below would be the 4Ps (People, Price, Policy, Preference)
People. More people equals higher demand for property. Beyond just trying to google for information about population, we could also do the following. We can drive around the neighbourhood. Do we see an active mall, even if it’s a small one powered by an anchor tenant. Or do we see a ‘half-dead’ mall with only half the shops open? Do we see many new rows of shophouses, many which are open for business or under renovation? Or do we see rows and rows of shophouses with ‘For Sale’ banners by many different real estate agencies? Do we hear of a new branded university starting its operations in the near future and this university is considered a popular choice? What about a popular international school brand or even a relocation of a new SRJK (C)? Are there other typical signs such as Starbucks, McDonalds and even a 24-hour mamak restaurant which is rather busy all the time? All these are signs to support our purchase. It does NOT need to be in the typical hotspots of today.
Price. This is another important factor which has helped secondary areas to become acceptable and later a hotspot. If given a choice, everyone would want to stay as near as possible to their working place. Thus, the only reason they could not buy a place close to their office is due to price. It’s either same price but much smaller or lower price but further. What happens then if one insists in staying nearby but paying almost the same price as years before? They can opt for smaller sized homes. This is already happening in many advanced markets of today. When given a choice between landed versus high-rise and both are similarly priced and next to one another, it’s a no-brainer that landed as a choice wins hands down. However, price will continue to change property investment decisions.
Policies. In Singapore, car prices are not considered very expensive even if they are priced in S$. However, owners must bid for a Certificate of Entitlement (COE) which is another significant amount of money. Beyond just the car price, when one drives into the city centre, one would incur additional tolls and the parking is also expensive. HDB flats also do not come with a car park and anyone needing to park would have to pay car parking space rental for it. With the right policies in place, everyone would be ‘encouraged’ to take public transport. There are already suggestions for more expensive car parking fees and even tolls similar to that in Singapore when people drive into the KL city centre. At the moment, no signs of it happening anytime soon. Of course, beyond just making it expensive, we also note that the approval of new residential developments are tweaked to give more flexibilities to the TOD ones.
Preference. Nowadays, everyone is talking about Transit-Oriented-Developments (TOD). Many property experts are saying that buying a property next to the LRT / MRT / KTM is already a must. Many of the younger professionals are already getting used to public transport because their office and their home are just stops away. This is a preference because if the preference to own a car does not change, then TODs will fail. People will buy thinking they could adapt but they could not. Thus they pay a premium to buy a TOD but in the end they continue to spend a lot on petrol and toll. When the jams get too crazy, more people would prefer to stop driving. All these would take time but suffice to say, as soon as the preference chances, we are looking at Malaysians Ride This (MRT)
These would be the 4Ps that we should evaluate objectively when it comes to buying our dream property. Other things to take note of when we are buying a property? We must be aware of the duration for the drive and not the distance. There are further places with a lot less jams than nearer places. Renovation should be based on what we need and not what we love. Future buyers may not share the same thoughts about our design. When we spend too much on renovation, it’s very unusual for future buyers to love our renovation so much that they pay a premium for it. Treat all areas as equal because when it comes to property investment, there are always the 4Ps (People, Price, Policy and Preference). Remember, even if we are thinking of buying just one property, it’s great to use this template to look through the area objectively. Happy buying your home sweet home.
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