I was invited to join my good friend Miichael Yeoh the other day for this talk: “Budget 2019 and the Impact on Properties. Strategies Moving Forward.” In the nearly 2 hour sharing and taking questions from the attendees, one particular question popped up again, as usual. “For property investment, isn’t it better to buy landed because land is scarce while high-rise can just be built ever higher.” First of all, this statement is very true. In many mature neighbourhoods, whenever unused land is available, it’s usually a very small pocket here and there. Secondly, even for redevelopments, it’s usually just that particular development which will be torn down and redeveloped. Thus, we will not have huge tracts of land like those of newer townships by many branded developer these days. Last but not least, let’s now look at the price as well as affordability of fellow Malaysians.
#1 – Property price. When we look at the property price and we factor in the inflation numbers, it’s plain to see that property prices will keep rising due to the construction costs including land, manpower, materials and even possibly the compliance costs. With this in mind, whether it’s landed or high-rise, both will have to have higher prices unless… refer to #2 below.
#2 – Affordability factor. At any point in time, there’s a limit to the price affordability. This will be the driver for property prices. For example,Khazanah Research Institute said that based on the median household income, for homes to be affordable, it must be priced slightly above RM200,000. If they are to repeat this every year, this number will show an increase over time. In other words, whether it’s landed (which is more expensive) or high-rise (which will be very common), both are worthy investments if we buy and wait versus waiting to buy.
#3 – High-rise is common because … With a growing population due to urbanisation and with KL as a capital city and Greater Kuala Lumpur as a good place for work, rest and play, demand for properties will grow. However, majority of these younger working professionals with a tertiary qualification and a few years of working experience will still be within the M40 households. (What is M40?) In other words, most would be aiming at a high-rise unit instead.
#4 – Preference are changing too. Even for landed, for those who could afford one, the younger generation are looking at clubhouses, facilities and security. Just having a landed within an old neighbourhood is not exactly the best choice for many these day. That’s why even if they bought into the neighbourhood, they may rebuild the home they bought. This is why most newer and modern landed developments have these features and the prices as well as the monthly maintenance fees are definitely higher than many years ago.
To answer the question of whether buying landed is better than buying a high-rise, the answer may be to just buy if we could afford and enjoy what we buy because when the tide comes in, it does not usually bring just the big boats. When the price of landed doubles every “X” number of years, the prices of high-rise will be rising too, even if many will argue not as high as that of landed. The only wrong choice is to keep all the money under the bed because we are still evaluating whether we should buy landed or a high-rise. Or even buying the WRONG property, regardless of landed or high-rise. Happy understanding.
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written on 26 Nov 2018
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