Buying a property is perhaps the most enduring and popular investment option. Young investors, especially in the Klang Valley tend to work towards buying their first piece of property while in their 20s and early 30s. Goh Ee Koon checks out the choices out there and got investors to give some advice to first timers.
WHEN Datuk Michael Yam was still living in England, he pooled together his savings, borrowed some money from his father and took out a loan to purchase his first piece of property. A few years later, the price for the place had risen by so much that he sold it at a tidy profit.
Yam, of course, is the managing director of Sunrise Bhd. Having invested in property himself for a number of years, he has a few views to offer.
Yam said Sunrise had seen a few property buying trends among its customers in the past few years.
The first is that the older generation has a strong tendency to buy homes for their children – some book lots while their children are still in school and by the time the home is ready, they would have graduated and are ready to move in.
Second, women are becoming increasingly independent and exercise equal purchasing power in buying homes. “Our clients are fairly well balanced ? maybe just slightly more men than women buying their own homes,” Yam said.
Third, the older the purchaser, the more expensive the home tends to be. “Our units costing RM750,000 and above are taken up by those who are largely 35 to 40 years old. The million dollar homes are bought by people in their 50s.
“Thus, the young investor prefers the slightly more affordable condominium and housing units in general,'' he said
Income levels and lifestyle perspectives also play a large part in determining what to buy. There are house buyers who opt for a condominium, although many still opt for landed property.
Location, a key determining factor of the rate of return, is also always taken into account. One investor said he bought what he could afford at that time – a home in Cheras – and would only “upgrade” to a place like Kuala Lumpur or certain parts of Petaling Jaya when he have had enough resources.
Properties in the Klang Valley, Bangsar, Sri Hartamas and Damansara Heights, generally known as “high-class” areas, fetch a bigger price tag and are the top choice for up-and-coming executives and entrepreneurs. Petaling Jaya and Subang Jaya are also popular choices for good buys.
Office equipment manufacturing country manager Andrew Low told StarBiz he had held out on buying a house when he was in his 20s because he felt that with more resources and greater earning power in his 30s, he would be able to afford the luxury of wider choices of what to buy and thus, end up with a property with better yield.
Yam concurred, saying: “A number of buyers tend to wait out the period (in their early 20s), preferring to rent before purchasing something that can give higher returns. While a number of people do opt for cheaper units, there are also investors who wait for the time when they can afford a more expensive property.
“Thus, it is uncommon for property investors to start in their mid-20s. Buying patterns get more marked as people move into their late 20s and 30s.”
However, Yam said that serious property investors who are flush with funds tended to buy a second property fairly quickly after their first purchase.
Another good piece of news for property buyers is that developers are becoming more competitive in offering value-added services and working to strengthen their brands.
Yam admits: “There may be a race among property companies in giving customer service, quality product, good asset protection and good yield.
“But there must be competition, because people are paying for something that they want to be assured of. So, there needs to be an effort (on the part of the companies) to constantly offer better packages.”
Property investor Mi-Ki Choong has some advice for new buyers. Choong, who is an entrepreneur and happens to be a property developer herself, began investing in properties after she graduated from university overseas.
Family influence got her into property, and while she also puts her funds into watches and jewellery, property remains a top choice.
“We (my family) believe that properties are good, solid investments that generally increase in value, as land becomes more scarce while the general population is increasing.
“It is also basic knowledge that in property, prices go up rather than down over time,” she told StarBiz.
Choong, however, agrees that other investment options like bonds, unit trust or stocks are easier to get into, as it takes less money.
The first hurdle in property investments is qualifying for a loan, although Yam said there was no better time than now to buy property, as banks are offering low loan rates.
When it comes to choosing between residential and commercial, Choong said: “If you want good rental income, go for condominiums and apartments in good locations with good facilities, such as those in the heart of the central business district area in Kuala Lumpur or near major office buildings or embassy areas.
“But if you want capital appreciation, go for terraced houses in certain residential areas which are expanding in population or in states like Penang, where the island is known for its apartments and the mainland, its landed property.”
Choong also said commercial properties were not performing as well as residential ones due to oversupply, but shop offices looked like they were maintaining value and were performing better than office and shopping space.
She said some investors might buy property with the intention of renting it out first only to sell it off after a number of years.
Others prefer to invest in property for the duration of construction, and disposing it after the Certificate of Fitness or Occupation Certificate has been approved and the keys to the property collected.
One major factor to consider is location. “It determines the value and time for investment returns. Thorough research must be done on the areas surrounding the property to make sure that there is good potential to be a population catchment area.
This applied more to new developments as old ones had already proven their worth, but it was the new properties that had a lower entry cost and appreciate in value the fastest – provided they were in the right place, Choong said.
Other factors included whether the land was freehold or leasehold “but most people don’t realise that it is not the end-all, be-all factor as renewal is not a difficult procedure and 99 years is a long time,” she added.
Choong said the question of price was one of mass projects versus high-end niche properties.
“Price also determines how fast you can resell.
“Some mass projects by reputable developers can fetch great returns in a short time, so look out for those!”
As for high-end projects, these are favourites among overseas investors and tend to fetch better rental income.
Finally, both Yam and Choong said that research was of primary importance before taking the step to invest.
“Engage an investment strategist if you can afford one as they can give professional advice and options.
“Also talk to family and close friends who have had first-hand experiences.
“Property investment is a costly one. So, do thorough research to ensure that the developer, location, property type and status, prices, facilities and quality fit your requirements,” Choong added.