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The Star: 13 August, 2007
WHAT is the best type of property to invest in now? My bet is on commercial property, particularly shop offices with a good concept and in prime locations.
Why not industrial properties, bungalow land, condominiums, houses, or high-end homes like detached houses or holiday resorts?
Let's look at each property types:
Industrial properties: There are hardly any new industrial properties being built. If you are lucky, you may get a good buy from an auction; otherwise, this segment is not the preferred choice.
Bungalow land: In the early 1990s, many people bought land but failed to build their bungalows and got “burnt”. Even those who have bought bungalow lots in so-called prime areas are stuck as there are few buyers and their land prices have not increased much.
Condominiums/apartments: If you can make a tidy profit from the sale of your condominium, well and good; but look around you. There are so many condominiums, especially in the Klang Valley. Although latest reports from top condo enclaves like Mont'Kiara showed some new launches had been sold out and prices are going up, there are too many developments there; and renting out or selling a unit will become increasingly difficult.
Hence developers are coming up with more unique features - either super-condos that are very large or quite small units (like the Verve Suites) that boast special features like big recreational areas on the top floor. Through clever product differentiation and positioning, the strategy is to narrow the supply gap and create new demand that hopefully will translate into premium pricing.
Houses: Landed properties of are always good for investment provided they are in good locations.
House prices that have remained quite flat for years will eventually command higher prices as construction costs escalate. Things to look out in a township: new amenities such as a wet market, school, mosque and highways being built. Are people renovating their homes and are there many successful sub-sales? These indicate that property prices are likely to go up as the population grows. Hang on to your home and sell only if the price is right.
High-end homes: As the saying goes: the higher the risk, the bigger the rewards. If you can afford high-end homes, generally you stand a better chance of higher returns.
Currently there are many new condominiums and serviced apartments/residences in the KLCC area and its fringes. Recently prices have spiralled. A few years ago people doubted units priced from RM1,000 per sq ft (psf) (e.g. Berjaya Central Park) could sell. Now new projects are hitting RM2,000 psf. The perception has changed. A price tag of RM1,300 psf does not shock people anymore.
If you can afford to buy super condos and keep it, why not? But if you think you can rent it out easily, I am not so sure.
Commercial properties: Shop offices are now very hot and with good reason, too. Many shop office developments, even in outlying areas like Rawang town, are being snapped up.
Hot areas include Kelana Jaya and Sections 13 and 14 in Petaling Jaya where the 3 2 Square, , Jaya 1 and Jaya 33 projects are coming on-stream and have reported brisk sales. Over in Shah Alam there is the newly completed Centro, and nearby, the RM2bil I-City with its modern shop offices is under construction. As these shop offices are part of a unique knowledge-city development and within the first Multimedia Super Corridor Cybercentre in Selangor, they should command a special premium.
Astute investors prefer to invest in a shop office rather than buy a second or third residential property that only fetches 2% to 3% rental return per annum compared to an average of 7% to 8% for commercial properties. The better projects can fetch above 9% return.
Buying a stratified shop office is a plus as you buy the whole block, but you can also sell the upper floor shop or office on a strata basis. This flexibility enables you to rent, own and dispose the property.
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