One of the main themes to come out of the iProperty.com Expo was the importance of knowing what makes a good investment opportunity. Below, we look at the top ten criteria to help you decide whether a property would be a good investment or not.
(Singapore at night. Photograph: Singapore Tourism Board)
It’s important to reiterate how important this is. The location will determine a property’s price, risk and returns. An average property, for example a three bedroom HDB, in Holland Village, can expect to fetch more on the resale market than a two-floor mansionette that’s twice the size in Jurong West.
2. Developer’s philosophy and standards
Does the developer have a track record of producing quality products? If it’s a new project, do your homework and tour previous developments built by them. Don’t be overawed by a big name. A travel writer acquaintance of mine stayed in a new five-star villa resort in Bali recently, and reported that, while beautiful, the unit’s fittings were substandard with tiles falling off the bath and sockets loose in the wall.
What level of oversight will be provided by the management of the development? If you’re staying in the property as an owner-occupier, this is less critical, but as a landlord, especially in absentia, it’s vital.
4. Future prospects
For property as an investment, the bottom line is how much income it can generate for you. Again, research the market, getting different opinions on what the capital appreciation and rental returns will be for this property.
5. Practicality / Design / Layout / Usability / Desirability
Who is this property going to appeal to? I looked at the Urban Lofts project, located on Rangoon Road next to Farrer Park MRT. While its location is fantastic and the lower floor flats had their own hot tubs, the extremely limited floor space would make it unsuitable for any but childless couples and singles. Always consider who would live here before you purchase?
6. Comparative prices for comparable product
If you can, try and see how similar properties in the area have done in the past in terms of price per square foot and capital appreciation in order to compare and work out whether the property is an attractive investment opportunity.
7. Connectivity / Convenience
We have written before on the importance of a condominium’s proximity to schools, work places, and shopping and leisure facilities – but transport links are often the biggest drivers of value. Research has shown that condos near MRT stations often gain the most capital appreciation in Singapore.
Less of an issue in Singapore, where crime rates are amongst the lowest in the world, in Malaysia and Indonesia – while crime levels are perhaps overstated by the media – the range of a development’s security options – gated communities, 24-hour guards, first-response alarms, etc – are an important factor.
A property’s facilities do add value to a unit – a landed property with a pool, for example, can add around 8% to the value of the property – while many condo facilities now include gyms, spa facilities and games rooms.
A rented property can produce a greater passive income than simply investing it in a bank but you need to ensure that is attractive to renters.
In many ways, Kuala Lumpur’s Mont Kiara district might seem the ideal investment location: it’s got a big expatriate population who need to rent, and it’s close to the city centre and various dining, entertainment and leisure facilities. However, there are so many developments going up there that it has become a tenants’ market, so other factors come into play.