Evergreen Property Investment Strategies: Part Deux

Melaka house

As our portal (GoodPlace Homes) is launching in less than a month (read the back story here, and then here), every minute of my waking life is now spent doing either one of these things:- developing content or writing code. Indeed, things have been quite overwhelming recently that I even started having weird dreams about my work, like, writing a blog article entirely in computer code1.

Indeed, the clock is ticking, and the pressure is piling up.

And like it or not, the blog will have to take a backseat until after the launch. Don’t get me wrong – I’ll still be posting up content, but the articles will be shorter, and so there will be less mindless memes/ Guru piss-taking /etc. I hope you understand. 🙂

GoodPlace Meme

The typical GoodPlace reader

In our last home buyer guide (click here if you have missed it), we have talked about how smart investors just keep hustling day and night – no matter if the market is getting hotter than Hansel or is drying up like Bruce Jenner’s testosterone. There’s no rest for the wicked!

And so in this continuation in the series of articles on evergreen strategies, we shall explore another one of those –

 Spotting The Next Growth Pocket

My good friend “lanky” Ari (you may recall first reading about him at GoodPlace here) made his fortune from trotting around the globe and buying up properties in markets on the upswing. Ari honed his skills in predicting market cycles, and as such, he traveled extensively to look for opportunities to buy properties in bear markets on the verge of the upturn. “I don’t invest in properties,” he would quip. “I invest in markets.”

When probed further, he said: “Here’s what I do. I look for markets on the uptick. A rising tide floats all boats. Even if you happen to buy a sub-par property, if you’re in a hot market, it’s likely that you will make money. On the contrary, even with a killer property you’ll probably have to wait for the market to be hot before you sell. So, for me it’s quite simple; it’s about the market, not the property!

“Makes sense.”

“So here’s the deal. Whenever the market is showing signs that it’s drying up, I start to look for pockets where the next wave of price growth is going to hit.”

“But how?”

He smiled and replied rather cryptically: “It’s all about the WHO”. But it all became clear to me when he drew me this table –

ari-table

“Predicting about where the next price growth area is all about the movement of the different types of buyers,” Ari explained. “I’ve found that property cycles in almost every country follow this exact pattern.”

“What pattern?”

The pattern formed by buyer movement. In the case of Malaysia, it’s about the net migration into the Klang Valley, or secondarily into Penang. The wave of first time buyers typically hits the fringes of Kuala Lumpur because those are areas where properties are relatively affordable. To these buyers, financing is the key driver; it’s all about affordability, the ease of getting home loans, and the quantum of down payments.”

“Got it.”

“This growth in the fringe areas of Klang Valley then cascades into the inner city. You see, typically upgraders will move to better, higher priced properties in Kuala Lumpur or to new townships in the Klang Valley offering bigger spaces but not necessarily at lower prices. Remember that these upgraders were first time buyers, and they would be upgrading by selling their properties in the fringe areas to first time buyers which I have just mentioned.”

“What are the examples of these areas?”

Landed properties

As buyers upgrade, they tend to move from high rises to landed properties especially if they are in the fringe of KL.

“In KL, these would be places like Desa Parkcity, or even areas deemed to be upmarket like Mont Kiara. However, for areas immediately outside KL like Petaling Jaya, Puchong or USJ, you’ll see a shift where previously first-timers would upgrade by moving from an apartment to a landed property. And of course, those making even bigger leaps would be joining uber prestigious neighbourhoods like Kenny Hills, Damansara Heights or the bungalows of Tropicana, but these would be at the tip of the pyramid; very low in volume.”

I looked closer at the table he drew me. “How about retirees then? This is perhaps the most overlooked segment of buyers by far.”

Ari nodded. “I agree. But I am sticking my neck out here to predict that the retirees demographic will be the next huge growth area. Naturally this is the demographic with the biggest financial clout, and with perhaps a growing portfolio of properties accumulated over the years. For this group, financing concerns would not be as important as, say, quality of life, locational conveniences and accessibility.”

“Let me see. So do you predict the emergence of townships outside KL consisting of bungalows with large open spaces, connected to the rest of the Klang Valley via new highways?” I offered.

“Yes! But let’s not also forget that there are retirees who would still want to live inside KL to enjoy the convenience and the superior walkability of being in the city. These would typically be older couples who would move to an upscale condominium in KLCC to enjoy city life.”

In summary:-

  • When in the “quiet” cycle of the market, opportunities to spot the next growth area become clearer.
  • To see if an area will grow in terms of property price, look closely at its demographics (both inflow and outflow over time).
  • Spikes of demand in the fringe areas of Klang Valley are driven by migration from the younger demographic into the city. First time buyers are driven more by financial accessibility than other factors.
  • Upgraders typically move between areas and also from apartments to landed properties. Driven less by financial concerns, this demographic of buyers look for convenience, quality and accessibility.
  • The retiree market could be the next boom area for Malaysia property. Retirement locations can either be new townships offering bigger spaces, or inner city units offering superior walkability and convenience.

NEXT WEEK: The “Zombie” Effect (first outlined here) in action!

  1. In case you’re wondering, it’s entirely possible to write an article in computer code. For example, the phrase “evergreen strategies” can be expressed in pseudo-code as while (true) { strategy(); }; . Yes, I’m a weirdo.
About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

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