Note: This is the continuation of the previous guide on property prospecting (or, the art of predicting if an area is going to be ‘hot’). In the first part, we have discussed about the two major drivers of demand: population growth and adjacency (if you have not read Part 1 yet, click here). In the second part of this mini-guide, we will delve into the other three factors: availability of jobs, income levels and ease of doing business.
Step #3: Are Jobs Available?
As the ‘fringe’ townships begin to grow in the Klang Valley (think Puchong South, Cyberjaya, Putrajaya, Nilai, Equine Park, Seri Pajam, Rawang, Kajang) we expect that jobs will be more “localized”. This means that workers will have stronger preferences for jobs which are near (within 30 minutes) from where they live. Traveling to downtown Kuala Lumpur to work may not be feasible anymore especially when you are in the aforementioned fringe areas.
It took me two full hours to reach Pusat Bandar Damansara for a meeting from SetiaWalk last week; to say that the traffic was horrendous would be an understatement. I could never bring myself to spend hours on the road each day to commute to work, and this means that I will always choose to live near where my office is (in this case, central Puchong). And with more “self contained” townships in development (as well as mixed projects such as Gateway Kiaramas) we expect people to want to stay off the roads as much as possible. This means that they will want to live near where they work.
For an upcoming area, there must be employers that bring the money flow INTO the area. My Mentor has got a handy checklist that he uses when he assesses the economic prospects of a new area which you can also use below.
GoodPlace.my Sector Prospecting Checklist
|Government||Centres of government which draws in tax ringgit from throughout the country. Also, government led initiatives and growth corridors.||Putrajaya, Cyberjaya. To some extent, Iskandar.||Yes / No|
|Tourism||Travel and tourism hotspots are almost a good bet. Look for new travel destinations.||Certain areas in Melaka and Penang.||Yes / No|
|Manufacturing||Increase in manufacturing activity (or FDI) is usually correlated to property price growth.||Penang.||Yes / No|
|Education||Look out for new education hubs; colleges, universities AND international schools.||Cyberjaya, and certain areas in Petaling Jaya (Subang Jaya, for example).||Yes / No|
|Retail||Large shopping malls and warehouses.||IOI Resort City and its surrounding areas (with the impending IOI City Mall)||Yes / No|
Step #4: Check Income Levels
Income levels are obviously related to availability of jobs, and in a broader sense, the primary sector which drives the local economy. For example, if you are considering a condominium in Cyberjaya next to a cluster of colleges then you’ll most probably be renting out to students. On the other hand, if you’re buying a Mont Kiara or KLCC apartment unit then your return on investment will be largely determined by the expatriate sector.
Cyberjaya used to attract technology companies looking for employees who want to live in an area with a relatively lower cost of living (compared to central Kuala Lumpur). Now with the escalating property prices in Cyberjaya it no longer offers cost advantages, which means that there will be a few “adjacent” hot spots for high tech in the future. Where will these be? Your guess is as good as mine. 🙂
Step #5: Is It Easy To Do Business?
“Brain drain” does not only happen on a national level. Cities or towns suffer from economic decline because entrepreneurial individuals leave to look for places which are conducive for business.
I would stay away from investing in areas outside the major economic centres (Klang Valley, Penang and Iskandar) simply because young people are moving into the cities, not out.The Mentor
For an area to prosper, the entrepreneur’s drive to create and capitalize on opportunities is as essential as the presence of a qualified workforce in the area. As such, an area’s “friendliness” to business could make or break its long-term prospects. No city (or, to a larger extent, country) can increase its wealth unless it enables the entrepreneur to freely innovate and grow.
- Check for population growth. Are people moving into or out of the area?
- Consider the “adjacency” factor. Are there areas with spillover effects from the main growth centre?
- Are jobs available?
- Check income levels. Will the population sustain the growth in property prices in the future?
- Is it conducive for business?
Analyzing “technicalities” like population growth and income levels may be boring to some, but unless the buyer does some simple due diligence like this he or she is just gambling with money. You may have had success without doing the homework, but you might not get that lucky the next time. Trust me, I am speaking from experience. 😉
The Malaysia property market is predictably cyclical, and it’s possible to somewhat “predict” its direction by looking at demand and supply. Be on top of the market by tracking the LEADING demand and supply indicators (and not make the rookie mistake of looking into past trends), and you’ll be at a better place than most property investors.