Conventionally, people settle for properties closer to the city centre to minimise time and costs associated with daily travel. But this convenience comes at the expense of more space that a suburban home could provide for the same price.
Meanwhile, the pandemic has changed the way people live, work and interact with one another. With movement restrictions and work-from-home policies in the mix, the confines of city dwelling may feel a lot more restrictive.
Needs and priorities change as space and privacy take precedence. With homes now also serving as a work environment, buyer sentiment, too, has changed, as reflected in transaction data earlier this year.
Buyer trends across the Klang Valley, Johor and Penang as reported in the Q1 property market update by PropertyGuru DataSense show that:
- Buyers still prefer landed properties, with terrace houses remaining the top choice;
- Semi-detached houses saw increased interest this quarter in the Klang Valley and Johor among those who own more than one property;
- Despite the pandemic, the median purchasing price for residential properties increased; and
- Over 30% of transactions are within the RM300,000 to RM500,000 price range.
Many of the projects with the greatest number of transactions are in self-contained townships such as Setia Alam or Bukit Sentosa. The data suggests buyers have also taken advantage of government and developer incentives to upgrade to bigger homes.
The dream home, once priced beyond reach, is now more attainable as asking prices and interest rates have dipped.
Tips for upgraders
Preference for larger properties leads buyers to migrate to the fringe of city centres, where prices per square foot are lower. But properties in new areas usually take longer to generate capital appreciation and rental yield if they lack certain factors that would boost their value.
These factors might not be of immediate concern if upgraders intend to use the property for their own stay, but they do weigh more heavily if the property is to be sold or rented out in the future.
To reduce risk on your property upgrade, first examine existing and upcoming public infrastructure such as highways and rail networks that improve connectivity. According to research conducted in the Klang Valley, properties in close proximity to LRT stations are valued higher than those farther away.
Prices trend upwards as public infrastructure reaches completion, so it is worthwhile to purchase properties early. Take note of amenities such as shopping malls, educational institutions and commercial zones, as these will increase demand for nearby properties and will also garner interest from students and employees, which will eventually contribute to better capital appreciation and rental yield.
Rental rates for properties in the city centre could further deflate if working from home remains a widespread practice in the post-pandemic era. Investors, in turn, may face higher competition amid lower demand for their rental properties, especially in the case of units that are highly dependent on students or employees.
Be prepared to accept lower rental rates to minimise losses in the interim, rather than hold out for months to secure tenants at higher-than-average rates.
If accepting lower rental rates is a concern, sign for shorter tenancy periods such as a year and see if market conditions improve down the road. Consider renting out the unit fully furnished as renters are unlikely to have extra cash for furnishing during a challenging economic climate.
Be mindful, however, that renting out a fully furnished unit may not always command a higher rental rate if the building caters to a price-sensitive demographic. At the very least, though, it should help the unit differentiate itself from competition in the same building and attract more prospective tenants.
Is work from home here to stay?
With increased vaccination rates and the reopening of the economy, will working from home remain common practice or will old habits die hard?
Bloomberg reports that workplace activity is still below pre-pandemic levels across the globe, based on mobility data by Google.
The spread of the Delta variant in the United States has delayed recalling workers to the office. In Europe, despite largely relaxed movement restrictions, employees are waiting for the end of school holidays.
In Malaysia, a Jobstreet survey showed that multinational businesses, high-salaried employees, those from the IT industry, and those living in Kuala Lumpur are more likely to work from home.
Some 27% of human-resource decision makers continue to support work-from-home policies, while another 30% recommended fewer hours working from home.
Should this trend continue in the post-pandemic era, buyers seeking bigger properties on the fringe of city centres would remain. Investors should be quick to adapt to ensure investment properties remain competitive, and be on the lookout for more opportunities to diversify their property investment portfolio.