Buying a new home can be an arduous task because of the numerous factors one must consider. The reputation of the developer, the workmanship, architecture design, surrounding amenities is some of the common factors homebuyers consider among the many checklists they have.
However, there is no factor more important than location. You will be surprised to see how over the years, properties in great locations (cities and up-and-coming suburban) have grown at a much faster rate than other mediocre locations.
To put into context, a terrace house in centre Selangor have seen rapid growth, tripling property value from 2004 – 2015 while a similar property in rural Selangor sees a lagged growth of doubling property value. All this is because of fewer job opportunities in the outskirts, resulting in less commuting convenience and property demand.
Hence, the first consideration for any homebuyer should always be location. Compared to all other factors, location plays the biggest role in property valuation and living quality. Here are some reasons why location is a top priority factor to consider while buying a home.
Why is location important while buying a home?
Location is considered one of the most important factors in property investing because it weighs heavily on capital appreciation. While factors such as property size and design do affect property valuation, the effect from a thriving neighbourhood is more prominent and non-negotiable.
1. Centrality
If you study how property valuation changes over time, you will notice how a location’s value is highly dependent on job opportunities and the surrounding amenities. Cities like Kuala Lumpur City and Petaling Jaya while having less room for additional development tend to have higher property prices than rural cities.
When job opportunities improve, we see population movement from outlying towns into the city in hopes of making a better living in the city. With such a population increase in the city, naturally, the demand for housing increases, driving the housing prices in the city upwards.
2. Safer Neighbourhood
If you are looking to establish a family, safety and comfort are definitely on top of your mind. With that said, it becomes crucial to choose a good neighbourhood with a low crime rate and a conducive living environment. Typically, these requirements are found in good locations where the residents have better living standards and would demand better security measures.
On top of that, gated communities is a good way to keep your family safe and secured. Limited access to the public, fitted with 24 hours CCTV surveillance and bumped up security measures are some of the many perks you get to enjoy in a gated community. If you want to understand gated communities better, check out this article on the difference between gated communities and guarded communities.
3. Asssessibility and Connectivity
Good locations naturally have good connectivity to the different business hubs and major city landmarks. This connectivity is crucial in improving a location’s desirability, ensuring better returns rentals on properties and improving resale value. It is no surprise that a neighbourhood connecting major city landmarks to receive more enquiry because of the higher traffic.
Besides that, easy access to public services and a well-maintained road plays a role in enhancing the value of a property.
4. Facilities
A good location is typically surrounded by conveniences. This includes common places such as retail stores, schools, hospitals and other necessary facilities. Like it or not, humans have always leaned towards convenience and staying in a good neighbourhood typically means less time spent on trying to get the basic necessities.
In contrast, goods and services do not usually reach the most rural of locations. If you are lacking parts for home repair work, you stand a better chance of getting spare parts within the city. This is the unfortunate reality of staying on the outskirts.
5. Capital Appreciation
One thing I cannot emphasize enough is that a good location is highly desirable for convenience, accessibility and address. When there is high desirability in a location/neighbourhood, the demand for property or housing improves and it tips the property value in favour of homeowners.
In some cases, new neighbourhoods will see the same explosive capital appreciation after undergoing development to upgrade infrastructure, facilities and accessibility. Take Desa Parkcity as an example, before it was a prominent township in Kepong, it was an undeveloped mining quarry that no one wants. However, the introduction of conveniences, better infrastructure, facilities and an organized township turned what used to be a wasteland into a prominent township, skyrocketing the location’s desirability and quadrupled property value over the past 20 years.
What are the signs of an up and coming neighbourhood?
The signs of an up and coming neighbourhood are found in the development plan for future amenities and civic infrastructure. Plans for better public transportation, road infrastructure and leisure hub can easily attract more crowd, dramatically improving property value.
1. Public transportation
Whether if it is driving your own car, taking public transport or walking to work, commute time is always a factor when choosing a location. To put into context, locations such as Petaling Jaya and TTDI is highly sought after because of the RAPID buses and the MRT line. I reckon these property prices would not be as expensive today if there is no public transportation to ease the public’s commute.
At the same time, properties in locations such as Kota Damansara and Bandar Utama increased in value with the introduction of MRT2 and MRT3. However, do note that properties situated right beside the train tracks have decreased in value because of noise pollution.
2. Basic facilities
A good neighbourhood is typically self-sustained with sufficient grocery stores, eateries, entertainment, leisure and healthcare. Take Mont Kiara as an example, it is a highly convenient location where grocery, eateries, school and hospital is only a stone’s throw away.
The interesting thing about Mont Kiara is the wide variety of food the neighbourhood houses. Because of the many different cultures within the location, Mont Kiara became well known for good food catering to the Koreans, Japanese, Italian, Swedish and French.
In my experience as a property agent, a majority of buyers I personally worked with make certain the basic necessity are all within a 5km radius. In particular, a 10 minutes drive to the nearest convenience store is one of the more common requests I received.
3. Schools
In the city, families with young children are often obsessed with their children’s education. At times, even to the point of relocating their residences to a neighbourhood nearer to a good educational institution.
Hence, a safe way to invest in real estate is to also consider neighbourhoods with great school systems.
Should I buy the worst house on the best street?
I believe we covered extensively why it is important to consider first the location before we consider the property. Now, another common adage for homeownership is to buy the “worst house on the best street”.
While this saying is not set in stone, there is some truth to the thought process. It is possible to buy the worst property in the best neighbourhood in hopes of flipping the property for good returns after reasonable renovation.
In reality, buying the worst house on the best street may not always work in your favour. This is because premium neighbourhoods typically see lower capital appreciation rates as compared to the growing neighbourhoods.
Personally, I believe this saying is the same as “buy low, sell high”. A premium neighbourhood that is already at its peak value usually has less room for further capital appreciation. Instead, choosing an older neighbourhood that is going through infrastructure transformation might just be key in enjoying the best of both worlds; buying cheap property and having great capital appreciation.
Hence, I recommend buying into older neighbourhoods with properties recently renovated in the past years. To me, this is an indication that a number of properties within the neighbourhood have recently changed hands and the new homeowners are looking to settle down – indicative of good desirability.
At the same time, older neighbourhoods are typically a lot more mature in terms of surrounding facilities and amenities, albeit the outdated infrastructure. If works are being put in place to improve civic infrastructure, there is no doubt that older neighbourhoods stand the highest chance to have strong capital appreciation.
Hence, I believe it is better to buy the worst house in the hottest neighbourhood that is going through further development to the civic infrastructure and facilities.
