This seems to be a popular question: “For property investment, isn’t it better to buy landed because land is scarce while high-rises can just be built ever higher.”
In many mature neighbourhoods, whenever unused land is available, it’s usually very small pockets here and there.
Even for redevelopments, it’s usually that particular development which will be torn down and redeveloped.
Thus, there are no huge tracts of land like those of newer townships by many branded developer these days.
Let’s now look at the price as well as affordability of fellow Malaysians.
1. Property prices
When we look at property prices and factor in inflation numbers, it’s plain to see that property prices will keep rising due to construction costs including land, manpower, materials and even possibly compliance costs.
With this in mind, whether it’s landed or high-rise, both will have to have higher prices unless… see number 2 below.
2. Affordability
At any point in time, there’s a limit to price affordability. This will be the driver for property prices.
For example, the Khazanah Research Institute says that based on median household income, for homes to be affordable, it must be priced slightly above RM200,000.
If they are to repeat this every year, this number will show an increase over time.
In other words, whether it’s landed (which is more expensive) or high-rise (which will be very common), both are worthy investments if we buy and wait versus waiting to buy.
3. High-rises are common because…
With a growing population due to urbanisation and with Kuala Lumpur as a capital city and Greater Kuala Lumpur as a good place for work, rest and play, demand for properties will grow.
However, the majority of these younger working professionals with a tertiary qualification and a few years of working experience will still be within the M40 households.
In other words, most will aim at a high-rise unit instead.
4. Preferences are changing too
Even for landed, for those who can afford one, the younger generation are looking at clubhouses, facilities and security.
Having landed property within an old neighbourhood is not exactly the best choice for many these days. That’s why even if they buy into the neighbourhood, they may rebuild the homes they buy.
This is why most newer and modern landed developments have these features, and the prices as well as the monthly maintenance fees are definitely higher than from many years ago.
To answer the question of whether buying landed is better than buying a high-rise, the answer may be to just buy if you can afford it and enjoy what you buy because when the tide comes in, it does not usually bring just the big boats.
When the price of landed doubles every “X” number of years, the prices of high-rises will be rising too, even if many will argue that it won’t be as high as that of landed properties.
The only wrong choice is to keep all the money under your bed simply because you are still evaluating whether you should buy landed or high-rise. Or the WRONG property, regardless of landed or high-rise.
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.