Monday, 2 November 2015

A Little Crossroad

Every day we are faced with many little crossroads whether we realise it or not. Some are small decisions we can make instantaneously with little impacts on our general happiness, while some can be so significant it would punch a hole on our wallet for some extended period of time if we were not careful enough, and thus our general happiness.

For instance, changing a job, buying a house or car, getting involved in a joint venture deal with a business partner and maybe planning a trip to some exotic destinations. All these are crossroads that would determine your future paths and financial situation.

I was quite risk averse but over the years in the UK, I have become more and more risk tolerant, thanks to the endless opportunities to invest in the UK. I was younger and I was more than willing to absorb a slightly higher risk for a greater return. I had invested a fair amount of about £4,000 in Funding Circle, a P2P lending platform to SMEs in the UK, but withdrew most of it when I returned back to Malaysia.

Now I am facing yet another crossroad: whether I should buy a property now. As you would have noticed (come on, it's everywhere on the news so if you haven't heard anything about it, you should really start reading some news), the economy hasn't been performing well in recent quarters due to the Ringgit depreciation, coupled with some internal and external factors. GST has been introduced for more than a year, crude oil price fell and import prices shot up.

I know I should have been more reserved and conservative on making financial decisions, after all I have just started working for 3 months. Even if I am able to afford a condominium unit doesn't mean I should commit myself so hastily to a huge financial obligation. Everyone I spoke to advised me to wait, and they are mostly right. I should wait a little while before digging myself a hole to jump in. I am still young, and I have more than sufficient time to research through everything I need to know.

The project I have found is called Oasis 1, located at Mutiara Height, Kajang. KAJANG?! Everyone said it's far, but upon calculation it is still within 25km from the city centre. I know it is about 26km away from my workplace, so it is approximately the same distance with my parents' house. There is a proposed MRT located just 3km away from the condominium. I was quoted RM450k for a unit of 1246 square feet, averaging RM361 per square feet. Where to find such a good deal in Klang Valley and Selangor?!

I am seriously tempted.

But here's the catch: Despite being surrounded by 5 highways (PLUS, LEKAS, SKVE, Silk and Saga Cheras), it meant one thing - TOLLS! There are so many tolls. Just last Saturday I went to the TLS Group showroom and I had to drive pass a few tolls. Just recently the toll rates were raised for a range of 60 sen to RM3 in various expressways in Klang Valley. This is madness! The only thing I can rely on is the newly proposed MRT Saujana Impian due to be completed in 2018.

Upon speaking to a number of seniors, it is a general consensus the property market is slowing down and there will be an oversupply of condominiums in the next couple of years. But whether the prices of condominiums will decrease remains an uncertainty. The property prices are likely to fall in hotspots such as Bukit Jalil and Kuchai Lama, as well as their rental yields. If the property bubble bursts, the properties where there are amenities, banks, schools, LRTs/MRTs stations will be the first to recover from the downturn.

There are two aspects a property investor can look at when considering a project: capital appreciation and rental income. So how does Oasis 1 perform in these two aspects? From the capital appreciation perspective, Oasis 1 seems promising. Kajang is growing and it will only continue to grow. It is still within 30km proximity from the city centre anyway. There is a reason why many big boys developers have started looking into Kajang areas for future projects. TLS Group has been here for ages which explains how they claimed their first share of land. Plus there are MRTs coming up, so the transports link to city centre will only get easier over time.

On rental income though, there is no guarantee. Properties located at the hotspots, due to an oversupply of condominiums, may have their rental prices compressed. However, Bukit Jalil area won't seem to be affected too much though, due to the existing Bukit Jalil and Sri Petaling LRT stations, as well as upcoming Technology Park Malaysia (TPM) MRT station. What about Kajang? Again it will heavily depend on the MRT. Oasis 1 is not within the walking distance from the nearest proposed MRT station (about 7 minutes drive), so rental market won't be too appealing.

Verdict: It is up to my purpose of buying the property. If I wish to buy for own stay, maybe it is a good investment. Even if for own stay, whether I am willing to travel this distance every day to office remains another question (maybe not?). But if I want to rely on the rental income to finance my monthly instalment, I may not be able to demand a full coverage and there is a high chance I will need to topup.

Maybe I will just wait and do more research. Also considering Park Hill Residence in Bukit Jalil and LakeVille (Mah Sing project) in Jalan Ipoh. Hope to get somewhere closer within Kuala Lumpur, with fair price and wide accessibility to public transport (LRT/MRT). I definitely have a lot more to learn. I wouldn't want to regret making a wrong financial decision.

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