Capital gains (go for growth)

Working as a land surveyor, I am exploded to land and property opportunity. Subsequently I also learn some skills from the my clients either from developer, land or property owners.

Recently one of my clients told me that he bought the piece of land I demarcated for him at Tengkera, Melaka only cost him RM300K for 9000 square feet. This amount of money to me is huge because this is a vacant land without any building. Perhaps to this young and rich guy is reasonable because he likes to stay at town area.

The lot located at the heart of Melaka town, 2 schools around this area and government clinic at the main entrance of the lot. Even there are still have some wooden houses at neighbor lot but there is new access due to development (housing project) of opposite lot and a lot of people can enjoy the new access without using the old and narrow road.

During our conversation while I did the survey, he did mention to me that somebody willing to offer him RM50 per square feet for this piece of land but he refused to sell. He easily can gain RM20 per square feet or RM180,000 if he sell the property. This young guy told me the main reason he invest in this piece of property because initially he want to buy the semi-detached just opposite this particular lot but the price is from range RM350K (min) to half a million where the area of the lot is less than 4000 square feet. Thus, instead of buying the semi-D, he bought this vacant land and build his dream bungalow on this lot.

This is why people (my clients) also told me that property usually increase in value because of rising demand as their areas become more popular and mature such like above case or because there is easy access to facilities and infrastructure provided is conducive.

Below are some factors to look out when buying for capital gains property :-

1. Look at surrounding values to determine potential

-Like above young guy, he saw the opportunity of this lot while he want to buy the semi-detached which maybe cost him half a million.

2. Limited supply

-Please bear in mind that prices will rise if the property is in great demand but there is limited supply.

-Sometime the value of the property is seem high but able to sell before start the construction. Normally this project is small less than 4 acres but with unique concept and targeted especially government servants. This group of investor are entitled government of RM200K with 4% interest loan.

-If you want to invest in shop house then the ratio of shop house to residential units should be not exceed 1 : 20. Anything less than 20 would indicate a possible oversupply situation. I noticed that a new development in Krubong, Melaka. This developer only built 2 rows of shop house in front of the frontage with majority bungalow residential. The sale is amazing according to the developer even located far from Melaka town.

3. More land

-According to House Price Index published by Napic, detached houses and semi-detached houses have registered the highest rate of capital growth while high rise properties have recorded the lowest. This information is telling us prefer land title rather than strata title if want capital appreciation.

4. Location

-Most of the people is emphasis on location. Good location usually with expensive rate. Rate of agriculture land normally based on acreage but in potential area such as Hang Tuah Jaya, Melaka. The land owner take this opportunity to raise the rate into square feet instead of acre for agriculture land.

Sometime location not a main factor in determine the value of property. I have a case that involve of a Malay land owner told me on previous years ago, his land value increased tremendously after a road acquisition occurred by state government. The area of the property became less but he happy because he receipted the compensation and the most he enjoy is the value of the land. He is a millionaire if he sell the property.