PROPCAFE™ Guide : Home is the Value

We seldom speak about property philosophy not because we do not want to, because we don’t know much about it, we admit. This is not the only main reason we don’t talk; most of them when they talk, they think they know everything.

Recently we hear something on the topic of property value and the scariest thing to hear is not about what they know but the thought of they think they know it all. Since today is weekend, my fellow friends and investors, let’s have a small talk here. In your mind , what is property value to you?

What factors determine property value? First of all, lets talk about residential property under schedule H for example serviced apartment, landed property, condominium because we believe this is what commonly owned by most of us.

Why do you think a residential property value increases? We just talk on the most fundamental and basic here. We all know land scarcity, location, amenities, connectivity and etc. Let’s put all those complicated, fancy, hi-tech, bombastic things aside.

The main reason we asked this because someone told me rental yield is one of the factor which deciding or influencing the property value. If a residential property gives you a high rental yield, the property value will appreciate. What do you think?

Technically, is not wrong in the above statement. However at this juncture, we would like to ponder a bit deeper because we think many people actually got confused.

It is empirical that the residential property value will determine the rental value and not necessary the rental value will determine the property value. We can’t solely use rental yield as the factor in determine the residential property value unlike commercial property like shoplots, warehouse or factory.

Recently we hear a lot of new fancy concept to apply the commercial property concept into residential property in order to obtain high rental yield like sublet the rooms by transforming or optimizing the unit layout to maximum number of rooms in order for better capital appreciation in the future. Well, if you own a commercial building or warehouse or a hotel or any single building for commercial purpose, then this is something logically should be done. However if you doing this to your residential property especially strata property like high-rise, in long run it will hurt you more as owner and other owners who share the same building or same walls with you.

There is always an exceptional to everything, for example residential-hotel combination property. But this kind of property normally had been well planned beforehand, (please take note : is BEFORE and not AFTER) to blend the concept effectively to increase the property value for instance the matter of welfare, privacy and exclusivity of the owners, residents are being protected and more often if not managed by a well-known 5-stars hotel operator. So let’s not complicate our discussion and back to our original discussion since this type of property is not our focus at this moment.

Bringing commercial value appreciation strategy into a residential property will only disrupt the harmony and appreciation of the residential property value. Someone told me, the tech disrupt the world in a good way for the future, however we would like to remind, no matter how the world changes or advance with tech, the core value of Home has been remaining for thousand years although the definition evolves with time

Home value is timeless, although the definition of Home changes with time.

Other than location, community and people living in and out of the building itself is equally important for a healthy capital appreciation. A balance and harmony relationship, community, quality of tenant and residents, and effective and responsible JMB plays an important role as well. Those are the intangible quality and asset of a good residential property.

There is a reason why we don’t call hostel, dormitory or hotel as Home, because these places lack of quality mentioned above. They are merely strangers living under the same roof.

Home is Home. Home is the Value.

And I can proudly telling you all I am going Home now, my Home is waiting for me Just like the song “Take Me Home, Country Roads” by John Denver

Good night.