BY Chris Prasad
By now, most Malaysians would have come to terms with the fact that the economy is not as healthy as it once was, and that it may take some time before we return to solid ground.
Naturally, in the current environment of uncertainty, many of our countrymen can’t be blamed for shying away from investments, but a dip in transaction eventually results in a whole new set of problems.
Most economists will tell you that a lack of monetary injection into the market will only serve to make a slow economy come to a standstill. But more than this, they also argue that a slow economy is precisely the time when individuals should be looking to safeguard their wealth. External inflationary pressures will continue to devalue the ringgit and the current fixed deposit rate of about 3.3 per cent is hardly enough to cope with an inflation rate that is creeping towards the 5 per cent mark.
It is a universally accepted truth that property represents one of the safest and most certain forms of investment available to modern society, provided it is utilised and approached correctly. For too long, many in the local market have viewed property investments as a rapid wealth generator and capitalised on rapid price shifts to flip the asset and make a quick ringgit. From that perspective, a property investment certainly looks risky right now.
But if you are looking for something other than a quick fix to your long overdue credit card bills, then property has long been – and always will be – a safe haven that can see your investment grow in the medium to long term; by generating rental yields that can match the inflation rate and providing you with the kind of capital appreciation that can surpass it.
Historic data show that properties in Malaysia can grow in value by at least 50 per cent over a 10-year cycle, regardless of any economic downturns we have faced in the past (yes, for the benefit of the youth, this isn’t our first). In areas that have undergone growth booms within these cycle periods, property values have in fact escalated by 100 per cent or 150 per cent.
It is important to remember that history, just like the economy, works in cycles.
One example is the township of Puchong in Selangor, where a growth boom in the early 2000s resulted in a phenomenal rise in property values. Between 2001 and now, which is less than two decades, the price of an average terrace house has ballooned by about 250 per cent.
Ironically, Puchong is now on the cusp of a second boom as improved connectivity has now given it fresh appeal as an alternative gateway to the south of the Klang Valley, the importance of which will be discussed in the contents of this article.
First, let us establish that even if prudence governs our investment judgements in these troubled times, the astute question we should ask ourselves is not “if” we should engage in a property investment, but “where” we should do so.
On that count, there are indeed a number of viable options, but none that provides as much certainty as the on-going southern expansion of the Klang Valley. Here, growth isn’t just promising… it is inevitable.
The reasons are many, but they can probably be summarised in three groups of important factors: population and geographical pressure; the Putrajaya-Cyberjaya-KLIA cluster; and Seremban’s own expansion needs.
The ease of southern conurbation
The easiest way to explain the development focus in the southern region of the Klang Valley is that it is the most conducive path for growth. While plans are already afoot to enhance development activity to the north of KL, the overall enthusiasm about expanding northward doesn’t seem to be on par with the south (yet).
Geographically, this can be explained by the topographical challenges along the northern route, where developers have to contend with a terrain that is largely hilly and rutted, which ultimately results in higher development costs.
Meanwhile, prospects are limited to the west as you eventually run into the Straits of Malacca, and the east is blocked by highlands and protected forests beyond it.
By contrast, the southern route is relatively flat and free of encumbrance all the way to the tip of the peninsula, making it conducive for the built environment. Historically, this has resulted in the mushrooming of numerous rural communities along this stretch, and the proximity of Seremban has been a catalyst for continuous infrastructure improvements linking the Negeri Sembilan state capital.
The need for expansion is of course closely linked with the immense population growth being witnessed in the Klang Valley, driven by annual migrations into the capital district and outer lying cities by those seeking jobs within Malaysia’s most economically vibrant region.
The current Klang Valley population is 7.2 million, representing about a quarter of the country’s total population. By 2020, the population is expected to hit 10 million and urbanisation is expected to reach 70 per cent. At this rate, Klang Valley will be home to about 20 million by 2030.
As a result, authorities on both national and state levels have recognised the need to ease the infrastructure pressure in centres such as KL, Petaling Jaya and Shah Alam and pursue a more sustainable course by promoting a Greater KL/Klang Valley vision. This, in turn, has further intensified development activity in the new frontier.
Other than the most obvious growth trajectory along the North-South Highway, recently established links such as the Maju Expressway connects KL City directly to the south, while the Putrajaya-Cyberjaya Expressway is transforming the already booming Puchong township into a major alternative southern gateway.
From a property investor’s perspective, it is not just the neighbourhoods that lie close to these links that stand to gain from enhanced values, but also the new ones that emerge along the way.
Golden Triangle of tomorrow
Although the KL-Seremban link can be credited for initiating growth along this path, it is what lies in-between that has truly propelled the intense development activity that it is currently witnessing.
The triple economic hubs of Putrajaya, Cyberjaya and KL International Airport have been dubbed by some as the Golden Triangle of the future (although the term, metaphorically used, as plotting these three points, would result in a hideous looking triangle).
What is clear, however, is the fact that these three focal points have created jobs, attracted new industries and nurtured fresh commercial activity; and they are likely to continue to do so in the foreseeable future. This creates an environment conducive for sustainable growth in surrounding areas.
To their credit, many developers have also seized the opportunity to provide homeseekers with lifestyle options that are difficult to attain within city limits these days, further enhancing the appeal of relocating to healthier and greener surroundings.
Cheaper land prices mean developers can spare land to create larger homes, parks and green environments, attracting young families and up-and-coming professionals to a new economic growth sector that requires an intelligent workforce.
The Federal Government’s presence in Putrajaya offers numerous opportunities for the public sector, while Cyberjaya’s status as the country’s premier cyber city continues to attract both foreign and local knowledge workers and investments.
Importantly, KLIA represents a huge economic hotspot as key airports around the world have traditionally become fertile ground for increased economic activity in surrounding areas. More than job creation and a boost to logistic industries, airports can be an immense catalyst for commercial activity in immediate and nearby vicinities.
Seremban’s economic ambition
Just as KL reaches out to connect to the Putrajaya-Cyberjaya-KLIA hub, so too will Seremban – and for very similar reasons. Having spent a protracted period in relative slumber, Negeri Sembilan is now eager to partake in the wealth future economic hotspots will bring, and it is already visibly doing so with developments stretching out of its northern border to connect with important economic trigger points.
In fact, property prices in new growth areas along the fringe of the state capital city have seen better price movements in over the last five years than those locked within its traditional boundaries. This suggests that from the Seremban perspective, locations more conveniently linked to KLIA, Putrajaya and KL are perceived to be more valuable.
Many of these new satellite townships are also creating added value for themselves by conceptualising communities that are green, self-sufficient and offer convenient access to key national traffic arteries – such as a dedicated interchange.
The result of this northward urbanisation drive is a likely connection to Klang Valley’s southward push, and Malaysians may eventually see the birth of a megalopolis spanning across the borders of the Federal Territories, Selangor and Negeri Sembilan.
At the centre of this seamless urban expanse will coincidentally be the national administrative centre of Putrajaya. Perhaps this was the master plan all along.