Colin Tan is a top Analyst, Sales and Marketing Consultant, and among the most recognised personalities in the real estate industry.
There’s an old Chinese saying that many of us grew up with; “Good things don’t come cheap, and cheap things don’t come good”. Then, why has it become a common approach by many to constantly look for cheap properties? Is looking for cheap properties the right approach to buying a property, especially if you are buying for yourself to live in? I hope that you’ll start to change your thinking after reading this. Obviously, the best properties in a neighbourhood will also tend to be the most expensive – a lot of the time. But, here’s why you should buy them if you can afford them. You can refer to the illustration I’ve shared.
1. The best is only one while the rest are aplenty
In most neighbourhoods, you’ll find many developments that are priced neither as the highest or lowest. Generally, a property recognised under this category would be more affected by any oversupply in the market. Competition from such sellers and landlords could therefore affect rental yields and capital appreciation because of such competition. The most expensive properties also tend to be rare, just like a limited edition timepiece versus a mass produced watch.
2. Quality and desirability
When planning for a development, developers would always fear overpricing. This may surprise some but this is one of the biggest fears for a developer which is to start construction without selling sufficiently. A few good developers will try to overcome the competition by building more expensive properties and providing for better quality of life to make them the pride and joy of buyers owning the best properties in terms of architectural beauty, quality of construction with high specification backed by a strong name and setting the development apart from the competition. Unfortunately, most poorly trained real estate agents fail to have buyers’ understanding on this and cause buyers to think these properties have been overpriced and hence, end up going elsewhere and buying something that they may regret later on.
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3. Higher value perception leading to higher offers
When a development is completed and placed on the market, subsale agents and residents of the neighbour would constantly comment to people looking at the property that “This is the most luxurious” or “This is the most expensive” development in this neighbourhood. This not only gives potential buyers a greater sense of want but they will immediately understand the need to pay more for the property. On the flip side, you do not want people going by your property daily saying: “This is the cheapest development here”. In the same token, regardless of how beautiful a painting might be – if it’s bought for a few hundred dollars, it is very unlikely that prices will appreciate. We have often seen paintings that don’t excite us. Yet, if it’s been sold for millions, the price would more likely increase.
4. Building the right network
What many average people fail to see is the life enhancing value of being in the most expensive development (most expensive neighbourhood). This immediately places the children in an environment where the neighbours’ children are from good financial standing backgrounds. This can play a very important part in securing the future of your kids being around the right network. As we do often hear, it’s not just what you know but who you know. Given the chance and when one can afford having their kids growing up in the most expensive neighbourhood or development, this option can’t be bad at all.
5. The best or most expensive properties determine their own value
Finally, looking at the illustration, if you are the owner of Development H – you cannot ask for prices which are the same as Development G. Development G has to wait for Development F prices to increase before its price can go up. If development G owner wants to ask for higher prices, buyers would rather buy a unit in Development F. However, owners of Development A – being the best, does not need to wait for any development to increase in price to ask for more.
So there you go: In every aspect of a product purchase, people always want to buy a Chanel or a Louis Vuitton or a Charles and Keith item, or a Mercedes over a Perodua – if they can afford it. Yet, for some strange reasons, property buyers seem to think people prefer cheap homes. Why? I would say that this boils down to the poor quality of most real estate agents in the industry.