Lock, Stock & Barrel: The Rise of Second- and Third-tier Locations

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This article first appeared in The New Straits Times on May 22, 2018.

A FEW weeks ago, a property magazine ran an article on the growing popularity of locations outside the popular tried and tested urban and sub-urban areas. The focus of that article was on locations which were considered further away from the nucleus and why, in recent years, these properties had not just become popular, but had also grown in value.

Not too long ago, if a developer launched properties in an area outside the popular residential belt, they would find it an uphill task to market these properties to the public. House buyers and investors alike were only keen on properties that were located within established neighborhoods that showed clear potential to increase in value. Locations like Bangsar, Petaling Jaya, Taman Tun Dr Ismail, etc. fetched top dollar, and demand for these properties far exceeded their available supply.

Then came the likes of Bandar Utama and Desa Park City. These properties were situated outside the popularly accepted choice locations but nevertheless managed to do exceptionally well for themselves through a combination of developer’s track record, quality of product, careful planning and an interesting concept. Over the next few years, these and other similarly categorized properties grew in popularity while their values went soaring skywards. Soon, the tried and tested myth of “location, location, location” was shaken. Shaken, but not quite shattered.

As prices of properties in the popular locations continued to rise, and as developers found it more and more difficult to purchase land in these established locations, the idea of the perfect location continued to be tested sorely. Developers started to consider land purchases in locations further away from the city and its immediate suburbs.

Suddenly, locations like Cheras, Puchong, Kajang, Kepong and Selayang become wildly popular. The ever growing population of the Klang Valley lapped up whatever was in store and developers and property investors were singing all the way to the bank.

The tiger economy of the 80s and 90s were upon us. Property prices continued to soar and it looked like the proverbial bubble did not exist in the Malaysian property market context. As the market continued upward, prices of properties in these established neighborhoods started to become too expensive for the vast majority of the middle class. Developers were then forced to change their strategy and as part of that change, started to look further afield for suitable development sites. Second-tier locations like Rawang, Bukit Beruntung, Semenyih, Seremban, Banting, etc. started to get onto the radar of these developers.

Suddenly, location was not the “be-all and end-all” of the property industry. Location was still important, but other things also needed to be taken into consideration. Connectivity was a fast-growing criterion for the new breed of buyers. It didn’t matter if their property was located further away. As long as there was a good network of roads and rail that connected these properties to the city, buyers were perfectly happy coughing up their money. The fact that these properties were priced substantially lower than those in established neighborhoods simply added to their popularity and attraction. The middle class lapped up these properties as fast as developers could launch them. And thus began the rise of these new locations.

Today, many of these so-called “second- and third-tier” locations are firmly established residential and commercial areas with a host of amenities and services, public transport, trains, and a vast network of first-class roads that serve these neighborhoods. Malls, F&B outlets, and other leisure activities are easily accessible from the neighborhoods.

As prices continue their upward journey, we will have no choice but to look further and further away for our investments and homes. Soon, many of these locations will no longer be considered to be in the outskirts.

If you are beginning your property investment journey, do not be afraid of these so-called “further way locations”. In time, these locations will improve in popularity, and prices of properties in these areas will continue to grow.