Your Property

Location! Location! Location!


Whether you are the owner or the Banker, location plays a key role in determining the sale-ability of a property. The built of the house, condition (if you are buying second-hand), nearby amenities, road infrastructure, distance to main centres of activities all play a part in determining the attractiveness of a property. This attractiveness will also be looked at by a bank in financing a property, as it effect directly the value of the property in the long term.

The way a Bank sees your property is directly related to the property value, especially the expected value in times of default where the property needs to be auctioned. The so-called forced-sale value is therefore very important for a bank, and you can see in all your property valuation report for a second hand property, the financing amount is hardly above the forced-sale value.

So what affects the value of your property and its attractiveness to the Bank?

Developers – Banks have a list of reliable developers who are known for their quality of workmanship. Properties developed by these established developers tend to fetch a higher price and will always be in demand by consumers. Usually, these developers have been around for decades and they are judged by their previous development and demand for their properties. For example, the established neighbourhood of Bukit Damansara or Taman Tun Dr Ismail or Bandar Utama are developed by established developers. However, do not be discouraged of the newer developers, some of them are really high quality but usually the banks will be aware of such developers via the bank’s panel of valuers.

Distance to Centres – Location is a key factor in determining the value of a property. If a property is too far from a the business centres, commercial areas or even city centres, there could be huge impact of the property value going forward. With banks, these values are crucial and consider such properties sub-prime if it is too far from such centres without an efficient road network. The question for banks is how desirable such properties are 10 years down the road.

Areas – There are areas where disaster always strikes the housing area or a particular property, either disasters due to natural elements or man-made or even a combination of both. We do realize these events reported in newspapers and other media regarding property. Flash floods and landslides are the key culprits, and some of them are compounded by human errors such as failure to provide drainage or earthworks. This greatly affects the value of the property, especially if there are damages to the property. Also, houses in higher risks areas also reduces the price of the house. Residential areas next to factories or industrial areas or water treatment plants or cemetery commands a lower price than many other properties.

Infrastructures – Very important consideration is the infrastructure of a development site. Over-time, there could be issues of Access Roads due to poor town planning, imbalanced amenities and support infrastructure and also traffic congestion. Areas with quick access to highways or major road network commands a better price, even if such network involves a toll booth!

Future Developments – The overall development of the area should also be considered. Look at the centre of development and see if development is coming or heading your way. For years now, the development in the Klang Valley has been moving south-westerly and also towards the north-west of Klang Valley. These shifts change over time and it is important to see if the development moves toward your property as well.

Leasehold Land – An important consideration is to determine if your property is under leasehold land or freehold land. Banks value freehold land more than a leasehold land, although I see in many cases, some leasehold land are better than a freehold land in terms of location and future development. Nevertheless, the shorter the leasehold period a property has, the lower the value of the property to a bank. As a rule of thumb, any property lesser than 30 years leasehold remaining is deemed high risk property; banks would decline such applications. Some banks have even stopped accepting a 40 years remaining leasehold properties.

Blacklist Areas – I am not sure how banks come up with this list, but generally, certain areas are blacklisted for financing of properties due to the poor track record of the property value. Certain areas have shown consistent decrease in value due to various factors and the declining trend is expected to continue. Such properties usually will face problems in disposing the house at a good price and may even have difficulties securing rent. Such areas may also have some abandoned projects and generally shows the signs of decline as more and more residents move out and put up signs “for sale or rent”. Banks are informed of these areas by panel valuers.

Of course, the above does not mean in all cases, your loan application will be rejected because of the property. It could also mean your loan may still be approved with a lower financing amount, provided your other criteria is met. Remember, the main reason where bank looks at property value is because of its disposal value at the end of default.

The question is “During auction, will the bank be able to get a buyer for the house at the right price?” That is the question you should be asking yourselves as well.

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