There is an old cliché
that there are only three factors that determine the value of a property,
namely Location, Location, Location.
In that sense, where a property is
located is more important than what
the property is when determining the value. Locations in short supply and with
high demand will command high market values.
According to Tim
Harford, “scarcity and bargaining strength are the driving forces within any
market that determine prices, and land and buildings are no different in this
respect to other goods and services. Where there is a shortage of supply and
high demand, prices are driven upwards.” (Harford, 2007)
Given some thoughts on
this, I looked at the land use principles in the Central Business District
(CBD) or Zone (CBZ). CBD is an area that has the highest levels of
accessibility and complementarity. It is a relatively small sized area and
demand from users are intense due to the advantages of its location, it will
enjoy peak land values. Commercial uses such as offices, retail and certain
leisure uses (example, entertainment and exhibition centres) will gather in
this area. Hence, the intense competition for space and high land values will
severely restrict the amount of residential property in this CBD area. If those
residential units that do exist, they will command high values, particularly if
in good conditions.
Now, using the principle
of supply and demand to find good value of residential property in the CBD area
may not be a difficult task for an investor. But, the process of doing it (i.e.
from soliciting to negotiating; from transferring of ownership to obtaining
financing; and from finding tenants to managing your investment property) is
not an individual work. It’s a collective effort.
What is your thought on
this?
Please feel free to share your thoughts and views in my Blog or Facebook Page
I look forward to hearing your valuable insights.
Stay safe
and keep healthy.
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