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Investing In Properties Along The Mrt Lines

When I started on my property journey, I was looking for a strategy to guide my purchases. At the time, the Government was embarking on a plan to build an integrated urban mass rapid transit system (urban metro system) and made it one of the key projects under the Economic Transformation Program (ETP).

The planned Mass Rapid Transit (MRT) lines are meant to improve the connectivity of Greater Klang Valley, thus spurring the nation’s productivity. The MRT 1 will cover 51 km and will stretch from Sungai Buloh to Kajang, while the MRT 2 will cover 52.2 km and will stretch from Sungai Buloh to Serdang to Putrajaya. Phase 1 of MRT 1 from Sungai Buloh to Semantan became operational in December 2016 and Phase 2 (Semantan to Kajang) will be fully operational by July 2017. MRT 2 is targeted for completion in July 2022. 

AN OPPORTUNITY NOT TO BE MISSED

I remember reading somewhere that many Hong Kongers and Singaporeans became millionaires from buying properties located nearby MTR / MRT stations, most notably Mr Li Ka Shing. It is not often that a country decides to build a new urban metro system. As our Government had decided to embark on this journey, I realised that I could not miss this opportunity to capitalise on the MRT play.

Another point I noted was that once a train line is built, it is likely to remain there for a very long time as it would be too costly and almost impossible to dismantle and realign elsewhere. Hence, when you secure a property nearby an MRT station, you would essentially be enjoying the benefits forever.

Also, with the steady increase in petrol prices, properties located within walking distance from train stations would always have an intrinsic value about them, supported by robust demand from tenants who wish to enjoy the transportation benefits. The demand will only increase as fuel costs and traffic woes compound.

Based on this, I decided to adopt a strategy to focus on properties along the MRT line.  

EMERGING AREAS ARE MORE AFFORDABLE

I decided to concentrate on emerging areas along the MRT lines where property prices were still low but would hopefully be “unleashed” once the MRT was ready. I was looking for “rough diamond” areas which are not traditionally on the radar of normal investors.

Besides reducing the competition, the lower property prices in these areas would make monthly instalments more affordable, thus giving a good chance for rentals to match them. People in these areas are also more inclined to using public transportation as compared to those in upscale areas.

 I targeted properties worth RM550,000 and below, as such properties would have a monthly instalment of RM2,500 (based on 90% financing margin at an interest rate of 4.5%). I figured that this was a reasonable rental rate for Malaysians to pay based on a young married professional couple earning RM3,500 each (household income of RM7,000), which was my target tenant market.

Once the MRT is ready, rental and capital appreciation would likely ensue due to increased demand as tenants and buyers become more aware of these areas for their improved connectivity.

EXISTING TRAINS WILL HEDGE YOUR BET

With this in mind, I pored over the MRT alignment maps for the MRT 1 and 2. MRT 1 has 31 stations and MRT 2, 36 stations. This gave me 67 locations to choose from. After removing all the “high end” areas such as Mutiara Damansara, Bandar Utama, Taman Tun Dr Ismail (TTDI), Pusat Bandar Damansara, KL Sentral, Bukit Bintang etc., I still had 50 over locations to choose from.    

In the beginning I thought I could easily dive into one of the 50 locations and buy a property within walking distance from a planned MRT station. However, I soon realised that this may not be the wisest strategy for two reasons:

I would be totally exposed to the risk of the MRT construction being delayed. In the event my property was ready before the MRT line was up, it would be challenging for me to secure tenants as the unique selling proposition of my property (i.e. MRT) would not be ready yet. Tenants may even be put off by the traffic jam caused by the ongoing construction of the nearby MRT.

I would also be exposed to the risk of changes to the alignment of the MRT. To give some context, at that time, the MRT alignment was still in the midst of being finalised and was prone to change. If I bought a property along the planned MRT line and the alignment was subsequently changed, I would be “left in the lurch”, so to speak. Alignment change most notably occurred when the MRT 2 line was shifted from Pandan area and redirected towards Bandar Malaysia, to create seamless interchange with the proposed KL – Singapore High Speed Rail (HSR) station.

To address these issues, I started looking at emerging areas which had planned new MRT stations, but had an existing LRT, KTM or Monorail station to support it. This was key to my strategy as it would allow me to “hedge” my property bets.

Should the construction of the new MRT station be delayed, my tenant would still be able to enjoy the existing KTM, LRT or Monorail. In addition, should the train alignment be altered, I would not be left in too bad shape, as I would still be supported by the existing train.

CRITERIA FOR INVESTMENT

Following the above thought process, I formulated four (4) criteria to guide my property purchases:

New MRT station proposed to be located there.

Emerging area (off the beaten path of traditional real estate investors) where property prices would be relatively cheaper.

Absolute price of the property should be RM550,000 and below to ensure mortgage payments are within RM2,500 per month.

There is an existing KTM, LRT or Monorail station there, which would eventually be integrated with the new MRT station.

Based on these criteria, I studied the MRT 1 and MRT 2 lines. Below are my findings. 

MRT LINE 1 (SUNGAI BULOH – KAJANG)

There are seven areas along this line that have interchanges (i.e. MRT 1 station overlapping with an existing KTM, LRT or Monorail station). Please see attached map. Areas have been circled in Blue.

From these areas, KL Sentral, Pasar Seni and Bukit Bintang are considered expensive areas, hence I did not delve further into them. In my opinion, Sungai Buloh, Taman Maluri and Kajang are promising as they are emerging areas and the properties would be relatively cheaper there.

I especially liked Taman Maluri as I saw that the area was poised for regeneration with Malaysia’s second Ikea branch being located there and Sunway Group constructing its Sunway Velocity mall. Both malls have since opened to much fanfare. MyTown mall has also opened very recently, adjacent to Ikea. In addition, Taman Maluri is very close to Tun Razak Exchange (TRX, two stops away) which is poised to become KL’s next Financial Hub.  

In 2013, I bought a condominium in Taman Maluri which is located 200m away from the new MRT 1 station and 400m from the existing LRT station. My current rental is sufficient to cover my monthly instalment and thus keeps me afloat pending the MRT completion.

MRT LINE 2 (SUNGAI BULOH – SERDANG – PUTRAJAYA)

There are nine areas along this line that have interchanges (i.e. MRT 2 station overlapping with an existing MRT 1, KTM or LRT stations). Please see attached map. Areas have been circled in Red.  

From these areas, I believe that Kepong Sentral, Kampung Batu, Titiwangsa, Chan Sow Lin and Sungai Besi are favourable as they are emerging areas, and not immediately on the radar of property investors. The existing train lines there will provide support pending the completion of MRT 2 in 2022. Also, as the construction of MRT 2 still has some way to go, properties nearby these stations may have a chance of being rented out to MRT Corp engineers (or their engineering partners) who are working on Line 2. You would thus be securing a blue chip tenant during the construction period.

Among this batch, I view Titiwangsa as being the most unique as it will have three (3) train lines – MRT 2, Sri Petaling LRT Line and Monorail, which makes it comparable to Bandar Tasik Selatan and just one line short of KL Sentral. It will certainly be a transportation hub. In addition, the planned redevelopment of Pekeliling flats will provide an added rejuvenation to the area.

Some parties have mooted a plan to build a “Battersea of the East” on the Pekeliling site i.e. mixed development project with malls, offices and residential. I am inclined to think that any project there would be large scale and sophisticated, to capitalize on the great location (Jalan Tun Razak frontage) and transport hub characteristics, and would thus enhance the overall profile of the area.

There are a few condominiums within a 200m radius from the train hub that are relatively affordable at around RM550 psf such as Titiwangsa Sentral and Vistana Residences. Besides their great connectivity, these condos are also currently supported by demand from the medical personnel of the hospitals within the vicinity (Kuala Lumpur General Hospital, Sentosa Medical Centre). A new serviced apartment project will be launched in the area soon that offers smaller sized units (600 sqft. and 700 sqft.) which I believe are suitable for city living professionals who would prefer to utilise a transport hub. I am looking out for this project.  

CONCLUSION

The MRT play is a unique opportunity for investors to buy an irreplaceable asset that will continue to give off benefits for a long time. However, in order to protect ourselves and hedge our bets, we should target areas where a new MRT station overlaps with an existing LRT, KTM or Monorail station. The existing lines will support your property investment pending the full construction of the MRT, and will ensure that you do not go home “empty handed” should the alignment somehow change.

Traditional factors such as affordability of the property should always be kept in mind to ensure that rental rates have a chance of meeting instalments, making your property self-sustaining. Focusing on “emerging areas” in KL would go towards addressing this.

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