Property Hunter Magazine September Issue 2014 | Page 88

/// Hot Topic

PRIME DEVELOPMENT:
Making the case for Prime Development Investment

/// HOT TOPIC

Jesselton Residences

P

rime developments are often associated with
long established cities with a stable history of
urban growth and sustainability. Depending on
which report you read, it could mean any city from
London to Calgary, Zurich, Melbourne or Dublin.
And depending on what you are interested in,
anything from an African game lodge to a New
York cityloft.

The Loft

But are they a safer investment option compared to other
standard properties?
“Not necessarily so. But it is not so much a question of safe.
The focus should be on one’s investment strategy. During
recession, a property may fall vacant leading to loss of rental
income and inability to service loans, if the investor is highly
geared. If one’s investment strategy is to speculate, he may get
into trouble during a recession, possibly selling his property
at a loss. Generally, one should buy or, rather, borrow within
one’s means. “

In a nutshell, defining the meaning of prime
property is not as easy or simple as it sounds.
Cornelius Koh, Director of CH Williams Talhar&
Wong (Sabah), says that there is no official
definition of ‘prime development’.

There has been some strong indications as to the resilience
of the prime property market. During the economic slowdown
that impacted the UK housing market in 2008 as a result of the
US housing bubble burst, properties at the top end remained
largely unaffected by the turmoil.

“In my opinion, prime developments are those that
have the combination of size, value and location not necessarily ‘100%’ for each aspect, but a high
degree of these features,” he says.
Prime developments are typically larger
developments with high(er) values (especially in
terms of value per square footage) situated in wellsought / established locations. Examples include
Jesselton Residences, KK Times Square Phase 1 &
2 and the likes of these.”
According to Knight Frank in its The Wealth Report
which tracks what they consider the most sought
after property markets around the world, the term
prime property equates to the most desirable, and
normally most expensive, property in a defined
location. Commonly, but not exclusively, prime
property market are areas where demand has a
significant international bias.

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The key would here is desirable. Not every very
expensive property will be luxurious and often,
especially in built –up area, what investors are
paying for is the view or the location.
To invest in property, there will be profit to be
made now and in the future – just like it has been
for many years in the past. The only difference is
that you have to find out where the profits are.
It is a search that has to be guided by what you
expect out of your investment. Koh commented
that investing in prime developments or locations
would be a good hedge against inflation but where

investment is concerned, there is always the
consideration of immediate returns in terms of
rental returns and long term capital gains.
He adds, “One must look at a combination of these.
In most cases, after a certain gestation period, the
property will appreciate in value and those that are
rented out would generate returns, although the
margin of appreciation and rate of return would, of
course, vary. Some investments may also require
a longer period but some only take a short time
before they see significant gains.”

Naomi Heaton, chief executive of London Central Portfolio
Limited, was quoted then to say that the prime property
market was unlikely to suffer from the same problems as the
mainstream market. She attributed this to the fact that prime
properties were “largely held by long-term owners, either as
second homes or as rental investments”.
With regards to the luxury home market, Ms Heaton was
quoted to say that low loan to value (LTV) ratios in wellstructured investments and long-term mortgages that have
largely been paid-off mean that repossessions are minimal and
distressed sales are few and far between.
The property market in the UK has remained a top choice
for many international investors not only because of its
stable growth but also for its ability to adapt itself. In a recent
interview with OPP (Overseas Property Professional), a leading

Jesselton Twin Towers

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