Section 3: Understanding Market Value Analysis
When conducting market value analysis, grasping two pivotal terms is essential: Absolute Price and Price per Square Foot (PSF).
Consider a property in KLCC marketed at RM200,000. At first glance, this might seem affordable. But if the unit is only 100 sqft, the PSF becomes RM2,000. Suddenly, it doesn't look so cheap. This example underscores why you must always consider both metrics together to assess true value.
Absolute Price refers to the total cost of purchasing a unit. For example, a condo selling at RM400,000 means you need that amount to own the unit entirely. PSF, or price per square foot, is calculated by dividing the total price by the built-up area. For example, if a unit is 1,000 sqft and costs RM400,000, the PSF is RM400. But if another unit costs RM300,000 for 500 sqft, the PSF is RM600.
Then comes the concept of Median Price. The median is the middle value of all transactions — not the average. For example, if five condos sold for RM300k, RM350k, RM500k, RM600k, and RM700k, the median is RM500k. This gives a clearer picture of market value because it's not skewed by extremely low or high prices.
Here's a practical 3-scenario guideline for buying new projects:
- Best Case: The new project is cheaper than nearby old subsale properties. This is ideal — you're getting brand-new quality at a lower cost.
- Second Best: The new project is priced the same as older units. You're not getting a discount, but you're getting modern facilities without paying more.
- Third Case: The new project is more expensive than the subsale market. This is only acceptable if there's a clear reason — like upcoming MRT stations, commercial developments, or major township growth — that can drive future value.
These are the three key concepts you must always compare when analyzing value:
- Absolute Price: The total price of the unit (e.g. RM420,000)
- Price per Square Foot (PSF): The price divided by the unit size. RM420,000 for 1,000 sqft = RM420 PSF
- Median Price: The middle value of recent sales in that area. If 5 properties sold for RM300k to RM700k, the median is RM500k.
Q1: What is the difference between Absolute Price and PSF?
A: Absolute Price is the full price of the unit (e.g. RM420,000). PSF shows how much you're paying per sqft (e.g. RM628/sqft). Both must be analyzed together to detect overpriced deals.
Q2: Why is comparing to landed properties important?
A: If a condo costs nearly the same as a landed property nearby, most buyers will go for the landed option. Your high-rise should ideally be 30% cheaper.
Q3: What does it mean to buy below the median?
A: If your unit's price is below the area's median sub-sale price, you're getting a bargain compared to most recent buyers.
Q4: Is it bad if a new project is priced higher than old ones?
A: Not always. Sometimes it includes future value like new MRTs, shopping malls, or premium facilities. But make sure the growth potential justifies it.
Q5: Why compare high-rise prices to landed homes?
A: If both cost the same, most buyers will choose landed. That's why your condo should usually be at least 30% cheaper.
Q6: What if the area has both prime and non-prime zones?
A: Median prices may not reflect your specific property's value. Always check the subzone or street-level details.
Q7: Can old condo transactions distort the market view?
A: Yes. Older, lower-priced subsale units may drag down the average. Compare with recent projects to get accurate context.
Q8: Why check asking prices of new projects?
A: Newly completed projects may have no transaction records yet. Asking prices give insight into current expectations.
Q9: Is a low market value always bad?
A: Not necessarily. Some developers price in future growth like new malls or MRT lines. Just make sure it's realistic.
Notes for Beginners
Absolute Price vs PSF: RM400,000 for 1,000 sqft = RM400 PSF. RM300,000 for 500 sqft = RM600 PSF. Don't get fooled by a lower total price if PSF is very high.
30% Gap Principle: Your high-rise unit should be 30% cheaper than nearby landed homes to remain attractive and exitable in the future.
New Project Pricing Logic: Best case = cheaper than old project. Second best = same price. If more expensive, check what justifies it.
Recap Summary Table
| Metric | Description |
|---|---|
| Absolute Price | Total unit price (e.g. RM420,000) |
| PSF | Price per Square Foot (e.g. RM628) |
| Median Sub-Sale Price | Typical resale unit pricing in area (e.g. RM499,000) |
| Median Landed Price | Typical landed pricing in the same area (e.g. RM1.2 mil) |
| Predicted Market Value | What PropertyLab's engine forecasts based on data (e.g. RM422,139) |
| Recent Asking PSF | What nearby new condos are asking (e.g. RM653 PSF) |
Continue to Section 4: Rental Analysis