Given a scenario of Type A and Type B condominium below, both are of the same price, what can you do to compare them? (Read about Terminology here)
For easy illustration, let us assume the below scenario –
| Condominium | Type A | Type B |
| Car Park Number | 2 | 1 |
| Floor Level | 5 | 10 |
- Assuming that there are elements which follows general market preferences, ie. people prefers more car park and higher floors.
Below is the table:
| IPI | Weightage | Type A | Score A | Type B | Score B |
| Car Park Number | 80/100 | 10/10 | 800/1000 | 5/10 | 400/1000 |
| Floor Level | 40/100 | 4/10 | 160/1000 | 8/10 | 320/1000 |
| Total Score | 960/1000 | 720/1000 | |||
| % Score | 96% | 72% |
From this comparison, the Index comparing would be 96% vs 72% base on higher weightage on Car Park (80%) and lower weightage (40%) for Floor level. This assumption is made for illustration only.
If they are of the same price and area, the better buy would be Type A (2 car parks) rather than Type B (1 car park). This decision is simple and you do not really need this index calculation.
However, in real life this is not the case. Let us assume Type A is RM430,000. Type B is RM390,000. Which is a better deal? Bearing in mind that the Developer A knows that Car Park is of higher value than Floor Level and Developer B knows that higher floor should be of higher price.
Then, the Index should incorporate the elements as below:
| Type A Price / Score | Type B Price / Score |
| 430,000 / 96 | 390,000 / 72 |
| Price / Benefits | Price / Benefits |
| RM4,479 | RM5,417 |
From the above, Type A wins hands down as it is cheaper per benefit received. But usually no two properties are of the same size. So, let us incorporate the floor area – which is another key element:
| Type A | Type B | |
| Price (RM) | 430,000 | 390,000 |
| Square Feet | 979 | 1108 |
| Car parks | 2 | 1 |
| Floor Level | 5 | 10 |
| Score | 96% | 72% |
| Price/Sqf/Score (INDEX) | 4.6 | 4.8 |
Hence the better buy is TYPE A because it give the better price per square feet per benefit weightage as per studied population.
In the meantime, here comes Mr David who is selling his unit in Condominium B at RM365,000. Now, do you think Mr David’s unit is a good buy?
| Type A | Mr David’s Type B unit | |
| Price (RM) | 430,000 | 365,000 |
| Square Feet | 979 | 1108 |
| Car Parks | 2 | 1 |
| Floor Level | 5 | 10 |
| Score | 96% | 72% |
| Price/Sqf/Benefit (INDEX) | 4.57 | 4.57 |
At this price Mr David’s unit is about the same as Type A. And, based on the selling price which is cheaper – RM365k vs RM430k, Type B (Mr David’s unit) should be a better deal.
By making a Index comparison between properties, it can present an impartial and unbias comparison between properties – amidst the myriad variables. Despite the difficulties in giving weightage, this method of indexation can assist public in making informed judgment of the properties (or any other products or services) for better investment considerations.
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