What Experts Say: A Challenging Landscape for Property

Ringgit depreciation

The Malaysian property market has been hit by various factors, amongst others the implementation of Goods and Services Tax (GST) on 1 April 2015, government-led cooling measures and tight bank lending restrictions under Bank Negara’s new responsible lending guidelines. In addition, the Ringgit has breached the RM4 mark against the USD to close at RM4.196 per USD1 as at Tuesday, 25 August 2015. Amidst all challenges and weak economic sentiments, what does this mean for the property sector?

Increase in foreign investors

Guocoland (Malaysia) Bhd’s managing director Tan Lee Koon commented in July 2015 that a weaker Ringgit will attract more foreign investment into Malaysia’s property sector. Tan says that Guocoland has received encouraging response from overseas buyers, in particular Singaporeans and Cambodians, in connection with the more favourable foreign exchange rates on their part.

In conjunction with the above, the property market saw a marginal boost in Iskandar Malaysia as some Singaporeans took advantage of the favourable exchange rate to purchase properties there. Certain projects in the KLCC area saw good take-up rates from foreign investors who saw this as an opportune time to enter the market. Edge Weekly had reported that the weaker currency placed Malaysian commercial properties under the global spotlight.

Demand remains stable despite economic challenges

The CEO of Ensign Media (an awards organiser and publisher of Asia’s industry-leading Property Report magazine), Terry Blackburn, noted that Malaysia’s property sector remains one of the most dynamic markets in the region, as proven by price growth in the past year and a highly active 2Q2015 transaction volume on the back of the long list of hindrances.

According to Andaman Property Management’s Managing Director Datuk Seri Dr Vincent Tiew, despite the challenging landscape, demand in Malaysia’s property has remained stable and investors still continue to purchase and place bookings on new projects.

Positive outlook

Knight Frank (an independent real estate consultancy) stated in their Malaysian Real Estate Highlights report for 1H2015 that several high end condominiums in Kuala Lumpur were completed in 1H2015. By 2H2015, an additional 13 projects are expected to come on-stream. Knight Frank observed that there were noticeably more previews and launches in 1H2015 compared to 2H2014 despite the cautious market sentiment amid the weaker economic environment as highlighted above.

To tie in, Eric Kho, president of the Malaysian Institute of Estate Agents (MIEA), estimates that construction cost had increased by up to 15% and speculates that some developers may hold back on launching new properties. Further, projects that had already been launched come with huge discounts to attract buyers. Buyers can also expect cheaper prices of between 5% and 10% in the secondary market, depending on location. Kho expects this situation to be temporary and that property in Malaysia would eventually appreciate, and notes that “holding property is always better than holding cash”.

We leave you with a quote from Khalil Adis, a property journalist: “the best hedge against it (the current economic situation) is to invest in a property and focus on capital appreciation. I believe that is the best bet for Malaysians right now.”

Sources: Bernama, The Star, Knight Frank, IProperty

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