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Malaysia's market recovery augurs well for investors
THE Malaysian residential property market has experienced five consecutive years of slowdown in terms of declining sales volume since its peak in 2012. However, the falling sales volume did not drive down the total value of transactions until 2015.
The average residential property value per transaction still edged up each year albeit with a slower growth rate.
Residential property price performance
Among the key property markets in Malaysia, residential properties in Johor performed well in terms of price growth, with a 9.8 per cent compounded annual growth rate (CAGR) from 2006 to Q1 2018. This was followed by Penang with a CAGR of 8.0 per cent and Kuala Lumpur with a CAGR of 7.8 per cent for the same period. Both Malacca and Selangor registered 6.7 per cent and 6.5 per cent growth per annum, respectively.
The average residential property value in Kuala Lumpur was RM797,000 (S$264,747) as at Q1 2018; followed by Selangor at RM465,000; Penang at RM421,000; Johor at RM339,000; and Malacca at RM249,000.
Foreign investment policy in Malaysia
Malaysia has a friendly foreign investment policy especially for residential properties:
- Firstly, foreigners are allowed to purchase and own residential properties in Malaysia which cost as low as RM500,000 and above;
- Secondly, foreigners are allowed to own leasehold as well as freehold residential properties in the country;
- Thirdly, foreigners are allowed to own both landed and strata properties.
The above may vary by state, as land is a state-governed matter. Hence, all the acquisitions will require the state authority's consent.
The various minimum price thresholds imposed on foreign purchases of residential property are set out in the table.
The property market in Malaysia has already been subdued for five years since 2012 and we do not expect the situation to improve rapidly in 2018. Nevertheless, we reckon that there are still pockets of opportunity for homebuyers and investors to look into, especially in this soft market.
In the secondary market, we observe that there are many value-buy residential properties already made available in recent months.
Some of these are in the sought-after locations, which previously did not have many good units available for sale. The asking prices of these properties are also reasonable.
In the primary market, we observe that developers are offering more incentives than before for their projects such as cash rebates, freebies (free maintenance fee, legal fee, stamp duty, electrical appliances, etc) and lucky draws.
Homebuyers and investors may benefit from the low-entry cost in acquiring property.
Nonetheless, there are key factors that will shape Malaysia's residential property market in the longer term:
- Increasing population and household formation;
- Increasing household income;
- Increasing job opportunities;
- Improvement of public transportation connectivity with the boost of rail line projects (such as MRT2 and LRT3 in the Klang Valley; JB-Singapore Rapid Transit System in Johor; LRT line in Penang Island) .
Amy Wong is head of research and consultancy at Savills Malaysia.
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