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Despite lack of transparency, real estate investment in Malaysia can be profitable

Article: real estate in Malaysia much more affordable than other cities in the Asia Pacific.

The Malaysian government’s “Malaysia My Second Home program” provides foreigners easy entry (a multiple-entry visa valid for 10 years), and makes Malaysian property attractive to Singapore investors.  An added inducement is the local finance also open to foreigners that can be available for as much as 90% of the property value.

Source: MalaysiaPropertyNews.com

Source: MalaysiaPropertyNews.com

Real estate prices have touched record highs in Singapore and investors have turned as a result to Malaysia for investment opportunities in real estate.

The price of luxury properties in Malaysia is only about 1/5 of the price in Singapore.  In addition, the strengthening of the Singapore dollar against the Malaysian ringgit is an added incentive for Singaporeans to invest in Malaysian real estate.

As in many other countries, successful investment in Malaysia depends on:

  • Location of the property
  • Standing of the developer

A well-regarded developer combined with a decent location can result in capital appreciation of up to 30% on the completion of the development.

  • Kuala Lumpur, Penang and Iskandar, which is in the southern state of Johor, are among the favored locations for investment for foreign investors.

Commercial real estate

The market continues to be good despite pressure from new completions and a reasonable supply.

The retail sector is driven by:

  • Expansion of existing brands
  • Influx of new brands.

In fact, Kuala Lumpur is now rated as the fourth best city for shopping in the world and the second best in the Asia Pacific region.

The hotel sector also continues to be buoyant on the back of government initiatives designed to boost tourism.  This holds true as well for the Kuala Lumpur office market, despite the enhanced supply and the wider the choice for tenants.

  • Rents continue to be stable despite a small decline in occupancy.
  • During the recent past, the cumulative supply of office space in Kuala Lumpur was distributed at  48 million sq ft while in the fringe, cumulative supply was steady at 17.5 million sq ft.

Residential real estate

Housing prices have continued to rise but the rate of growth has slowed down because of the slowdown in GDP growth and, during the last decade, prices have been in line with the growth in inflation.

  • The condominium market has been active especially in Kuala Lumpur, Johor Bahru, Kota Kinabalu, Kuching and Penang.
  • Despite strong demand, oversupply remains a concern.

CBRE estimates that around 2300 units were completed in 2012 half of which are located in the Kuala Lumpur City Centre.

Meanwhile, the supply of terraced houses, semi-detached houses, and bungalows remain strong.

Branded housing is the latest trend in the luxury housing segment. In the mainstream market, however, the trend continues towards home sizes to meet first time buyer demand.

The bottom line

Kuala Lumpur is relatively inexpensive compared to other cities in the region and prices are about 5 times lower than Singapore and around 2 or 3 times less expensive than Jakarta or Bangkok.

There are good prospects for capital growth but you should ensure that you carry out proper research before you invest because one major risk is the opaque nature of the Malaysian real-estate market. According to the 2012 Global Real Estate Transparency Index, from Jones Lang LaSalle, Malaysia is ranked 23rd, 10 places lower than Singapore.

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2 comments on “Despite lack of transparency, real estate investment in Malaysia can be profitable

  1. Pingback: Malaysia and the Transparency Propblem | Commercial Real Estate Finance

  2. Danny Nguyen
    June 24, 2013

    Real estate investment is good for a booming place like Malaysia since it gives foreign investments to look at the business portfolio of the said country.

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