Grey Clouds or Silver Linings? Cautious Optimism for Malaysia’s Property Market
With the reopening of China’s borders and economy on 8 January 2023, real estate players in Malaysia are hopeful that this signals a return of Chinese investment in Malaysian properties. Already, some realtors have observed more transactions, with China buyers making moves on properties they were originally interested in before the pandemic hit. Property agents in Malaysia have also reported an increase in inquiries for condos.
Visa schemes aimed at attracting foreigners to invest, work or study in Malaysia, such as the Malaysia My Second Home (MM2H) programme and the Premium Visa Programme (PVIP), have also provided Chinese nationals with more incentives when purchasing properties in Malaysia.
“For middle-class Chinese property buyers, Malaysia is an appealing choice with quality and affordable healthcare and education, especially when compared to Singapore. There are also cultural similarities between Malaysia and China such as the use of Mandarin to communicate,” said PropertyGuru Group’s Director of Special Projects Winston Lee.
Through an analysis of the browsing behavior of Anjuke users who search for overseas properties and navigate Malaysia's real estate market, it is clear that Kuala Lumpur is the top choice for property buyers from China - with a significant 48.3% of respondents indicating their preference for this location. These findings underscore the appeal of Kuala Lumpur among Chinese property buyers and provide strong evidence for its status as a preferred destination for investment in the Malaysian real estate market.
The new year has ushered in silver linings and a more upbeat outlook for the real estate industry as compared to 2H2022.But some analysts are cautiously optimistic, believing that it will take years before the real estate industry recovers to pre-pandemic levels.
The industry still faces significant headwinds such as rising costs of living, interest rate hikes as well as an oversupply of unsold properties, especially in the residential sector. Even with the return of Chinese investors, some analysts are questioning if it alone is enough to plug the expanding glut of high-rise properties.
Datuk N. K. Tong, president of the Real Estate and Housing Developers’ Association Malaysia (REHDA), believes the recovery of the real estate market might drag over three to five years, in line with country’s economy. The current inflation wave has led to an increase in interest rates, making it more expensive for people to own a property.
A market survey of 150 developers by REHDA also showed that 55 per cent of them had unsold residential units, due to factors such as rejections of loans, high price of developments and low interest from potential buyers. But business costs, especially prices of raw materials and labour costs, have eased slightly compared to last year, bringing reprieve to developers, many of whom had to resort to cost-cutting measures last year amid rising costs.
These sentiments were echoed by UOB Kay Hian Malaysia Research, which pointed out that on the whole, the real estate sector still struggles with structural issues such as oversupply and affordability.
Malaysian buyers are also likely to remain prudent with their spending amid rising inflation. The mismatch between supply and demand will likely lead to a widening price gap between potential buyers and sellers.
“Malaysians are now more careful when making big purchasing decisions. Rising inflation and higher borrowing costs have tightened potential buyers’ budgets, simultaneously forcing sellers to raise their prices to cover the higher cost of property investments,” said PropertyGuru Malaysia’s Country Manager, Sheldon Fernandez.
For now, growth will likely be uneven within the real estate industry. Industry players with high exposure to the residential sector will have to source for creative and innovative ways to launch new offerings amid a supply glut, while dangling incentives to lure foreign investors. As interest rates continue to rise, concerns on housing affordability among local Malaysians is unlikely to abate.
“Many Malaysians are waiting patiently for government assistance, and an improvement in inflation, before making their big purchases,” added Fernandez.
Click here to read more on Malaysia Property Outlook 2023 insights.
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