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Malaysia: Down, but not out

With the Malaysian ringgit falling 30 percent against the Singapore dollar, an uncertain economy, and the political scandal affecting Prime Minister Najib Razak, many Singaporeans are left wondering whether this is the right time to enter Malaysia’s property market, or whether they should adopt a wait-and-see attitude.

According to Ryan Khoo, Founder and Director of real estate consultancy Alpha Marketing, the current bearishness on Malaysia stems from oil price drops and the fallout from the 1MDB crisis.

But despite all the negative news reports about Malaysia, the country has been registering a GDP growth of four to 4.5 percent in the last few years, said Khoo. “Even with the recent oil price drops, GDP growth rate forecasts for 2016 are still at four percent. Compared to Singapore, which narrowly escaped a technical recession in 2015, I think Malaysia as an economy is quite vibrant and often misperceived.”

For prospective investors looking to buy Malaysian property for their own use, retirement, or passive income, Khoo explained that the sliding ringgit has made property across the causeway much cheaper and therefore, more attractive.

However, currency alone is not enough to make a buying decision, he said. “For investors today, they are generally more concerned about other factors, such as politics and oil prices, which may impact the ringgit further.

“If you want to buy Malaysian property, you must have a five- to 10-year view of how a particular location, local economy and type of property will fare, not just look at currency.”

A time to buy

Khalil Adis, founder of Khalil Adis Consultancy and brand ambassador for Iskandar Malaysia, believes that it is a good time to invest if you’re looking at fundamentals.

“Under investment fundamentals, you buy at a low,” said Adis, adding that there is still some demand for housing units and people are still renting.

“Foreigners don’t live there, so they’re spooked by the political situation, particularly the 1MDB saga. But there are good investment opportunities, such as hotel suites in areas like Malacca and Kuala Lumpur, which see many tourists but not enough hotel rooms.”

Khoo stated that contrary to popular belief, there is still a healthy rental market in Malaysia. “It’s always about location, pricing, furnishing and how you market your property. Many buyers from Singapore have to take note that managing property from a distance is not easy unless you have someone managing it for you.

“Some property types will rent faster than others. It is also becoming more popular in Malaysia to rent properties on a short-term basis via platforms such as Airbnb, as yields are higher.”

In general, high-rise properties can fetch rental yields of five to six percent at current prices, while rental yields for landed properties are in the range of four to five percent, noted Khoo.

He feels that Malaysian properties will always be on the radar of investors here due to the proximity and the fact that both countries are closely linked, culturally and economically.

His advice for investors is to look at commercial property, which has more upside potential than residential property. “Industrial property prices are at a low base, just above S$100 psf, so it’s difficult to see it dropping lower.”

He cited Iskandar Malaysia as one area that has been seeing record investments in manufacturing over the past three years that have translated into demand.

Optimism remains despite oversupply

Although the threat of an oversupply of homes in Iskandar continues to weigh heavily on the minds of investors, CapitaLand, South East Asia’s biggest property developer, remains optimistic about the potential of the region.

The Singapore-based developer is moving forward with plans to build a premier waterfront residential community on A2 Island in Danga Bay, comprising high-rise apartments, landed homes and other supporting amenities and facilities.

A statement released by the company last year said: “CapitaLand takes a long-term view of this project and is confident of the long-term prospects of Iskandar Malaysia. The development will be paced and executed in phases over a period of 10 to 12 years according to market conditions, as originally envisaged.”

During a parliamentary session in May 2015, then Minister for Culture, Community and Youth, Lawrence Wong, warned of a future housing glut in Iskandar that could devalue homes.

“Based on data from Malaysia’s National Property Information Centre (Napic), there are around 336,000 new private residential units in the pipeline — more than the total number of private homes in Singapore,” said Wong.

He added that buyers have become more cautious, with surveys showing that the number of Malaysian properties purchased through local property agencies plunged from 2,609 units in 2013 to 838 in 2014.

Adis has also observed that many Singaporeans are still waiting on the sidelines. “They are attending a lot of seminars but not purchasing property. In my opinion, they are doing their research first and waiting for the market to bottom out before jumping in.”

The HSR effect

In addition, with construction work expected to start in the next two years on the high-speed rail (HSR) link between Kuala Lumpur and Singapore, and the rapid transit system link between Johor Bahru and Singapore, Khoo believes that confidence will grow and buyers will return in huge numbers.

“Property prices in Iskandar Malaysia are still a fraction of Singapore’s, and the rail links will remove all the bottlenecks that plague the Causeway and Second Link.”

As such, “picking the right properties should ensure that you get the first choice of buyers or tenants, and that separates an average investor from a good one,” he noted.

Meanwhile, Adis reckons that Kuala Lumpur is another area worth looking at, with several upcoming mega projects, such as three MRT lines and Tun Razak Exchange. The latter is touted as Malaysia’s new financial hub, set to boost property values in the city.

Financing not an issue

For buyers looking to obtain financing, Khoo noted that while banks in both Malaysia and Singapore are tightening their lending standards for home loans, he does not see it as a major issue for overseas buyers of Malaysian property.

“Singaporeans and Malaysians earning Singapore dollars have a much easier time getting a loan, as the currency exchange is considered when factoring your repayment capability.”

But Adis thinks it is easier to get financing in Malaysia, as the banks there do not check the Total Debt Servicing Ratio (TDSR) of borrowers. Introduced by the Singapore government in June 2013, the TDSR limits the amount of a borrower’s gross monthly income that can be spent on debt repayments to 60 percent. In addition, Singaporeans buying property in Malaysia can obtain financing of 70 to 80 percent on the property’s value.

To get financing, Khoo explained that Malaysian banks require copies of the last three months of payslips, copies of bank account statements for the last three months, and past two years of IRAS tax notices.

For those who want to know more about Malaysian property investments, PropertyGuru will be hosting its first Malaysia Property Show for 2016 at the Marriott Hotel in Singapore on the weekend of 5 to 6 March. The two-day property exhibition will feature several new project launches and seminar speakers, including Adis, who will be providing insights on Malaysia’s commercial property market.

Pre-registration for the show is recommended, and those interested can do so at: bit.ly/21cFZ7Z

COUNTRY FAST FACTS
(MALAYSIA)

Population: 30.5 million

Total area: 329,847 sq km

Currency: Ringgit

GDP per capita: US$25,833 (2015)

GDP growth: 4.9 percent (2015)

Future transport: High-speed rail (HSR) link between Kuala Lumpur and Singapore

Average house price: US$72,519 (Q3 2015)

Distance between Singapore and Kuala Lumpur: 354 km

Summary of major property related issues and taxes associated with real estate investment in Malaysia: http://bit.ly/1R9wotV

INTERNATIONAL HIGHLIGHTS

Our picks of residential properties in Malaysia prospective buyers should consider.

NEW PROJECTS

Estuari Gardens
Estuari, Nusajaya, Johor

Type: Strata landed homes
Developer: UEM Sunrise Berhad
Tenure: Freehold
Facilities: 24-hour security, children’s playground, exercise area, cycling path
Nearby Key Amenities: Legoland Malaysia, Sanrio Hello Kitty Town, Horizon Hills Golf & Country Club
Nearest Transport: Malaysia-Singapore Second Link, Puteri Harbour International Ferry Terminal
Starting Price: RM1.39 million (approx. S$468,200)

Launched in April 2015, the freehold Estuari Gardens is a gated community consisting of 350 units of two-storey super-link houses with luxurious and spacious built-up areas ranging from 2,708 sq ft to 3,780 sq ft.

Scheduled for completion in 2017, the project’s facilities include 24-hour security, a children’s playground, exercise area and walkways/cycling path. Located in Puteri Harbour, Estuari Gardens is the first phase of the sprawling 390-acre Estuari development, which has a total gross development value of RM7.4 billion.

Branded as an eco-living community, it will comprise 2,858 residential units of mixed landed and high-rise strata properties.

Opus Kuala Lumpur
Jalan Maharaja Lela, Kuala Lumpur

Type: Serviced apartment
Developer: Bina Puri Properties Sdn Bhd
Tenure: Freehold
Facilities: Infinity pool, Jacuzzi, gymnasium, F&B services, concierge
Nearby Key Amenities: KL Sentral, Midvalley, Pavillion, KLCC
Nearest Transport: Maharaja Lela and Hang Tuah monorail stations
Starting Price: RM943,500 (approx. S$317,800)

Construction work has already started on this freehold serviced apartment project. Developed by Bina Puri Properties Sdn Bhd, it is expected to be completed by early 2019 and will comprise two high-rise tower blocks of 357 units.

The units range in size from 692 sq ft to 1,071 sq ft, and come furnished with Calvin Klein furniture. Residents will also enjoy a slew of facilities such as an infinity pool, Jacuzzi and gymnasium.

Located in the Jalan Maharaja Lela area, the development is just next to the upcoming KL118 tower, which is set to become the second-tallest building in the world when completed in 2020.

Picture Source: Landed homes in Malaysia.
Source copied: http://www.propertyguru.com.sg/property-management-news/2016/2/117764/down-but-not-out

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