Before COVID-19, Malaysia's real estate market has been recovering, since the third quarter of 2018, from more than two years of price correction, according to a Juwai IQI's report - Malaysia: A Cross-Border Buyer's Guide - which was released in March last year. The report revealed that investor confidence was positive, and transaction volume had risen. Home prices had bottomed out. National average home prices rose 0.9 % year on year in the second quarter of 2019, and transaction volume and value grew 6.1 % and 9.5 % from a year ago, respectively, in the first half of 2019. However, since the onslaught of COVID-19, the real estate sector has been hobbling. The country's partial lockdown has delayed property listings and stalled processes like completing documentation and progress payments as financial institutions scaled-down operations. Developers and builders are also unlikely to meet their completion deadlines as supply chains have been interrupted.
In Juwai IQI's Property Survey and Index Malaysia Q3 2020, the report highlighted issues faced by the property sector:
With customers unable or reluctant to leave their countries, sellers have shifted the emphasis to online marketing, including live streaming of seminars, more virtual tours, and social media platforms to promote their offerings.
At present, many developers are engaging local and overseas agencies, along with a series of digital marketing initiatives to market their products for the continuation of leveraging the interest shown by foreign buyers. For example, prospective buyers can use VR (virtual reality) to tour showrooms or destinations from the comfort of their computers or mobile phones.
Mainland Chinese buyers accounted for an estimated figure of RM 8.4 billion (USD 2 billion) of total residential property sales, about 12.1 % of the total by value in 2018. Approximately RM4.3 billion (USD1 billion) of new residential building construction in Malaysia occurs due to Chinese buyer demand.
Although foreign buyers' interest has been waning due to the pandemic, one hotspot maintaining its momentum in attracting foreign property buyers is Kuala Lumpur City Centre (KLCC). Agents say KLCC will continue to depend heavily on foreign buyers due to its price points and amenities, while Malaysians tend to live on the fringes of the KL City area.
According to the Malaysian Institute of Estate Agents (MIEA), foreign ownership of property in Malaysia is about 5 % to 7 % in the KLCC vicinity and 3 % in Selangor.
Other locations favoured by Chinese investors include Penang, Johor Bahru, Malacca in Peninsular Malaysia and Kuching in the East Malaysian state of Sarawak.
Malaysia is one of the most foreign-friendly countries in Southeast Asia for real estate investors. Here, anyone can have access to almost any kind of property type, including the purchase of lands. Until Covid-19 curbed international travel, most foreigners get an automatic three-month visitor's visa on arrival. So, investors can buy a property as soon as they step off the plane. There aren't many places in the world that allow you to do that. Overseas nationals are also permitted to own both leasehold and freehold properties in Malaysia.
Furthermore, to entice foreign property investors into the country and to combat the large overhang of properties across the country, the Malaysian government lowered the foreign ownership price threshold for high-rise buildings from RM1 million (USD245,489) to RM600,000 (USD147,293) starting from 11 June last year and valid for one year.
In Malaysia, you can purchase landed properties for a fraction of the price commanded in neighbouring countries such as Singapore or Hong Kong, which are among the most expensive housing markets in the world.
COVID-19 has further exacerbated price declines in Malaysia, with some property developers projecting that the industry may see a 10-15% decrease in prices. As a result, Malaysia's average house price stands at RM 423,179 (USD 97,070), which is much cheaper than the average price of a home in Singapore at S$1,183,375 (USD874,372), for instance.
As of now, an investor can buy a luxurious three-bedroom condominium of around 1,200 square feet in a new development right in the middle of Kuala Lumpur's business district, near a monorail stop, for approximately RM 900,000 (USD220,000). Furthermore, upscale waterfront homes and villas in the country, such as those in Johor and Langkawi, can be bought/owned from just RM1,600,000 (USD 393,000) onwards. Other such global prime properties would command exorbitant prices in the millions of dollars.
Experts say that due to the COVID-19 crisis, the Malaysian real estate market will shift back to a buyer's market from what seemed like a recovery towards a seller's market prior to the pandemic.
Malaysia is well-positioned to attract more international students from China due to the current political spat between China and Australia. At the same time, the US and the UK continue to wrestle with the impact of the pandemic. In 2019, there were over 13,450 students from China studying in Malaysia.
There are also currently 12 international branch campuses (IBCs) in Malaysia that originate from host universities in Australia, China, Singapore, the UK and Ireland, which award degree (undergraduate and postgraduate), diplomas and curricula identical to that of the parent universities but are usually more affordable. This is vital for agents and developers to note because China's fast-growing student population seeking an international education is one of the principal drivers of outbound real estate investment from China.
Cost of living, healthcare system, climate, ease of setting up residence has earned Malaysia the seventh place out of the ten best retirement destinations worldwide by a new survey by the American online guide International Living. Being in the top 10 could attract wealthy Chinese buyers to spend their golden years in Malaysia.
China has an ageing population. There were 241 million people aged 60 above at the end of 2017, expecting to hit 487 million by 2050. Older Chinese people travelled to 74 countries in 2018, according to a report from leading online travel company Ctrip, and as this group becomes more comfortable with travel, settling down somewhere foreign becomes less daunting.
This category of senior citizens will bring new opportunities for real estate marketers as Malaysia, with a multicultural population where Chinese form about 30 % of its total population, tick all the right boxes as a second home for wealthy Chinese retirees.
Generally, the property market's performance in 2021 depends heavily on the country's economy. Furthermore, political uncertainty continues to strain the country while the government fights to contain the Covid-19 outbreak. If this situation is prolonged, more business closures and job cuts can be expected. Under such circumstances, recovery in the property market can be unpredictable.
However, suppose the pandemic is well contained and no longer a threat, then our nation's economy will eventually improve, being underpinned by its strategic & central geographical position within South East Asia, rising oil and commodity prices, public spending to pump-prime the economy, job opportunities and so on. In that case, we can expect some form of recovery in the property market in 2H2021 or 2022.
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