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#GE14: Investors and the Battle for Malaysia

In just a matter of hours, Malaysia will enter what could be the biggest tussle for leadership yet — the 14th General Election. Image credit: Asian Business Software Solutions

In just a matter of hours, Malaysia will enter what could be the biggest tussle for leadership yet: the 14th General Election (#GE14).

Once again, the incumbent government faces a serious onslaught (its most critical since Independence, perhaps) as factions from the Opposition unite to mount a formidable challenge for rulership of the land. As the latter’s weapon of warfare looms in the shape of 92-year-old former Prime Minister, Tun Dr Mahathir Mohamad; the former continues to push its promises of cash and stability-in-the-status-quo to the masses.

The rising costs of living hogs the spotlight this #GE14, but yet another issue coming to a head as voters go to the polls tomorrow, is the lack of affordable housing, especially for middle class urbanites known as the M40 (ostensibly because they form part of the middle 40 percentile). This is an issue most pronounced in the bustling urban constituencies of Kuala Lumpur, Selangor and Johor Bahru. 

Bank Negara in its quarterly bulletin in Feb 2018, noted that homes had become “seriously unaffordable” in 2016 by international standards. The local media has also reported extensively on the lacklustre performance of the Malaysian property market and now, with the spectre of the general election looming ahead, contesting parties have pledged to tackle housing affordability as part of their election manifestos.

Not only is the M40 watching for the change(s) that could come with the #GE14; investors are paying close attention, too.

Currently, investors are adopting a wait-and-see approach. Wealthy Malaysian investors are diversifying their money into real estate opportunities across residential and commercial properties both at home and overseas, as well as assets such as bonds and gold in light of a more cautious market and the upcoming general election. The general sentiment is that investments into local property could pick up after the election once the dust settles and new policies are put into place.

Be that as it may, Knight Frank’s latest Wealth Report Attitudes Survey 2018 reveals that 43% of its Malaysian clients have plans to invest in properties overseas, going forward, with the top five overseas destinations being Australia, United Kingdom, Singapore, New Zealand and the United States. Interestingly, Malaysia tops the survey, followed by Hong Kong (40%), China (37%) and Singapore (30%).

The rising interest in overseas properties investment is not surprising, given the favourable returns that investors get (our portfolio of property investments can offer up to 10% nett returns for 10 years!).

“With the current property glut and wait-and-see approach adopted by investors, it is certainly a driver to continue investing abroad,” says Knight Frank Asia Pacific head of research, Nicholas Holt.

In a recent article in The Malaysian Reserve, Henry Butcher Real Estate Sdn Bhd COO Tang Chee Meng said that speculators and investors have been deterred by a host of issues including oversupply in certain locations, cooling measures by the government and cap on loan margins. The reduced interest from developers, he added, had resulted in more sluggish take-up rates for developers, thus contributing to the increase in the overhang statistics.

Stagnating rental growth rates have also clouded the local property market. And, with new developments moving at such a rapid rate, the rental market is hard pressed to keep up.

After tomorrow, the next few months will be crucial. The nation will be watching to see if promises are kept and if manifestos on bread-and-butter and housing issues will take effect in reality.

To all Malaysians traveling to cast their votes this #GE14, CSI Prop wishes you a safe journey. Selamat Mengundi.

By Vivienne Pal

Sources:


CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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Malaysian Property Market to Decline in 2018

Despite positive economic growth, the year 2017 saw Malaysia struggling to shrug off a severely weakened currency, international infamy due to the 1MDB scandal, and a declining property market.

While the ringgit has rallied, bursting through the start of 2018 at a high, the outlook continues to look bleak for the local property sector.

The Malaysian Reserve reports that high- and low-end properties are not expected to see any immediate rebound as affordability, excess stock, and economic and political concerns cast a dark shadow on what was once a vibrant sector.

That there is a glut in the market is now a clear understatement. Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in 10 years!

The total unsold units in Napic’s findings include overhang (completed, but unsold) units, unsold under construction units, as well as SoHo (small office/home office) units and serviced apartments.

Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in 10 years! Source: Napic; Image credit: http://bit.ly/2CtnTIm

83% of the unsold units constitutes the above-RM250,000 category and 61% of the total unsold units comprise high-rise properties, of which 89% were priced above RM250,000. The value of unsold and unutilised properties comes to an estimated RM35.5 billion.

And, with the impending general elections, consumers are exercising more caution in big-ticket long-term purchases.

Affin Hwang Investment Bank Bhd analyst Loong Chee Wei told The Malaysian Reserve that the property market is far from seeing any recovery due to the rising cost of living and the disconnect between society’s income and affordability level.

Local property investors looking to gain from property appreciation and hefty returns from the sale of properties, need to manage expectations as this year looks to be a buyers market (and a renters market). Property sales will not be as attractive as it used to be.

More’s the pity, then, given the rosy Malaysian economic outlook for 2018 and the steady ringgit growth. Public Investment Bank Bhd’s research arm reports that Malaysia is slated to become the second fastest growing economy in Asean.

Total unsold residential properties by state in Malaysia as of 1Q 2017. Source: Napic; Image credit: Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in 10 years! Source: Napic; Image credit: http://bit.ly/2CtnTIm

With the local property market at an uncertainty, some investors bide their time and jump at the opportunity to invest when the price is right (e.g. offered at fire sale prices), and then hold until the property market cycle goes into an upward trend, before they sell for a profit. 

Others diversify their investments into high-yielding, growing markets overseas, such as Australia and the UK, where the currency is stronger, hence rental returns and appreciation are at a higher value than the ringgit. 

Unlike Malaysia, these countries are facing critical undersupply in housing  due to population growth as a result of migration, jobs creation and educational opportunities.

“The UK and Australia have strong growth potential. The population and its demand for housing have grown faster than supply, causing property prices to keep appreciating. It is also because of this, that there is a strong rental market,” says property expert Virata Thaivasigamony of CSI Prop.

“With the current and forecasted performance of the ringgit, alongside the weakened pound and Australian dollar, investors now have the opportunity to invest from a position of strength. Diversifying investments is key to hedging against uncertainties both locally and globally.”

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260