Malaysia as a whole has encountered turbulences since 2014 until today. We have encountered situations and mishaps, which we never have had to deal with in our glorious history.
There were the unexpected, twin losses of Malaysia Airlines flights MH370 and MH17, AirAsia’s flight QZ 8501 and a series of major natural disasters — devastating floods in Kelantan that displaced thousands and an earthquake in Sabah.
Economically and politically never have we been so vulnerable. The RM has depreciated on average around 20% against major currencies; oil is trading at 12 year lows of US$27 a barrel, the 1MDB saga has dragged on creating anxiety among foreign investors, while the introduction of the Goods and Services Tax (GST) has taken a strain on the people. What does this mean for real estate investors? Is Malaysia now an attractive opportunity or an investor’s trap?
- Weak Ringgit a Blessing in Disguise
The classic example would be for a Singaporean investor, who could effectively buy properties in Malaysia with a substantial discount owing to the weaker Ringgit against the Singapore dollar. It would not just be real estate prices, but manufacturing and service sectors benefitting due to the immense cost in Singapore. Iskandar region is being massively developed as the southern hub which would augur well for investors to flock over the region.
- Property Prices will Outweigh in the Future
Malaysian property prices have constantly appreciated since the new millennium despite various challenges over the period. This year, the compound annual growth rate for properties in Kuala Lumpur is 6.5%, followed by 6.1% in Penang and 3.2% in Johor. Significant capital gains could have been made for patient investors through this time and tested period regardless of the economic challenges present.
- The Herd Mentality
When things get surreal, people will give all sorts of negative viewpoints to deter any investment decisions. When the situation is calm, all will point to a rosy picture ahead. Emotions must be put aside, while investment decisions should be of logical sense. If the market is that bad as some would say, then buy low now and sell high later when the situation improves. Any economic condition is bound by the equilibrium of financial situations and will improve accordingly.
There is always growth for the property market in Malaysia. Despite concerns on the potential glut of properties in certain areas, the reality is that demand for housing, especially for young or first-time home buyers, is still very strong. Even developers are aware of this and have repositioned their products towards meeting the demand for mass-market housing.
