Malaysian Real Estate: Risky Business or Rewarding Venture in 2023 ?
As the region enters a period of recovery following the worst of a three-year pandemic, the question of investing in real estate – often perceived as a time-honoured hedge against inflation – has once again come to the fore.
Indeed, with the reopening of borders and loosening restrictions, there has been a general rebound in confidence and demand in Southeast Asia’s housing market, according to a report developed by PropertyGuru for Business.
Malaysia is no exception. Against this backdrop, Ms Amy Wong, Executive Director (Research & Consultancy) at Knight Frank Malaysia, a Kuala Lumpur-based real estate consultancy, shared the outlook for the Malaysian property market, outlining the major opportunities and challenges to look out for this year.
She kicked off a series of keynote speeches and talks by key industry leaders at the Southeast Asia Property Investment Show (SEAPIS) organised by PropertyGuru on March 25 and 26, 2023 at the Sands Expo and Convention Centre.
Twin Roadblocks
Unsurprisingly, one major challenge that the market faces is rising inflation and a corresponding increase in construction costs for property developers. In other words, this translates into rising property prices for a market that already has a significant proportion of people who are unable to afford properties in the first place.
In fact, property prices in Malaysia are at an all-time high, with much of it being cost-driven, resulting in about 94 per cent of developers facing end-financing issues.
The second is a rising interest rate environment. While the overnight policy rate (OPR) in Malaysia dropped to a record low of 1.75 per cent during the pandemic in 2020, the inverse is equally possible. Market analysts forecast that the current OPR of 2.75 per cent would likely hit a high of 3.5 percent.
“Whether this is a risk or opportunity, I leave it to you to decide,” Ms Wong quipped.
Promising Prospects Ahead
But the pandemic has also altered human behaviour and habits in ways that should not be underestimated, according to a report by Knight Frank Malaysia, presenting opportunities for both investors and developers.
One of the most significant opportunities is investing in properties along newly-opened train lines in Malaysia.
Just last week, the second Mass Rapid Transit (MRT) line in Klang Valley– the Putrajaya line – fully opened for service. Together with the existing Kajang line, it will pass through and connect many new neighbourhoods, providing connectivity to more offices, homes and commercial centres.
“Klang Valley is definitely growing in terms of accessibility. And these lines are creating addresses that are worth investing in, that make investment sense,” she maintained, adding that such opportunities would only grow with more train lines in the works.
Yet, she noted that people are no longer merely interested in investing in overseas properties for rental purposes, but are keen to buy them for own stay.
Said Mr Lim Shi Jie, a freelance artist from Singapore who attended the event: “I aspire to be a digital nomad; I don’t want to be trapped in Singapore. If properties in the region are affordable, then I can go to other places to work and have fun."
“My peers are also looking elsewhere because Singapore is expensive, and we have no CPF (contributions), so HDB is not really a must-have for us.”
Specifically, buyers are increasingly drawn to green elements in their future homes, such as energy-, water- and waste-efficient buildings that are green-certified or have incorporated ESG elements.
Indeed, green is the new black in Malaysia. Green and sustainable townships have been increasing in both quality and quantity, with the likes of Sunway City Iskandar Puteri, Gamuda Cove Core Central Business District and Sunway Resort City.
So is it a good time to invest in Malaysian properties? The latest trends speak for themselves. Despite rising prices, the transaction volume in Malaysia, especially in areas like Klang Valley and Penang, was at its highest in eight years in 2022, a promising signal that the real estate market is recovering.
“It’s an exciting time to be in real estate. I have been purchasing homes as well for myself to live in,” Ms Wong said. “Why? You can’t exactly live in a token or a stock certificate.”
Note: Article content was written based on the speaker’s insights from Southeast Asia Property Investment Show (SEAPIS) event which was held on 25-26 March 2023.
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