Foreigners can still land a good bargain

ALTHOUGH foreign interest in Malaysian properties has slowed down in the last six months following the global financial meltdown, there are still investors who see potential in the market and are looking for value buys.

Industry players are keen to tap the foreign market and are going on roadshows to educate potential foreign buyers in various countries.

The fact that local properties have not appreciated drastically in the past few years like those in countries such as Singapore and Hong Kong, has turned out to be a blessing.

Property prices in Kuala Lumpur and other parts of the country are much lower than those in other neighbouring high-cost cities. Relatively speaking, the local property market is more stable and resilient than in other parts of the world, partly due to the fact that the country has not been severely affected by the global crisis.

Malaysia Property Inc (MPI) executive director Yu Kee Su says the only notable shortcoming is that real estate here has among the lowest capital appreciation in the region.

He notes that because property prices have not escalated in a frenzied manner over the last few years, the threat of an oversupply is somewhat kept in check. “So, Malaysia is not suffering from any sharp price decline,” he adds. “The shortcoming has indeed become a blessing in disguise for Malaysian properties.”

International Real Estate Federation (Fiabci) vice-president for marketing and networking Michael Geh says for European buyers, properties in Malaysia are five times cheaper than those in Europe because of the ringgit’s competitive exchange rate against the euro.

Besides the KLCC and Mont’Kiara areas, Geh says Penang has been identified as the location of choice for foreign investors because of its food, lifestyle, culture and heritage appeal. These foreign buyers are mostly from South-East Asia, Europe and the Middle East.

“As the Middle East, especially Dubai, is overheated and overbuilt, investors will look at other countries such as Malaysia to average out their risks. Besides, senior lifestyle relocations are gaining popularity in Japan and South Korea,” he adds.

Yu agrees that the local property market appeals to foreign investors because of its affordability. The lower cost of living and the Malaysia My Second Home (MM2H) programme are important catalysts in attracting foreigners to invest in Malaysia’s property.

He says the establishment of the MPI, a joint public-private initiative, will help to raise awareness of Malaysia as a preferred destination for international property investors.

Yu further highlights that the country’s property laws on foreign ownership are among the most accommodating in the world. With the exception of residential properties priced below RM250,000, both local and foreign property buyers are subject to the same laws.

“Friendly policies such as the exemption of Foreign Investment Committee guidelines and real property gains tax have also helped to promote foreign investment in real estate by 50% to 60% a year between 2005 and 2007.

Reapfield Properties Sdn Bhd president David Ong opines that local properties are a safer bet than those in other regional markets and believes the market is still attractive to foreigners. He adds that property investors have continuously recorded good yields and returns.

Ong is not unduly worried about the drop in foreign direct investment in the property market although the number of transactions has slowed due to the global financial crisis.

He says: “Some buyers may adopt a wait-and-see attitude, but generally this is the market that offers ample opportunities. Unlike some of the other regional countries, our property market is free from speculation. The stable property market provides higher possibility of good returns and capital appreciation in a maturing market.”

Ho Chin Soon Research Sdn Bhd managing director Ho Chin Soon says the Malaysian property market is not facing any price bubble.

“Compared with other countries, Malaysia looks very attractive. The only reason for the slowdown could be because these investors are so engrossed with the situation in their own countries that they do not have time to consider investing in Malaysian properties for now,” Ho quips.

Association of Valuers and Property Consultants In Private Practice Malaysia president James Wong projects that domestic property prices and demand will weaken by 5% to 10% this year, partly due to the drop in foreign investments.

According to an analyst, property prices in the KLCC vicinity have dropped about 10% to 15% since the fourth quarter of last year, while the medium to high-end market is holding out better.

Meanwhile, markets in Singapore, Vietnam, India and China are not as lucky as Malaysia’s, with asset values having eroded between 20% and 30% since they succumbed to the contagion effect of the global financial crisis.

By K.C LAW