Malaysia property outlook 2015

2015 is expected to be a challenging year ahead for the Malaysian property market. Still, there are opportunities to be sought by both locals and foreign investors.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

By Khalil Adis

The mass market and mid range property sector will continue to drive the domestic market this year due to the loan curbs imposed by the Malaysian government in 2014 for multiple property owners.

In a recent survey, iProperty.com, citing statistics from Bank Negara, said there was a decline of 4 per cent from a peak of 15.8 per cent in “credit-fuelled speculative purchases of residential properties from borrowers with three or more outstanding housing loans.”

They now make up for only 3 per cent of housing loan borrowers.

As such, the market will favour first timers as they are able to get up to 90 per cent loan and are considered as genuine home owners.

In addition, major urban centres across the country are expected to see strong demand for affordable homes due to the federal initiated PR1MA scheme.

Under this scheme, individuals or households earning between RM2, 500 to RM10, 000 can qualify for homes ranging from RM100, 000 to RM400, 000 that spans from Johor all the way to Penang and even Sabah and Sarawak.

“Malaysia’s relatively young population and labour force, increasing urbanisation, and general inclination to own a house, are factors that are expected to sustain strong demand for affordable residential properties in major urban centres, likely outstripping supply over the near and medium-term,” said iProperty.com in its second half of 2014 survey.

Kuala Lumpur

Most homes in the Klang Valley area are already out of reach for first time homeowners averaging more than RM600, 000.

Therefore, this market will primarily be driven by middle income and well-to-do locals as well as foreign investors.

Properties in prime areas are priced from RM2, 000 per sq ft onwards.

Last year, Kuala Lumpur’s prime areas witnessed a flurry of high-end condominium launches last year in Bukit Bintang and KLCC like Harrod’s and Banyan Tree averaging at RM3, 000 per sq ft.

Despite the prestige of such brand names, many locals tend to shy away from such projects due to overall quantum price.

However, high net worth Malaysians may still snap up such projects as these are considered “trophy properties”.

Even so, they are not likely to live in the area, preferring to rent it out or use it as their holiday homes.

For foreigners, these projects will be very popular due to the increase in minimum purchase price and their location right smack in the city centre.

On 1 March 2014, the minimum purchase price for foreigners buying properties in Kuala Lumpur was increased from RM500, 000 to RM1 million.

Hence, if we use RM2, 500 per sq ft as a price gauge, a studio apartment of 500 sq ft can easily fetch RM1.25 million.

Supply

According to DTZ Research, the third quarter of 2014 saw a healthy amount of new supply with the completion of another five high-end residential projects adding a total of 574 units to the market.

For the first three quarters of 2014, a total of 1,892 units have been completed.

The new completions in the third quarter were mostly located in the city centre, namely Brunsfield Residence@U-Thant (93 units), Madge Mansions (52 units), One@Bukit Ceylon (354 units) and an unnamed high-end residential development at UThant by Bandar Park Sdn Bhd (12 units).

Only one development, Kenny Hills Residence (63 units) is located outside the city centre.

Data from DTZ Research also shows that another 4,604 high-end residential units are expected to enter the market by the end of 2014.

Amongst the major developments expected to be completed in the fourth quarter of 2014 are The Elements (1,040 units) by Elite Forward, Sky Residence-Phase 2: Celesta & Divina (450 units) by SP Setia and Icon Residence (260 units) by Mah Sing Group.

For locals who are thinking of buying a home in the Klang Valley area, it is best to get small units like a studio as they can be easily rented out and sold to both locals and foreigners as their quantum price will be within the range for both locals and foreigners.

In addition, such units are limited in supply making them a rare find.

According to DTZ Research, the high-end residential market in Kuala Lumpur saw marginal growth in the rental values.

Average rents increased 0.7 per cent quarter-on-quarter, from RM3.59 per sq ft per month in the second quarter to RM3.61 per sq ft per month in the third quarter,

Moving forward, average rents are expected to fall due to the almost 6, 000 supply of new units will be coming on-stream in city centre from 2016 onwards.

Also, data from National Property and Information Centre (NAPIC), showed that Kuala Lumpur has an existing stock of 427,231 units with an incoming supply of 51,104 units.

All these factors will put pressure on rental yields.

For those who are thinking of renting out their properties, it is best to take a long-term investment horizon by focusing on capital appreciation.

The luxury sector also saw marginal growth in capital values.

According to DTZ Research, average capital values increased 0.7 per cent quarter-on-quarter, from RM758 per sq ft in the second quarter of 2014 to RM763 per sq ft in the third quarter.

This is expected to increase marginally, barring any economic crisis.

Selangor

Areas near the MRT extension, spanning from Sungei Buloh to Kajang Line are expected to be popular among locals as it will ease their commute time to Klang Valley, where many jobs are located at.

In addition, there are still affordable properties that can be found here from below RM600, 000 – well within the affordability price range for locals.

For locals, buying a property near the upcoming MRT stations will increase the overall desirability, rentability and capital values of your property as they will be in demand once the MRT line is completed in 2017.

For foreigners, they might skip Selangor altogether,

This is because there seems to be some sort of anomaly in Selangor’s property market as the minimum purchase price for foreigners has been increased to RM2 million effective 1 September 2014 in Zones 1 and 2.

The two zones include the Petaling, Gombak, Hulu Langat, Sepang, Klang, Kuala Selangor and Kuala Langat districts.

This is rather odd as the entry price in these areas are well below RM1 million.

As Selangor is located outside the Klang Valley area, the minimum purchase price here should follow Kuala Lumpur’s as not many foreigners will need a big space just to qualify for the RM2 million ruling.

In view of this, foreigners may be better off buying a property in Kuala Lumpur instead where the entry price is around RM1 million.

Supply

According to data from NAPIC, Selangor will have the largest incoming supply for new homes in Malaysia as at the second quarter of 2014 bringing it to a total of 156, 296 units.

Those who are thinking of renting out their units will face great competition once these units come on-stream in 2016 to 2017.

Therefore, properties that are located close to the MRT lines will be very much in demand and can command higher asking price.

Properties near to upcoming MRT stations with interchange stations such as Kwasa Damansara in Kota Damansara, Sungei Buloh and Kajang will be highly sought after.

Kwasa Land Sdn Bhd is currently building a township in Kwasa Damansara for bumiputeras measuring 2,330 acres.

The township will be served by two MRT stations and four expressways – NKVE, Guthrie, NSE and the proposed Dash Highway.

In Kajang, a PR1MA housing project near the Kajang KTM and MRT stations are in the supply pipeline to be launched in the future starting from around RM158, 000.

Properties near to MRT stations generally command a five to 10 per cent premium in pricing compared to others.

Penang

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

Penang will continue to be popular among locals and foreigners as it is a major tourism destination with plenty of good food and old world charms unique only to the island.

In January, Penang scored a major feat when Britain’s respected newspaper, The Guardian listed the island as number 8 in the Top 40 global destinations.

This, in addition to Georgetown listed as an important UNESCO World Heritage Site, has resulted in increasing tourist arrivals and a popular destination for retirement.

According to media reports, citing Chief Minister Lim Guan Eng, Penang saw international and domestic arrivals increasing by 8 and 33 per cent respectively in 2014.

This is expected to have a positive impact on its property sector, particularly under the Malaysia My Second Home (MM2H) programme.

Penang is one of the top retirement destinations under this scheme.

Since March 2013, more than 21, 000 applicants have been approved and Penang has always come out top.

Due to its booming tourism industry and island effects, Penang has the second highest price index in Malaysia after Kuala Lumpur according to data from NAPIC,

For locals who find property prices here too expensive but still want to live on the island, fret not.

PR1MA homes in the pipeline include one in Bayan Lepas, not far from the airport and another in Bukit Gelugor.

In fact, Bayan Lepas is the next hot spot as it is close to the second bridge, free trade industrial zone and the airport.

However, the federal government has yet to announce their indicative prices for the PR1MA housing projects.

Other new hot spots where developers have been acquiring land parcels include those near the second bridge on the mainland.

Since the announcement of the second bridge in 2006, land prices have grown by leaps and bounds.

Data from Henry Butcher showed that land prices were around RM8 per sq ft in 2006 but has since moved up significantly to RM50 per sq ft.

EcoWorld and Mah Sing Group are developing projects at Batu Kawan and Seberang Prai respectively, not far from the second bridge.

The traditional prime areas of Gurney Drive, Georgetown, Tanjung Tokong, Tanjung Bungah and Batu Ferringhi will still be popular among foreign investors.

However, expect traffic congestions from Gurney Drive all the way to Batu Ferringhi in the future due to new projects that have been approved and future land reclamations for Eastern & Oriental Berhad’s project at Tanjung Tokong.

Supply

According to data from NAPIC, Penang has an existing stock and incoming supply of 383,017 and 64,224 residential units respectively.

Majority of the incoming supply will be on the northern part of the island where future land reclamations for Eastern & Oriental Berhad’s project is located at.

In addition, almost 1,500 residential units will be coming up in Batu Ferringhi

According to media reports, the Penang government recently approved an increase in density for an upcoming development here from 15 units per acre to 30 units in January.

Traffic congestion has always been a problem in Penang, particularly from Gurney Drive to Batu Ferringhi.

Previously, it was a one way road but the state government has since changed that so that vehicles can ply both ways.

Still, traffic congestion remains a problem, especially during public holidays and weekends.

The next mixed use development overlooking Ferringhi Park will dwarf other developments in the area and will add to the notorious traffic jams.

The area is popular among foreigners and there will be a high likelihood of vacant units as most foreigners view their investment here as holiday homes.

This will put pressure on rental yields.

In view of this, the property market will be challenging for investors.

Affordable to medium priced homes will see transactions in the resale and rental markets as they are geared towards locals.

High-end homes will be better off for your own stay and capital appreciation.

On the overall, the “island effect” will continue to see capital appreciation on Penang as majority of the areas that can be developed on the island are located in the coastal areas.

However, the incoming huge supply, especially in northern Penang will be a cause for concern.

Iskandar Malaysia

Named after the Sultan of Johor, Kota Iskandar is the administrative capital of Iskandar Malaysia. Photo: Courtesy of Iskandar Regional Development Authority (IRDA)..

The residential property sector will be challenging and primarily driven by local buyers.

There are four projects of choices for bumiputeras spanning from Tebrau to Pasir Gudang with

The starting prices for the projects in Tebrau and Pasir Gudang start from RM180, 000 to RM185, 000 respectively onwards.

There is no indicative pricing yet for the projects in Masai and Pulai.

Pasir Gudang and Masai will be the new hot spot as it will enjoy the economic spillover from the largest oil and gas hub in Pengerang.

In addition, a new mixed-use development that will be coming up in Taman Seri Albion by UM Land is expected to create some 12, 000 jobs.

In other developments, the Bus Rapid Transit (BRT) line is expected to commence their service this year.

Therefore, areas along the BRT lines spanning from Bukit Chagar to Tebrau, to Senai and Nusajaya are worth looking into.

Foreigners will still look to Medini and Nusajaya as the latter is exempted from the minimum purchase price and Real Property Gains Tax (RPGT) while Nusajaya has better infrastructure and is well-planned.

JB Sentral is also expected to be popular as it will serve as a gateway to Singapore once the cross border rail service connecting Johor Bahru’s Rapid Transit System (RTS) connects to Singapore’s MRT by 2018 to 2019.

Expected to be in Bukit Chagar, the area will be popular among Singaporeans and Malaysian Permanent Residents (PRs) they can buy a freehold property in JB Sentral with full condo facilities whereas in Singapore, they can only buy an HDB flat.

In addition, the opening of Sungei Segget by end 2015 and various Johor Bahru rejuvenation projects will result in a positive impact on property prices in JB Sentral.

This, together with the newly refurbished Menara Komtar JBCC and Angry Birds Theme Park will further add vibrancy of the area especially the tourism and retail sectors.

Supply

Commercial properties will be popular as they are in limited supply compared to residential properties.

Data from NAPIC showed that as of the second quarter of 2014, the existing stock and incoming supply for shop units are 70,792 and 14,657 units respectively.

In comparison, there is currently an existing stock and incoming supply of 710,324 and 131,994 residential units respectively.

The main driver for the buying activity in the commercial sector will be the GST on commercial properties to be implemented on 1 April 2015.

Thus, some investors will look to buying commercial properties before the ruling kicks in.

Oversupply in the residential sector has been a huge concern and it appears the state government is acting on it.

It recently announced it will be putting a freeze on the supply of serviced apartments.

For investors who are thinking of selling their properties, it is best to take a long term investment horizon due to the huge supply coming on stream in 2016 to 2017.

This will put pressure on rental yields and result in high vacancy rates, especially in the Danga Bay and JB Sentral area.

In addition, as a foreigner, you will need to pay for Real Property Gains Tax (RPGT) should you sell your property in the first five years at 30 per cent.

On the overall, the strength of the Singapore dollar versus the weakening Malaysian ringgit will continue to spur investment across the causeway.

However, sales volume will not be as robust as before.

Malaysia braces for change post-Budget 2014

MRT in Greater Kuala Lumpur and potential controversy in Johor involving the Sultan and the Federal government are the hot topics in Malaysia’s property market.

View of Johor Bahru from Singapore. The new Bill has caused controversy in Malaysia. Photo: IRDA

By Khalil Adis

The property market in Malaysia is undergoing massive changes with new hotspots mapped out by experts in Kuala Lumpur, Selangor and Penang, a controversial Bill in Johor that has got the both former Prime Minister Tun Dr Mahathir Mohamad and current Prime Minister Datuk Seri Mohd Najib Tun Abdul Razak up in arms and the possibility of more land reclamations expected in the island of Penang.

Indeed, the Malaysian property market appears to be entering a new era of excitement mixed with uncertainty post-Budget 2014.

If pre-Budget 2014 has had foreign investors feeling wary and on the edge of their seats, then post-Budget 2014 could be well described as “chartering new territories” for both the rakyat (citizens) and politicians.

“Budget 2014 does not affect fundamentals of a location, in terms of hotspots. As for Greater KL: since prices have adjusted for the Blue MRT Line (Line 1), investors may need to do some research to speculate on the Putrajaya (Line 2) and Circle Line stations (Line 3),” says Ishmael Ho, director at Ho Chin Soon Research.

Agreeing, Faizul Rizwan, best-selling property author of “WTF? 23 properties by 30”, said investors need to study the supply and demand situation in Kuala Lumpur and Selangor.

“Investors need to focus on units that are limited in supply and those that are smaller in sizes as they are easier to sell in the subsale or resale market,” he said at the recently concluded Havoc Real Estate Convention 2014 at Craft Complex in Jalan Conlay, Kuala Lumpur.

While traditional prime areas like KLCC and Mont Kiara will be of interest to foreign investors, Rizwan and Ho Chin Soon said Greater Kuala Lumpur is something locals should keep a close watch.

According to them, townships in Greater Kuala Lumpur and Selangor that are near the upcoming MRT stations, are expected to be the next goldmine.

Expect sweeping changes in Johor

Coastal Highway – since 2008, the Malaysian government has spent close to RM900 million to build the Coastal Highway linking Johor Bahru to Nusajaya. As a result, property prices in Nusajaya have appreciated greatly. Photo: IRDA.

The biggest news by far for this year belongs to the state of Johor where the Sultan of Johor, Sultan Ibrahim Sultan Iskandar is mulling to introduce sweeping changes that could have a significant impact on Iskandar Malaysia.

Firstly, the ruler has expressed support for proposals to increase the minimum purchase price on landed homes for foreigners to RM2 million.

The Sultan has said the current RM1 million is unsuitable for Johor due to its close proximity to Singapore.

The move comes at an especially crucial time in the history of Johor as this special economic zone is Malaysia’s most successful economic corridor under its Economic Transformation Programme (ETP).

Property prices have for the first time appreciated – something not seen before in Johor’s real estate sector.

Nusajaya’s pricing now averages around RM900 per sq ft in Medini while Johor Bahru’s is around RM1,000 per sq ft.

Figures from Iskandar Regional Development Authority (IRDA), also showed that as of January 2014 Iskandar Malaysia had attracted RM133.07 billion worth of investments.

While the proposed ruling will protect Johoreans from soaring property prices, analysts predict Iskandar Malaysia will be adversely affected.

“This measure will surely dampen the property market in Iskandar Malaysia as it depends on the support of foreigners,” says Ho.

According to IRDA, Singapore is the top foreign investor at RM9.183 billion followed by Spain and Japan at RM4.181 billion and RM3.743 billion respectively.

If approved, this new policy will mirror closely policies in the opposition state of Penang.

Secondly, and perhaps the most controversial plans by far, the Johor Housing and Real Property Enactment Board Bill was passed recently in Nusajaya with amendments to limit the Sultan’s power.

Initially, the Bill was to empower the Sultan with executive functions that critics say will go against the principles of Malaysia’s constitutional monarchy and override policies on a national level.

Former Malaysian Prime Minister Tun Dr Mahathir Mohamad has said the Bill appears to overcome national policies as it will give the Sultan of Johor executive powers.

Current Prime Minister Datuk Seri Mohd Najib Tun Abdul Razak has also expressed his concerns by calling on the Chief Minister of Johor Khaled Nordin to ensure that the Bill would be in line with the principles of the Federal Constitution.

With mounting pressure from Putrajaya, the Bill was subsequently amended that will now require the Sultan of Johor to act on the advice of the Chief Minister.

The Bill will also see the formation of the Johor Housing and Real Property Board that will be tasked with policymaking, implementation, co-ordination and planning of the housing and real estate development in the state.

Branded residences setting new per sq ft pricing in KLCC

Pavilion in Bukit Bintang. Overhead linkways currently link Bukit Bintang to KLCC. Photo: Khalil Adis

In the prime area of KLCC, branded luxury residences are making in roads and setting a new benchmark in per sq ft pricing

“For investors wanting to invest in the luxury market, my advice is to focus on units that are small in size as they are limited in supply and easier to sell in the resale market. I would also urge investors to choose those that are near to LRT/Monorail stations with top-notch facilities,” Rizwan said.

Notable projects like The Four Seasons Place, Banyan Tree Pavilion Signature Residences are being launched at RM2,950 per sq ft and RM2,500 per sq ft respectively.

Others like W Residences and Harrod’s Hotel and Residences have achieved RM3,000 per sq ft  in pricing – setting a record for the high-end market.

New prime areas coming up in suburbs

Faizul Rizwan, sharing his findings at the Konvensyen Hartanah 2014 held at Pusat Kraft at Jalan Conlay. Photo: Khalil Adis.

With the planned MRT extension spanning from Sungei Buloh all the way to Kajang, even the suburbs in Greater Kuala Lumpur are commanding hefty price tags that one would usually associate with Damansara Heights and Bangsar.

Sharing his research at the convention, Rizwan said Southern and Northern Klang in the next hot spot.

For example, Ambang Botanic and Setia Ecopark are commanding prices of RM3.5 million and RM5 million respectively

The areas will be served by the upcoming Bandar Utama and Klang MRT stations and is easily accessible via the Shapadu and NKVF Highways.

In addition, Rizwan said the many amenities there like Bukit Rajah Shopping Centre, Billion, Centro, Shaw Centre Point and Setia City Mall @ Setia Alam have made these suburbs highly sought after.

“Shopping centres increase the desirability of an area and will cause property prices to appreciate,” he said.

Rizwan also shared another upcoming hotspot in Denai Alam, Selangor, where a massive project is currently being undertaken by Sime Darby.

Measuring 19,000 acres and part of the Selangor Vision City masterplan, the township will be served by the upcoming MRT 1 Line with stations that will include Taman Industri and Sungei Buloh.

Amenities in the area include Space U8 – Malaysia’s first eco-mall, 1 Utama and The Curve.

The plenty of golf courses there such as Sri Selangor Golf Club and Saujana Golf and Country Club also mean properties there command top dollar.

For example, Rizwan’s research shows that Verdana has an asking price of RM1.4 million while Sri Pilmor @ Ara Damansara is RM3.7 million

Meanwhile, Ho Chin Soon’s research showed that semi-detached homes in Selangor enjoyed the most capital appreciation compared to other types of residential properties.

Citing data from National Property and Information Centre (NAPIC), his research showed that between 2000 to 2013, the house index rose for such homes rose almost 100 points to reach 202 points in 2013.

Ho Chin Soon also shared his speculative MRT Circle and Putrajaya Lines at the same convention.

“Our advice has always been, for investors to follow the infrastructure like MRT stations and go with branded developers. However, “following” branded developers is not limited in the sense of solely purchasing their product. It simply means that a branded developer could transform a particular area. Therefore, it can be helpful to understand where has a branded developer head to in terms of their land acquisition exercise,” said the younger Ho.

Kuala Lumpur welcomes a dedicated entertainment enclave

Artist impression of Zouk KL once in opens in the first quarter of 2015 at Jalan Tun Razak. Photo: TREC.

Another interesting development in Kuala Lumpur is its own dedicated entertainment enclave much like Lan Kwai Fong in Hong Kong and Clarke Quay in Singapore.

Located just next to Tun Razak Exchange (TRX), the project – TREC – is Malaysia’s first purpose-built urban lifestyle, entertainment destination and KL’s largest F&B enclave located along the bustling Jalan Tun Razak.

With a development cost of RM$323.6m and built on a 7-acre site, TREC will have 77 outlets with a total of 256,000 sq ft of lettable space offering lifestyle and F&B choices, with lease-only units ranging from 350 sq ft to 5,000 sq ft

“TREC wants to be pioneers of a one-stop integrated entertainment and lifestyle zone that has made the likes of Hong Kong’s Lan Kwai Fong, or Shanghai’s Xintiandi must-visit locations in their countries. In doing so, cement KL (and Malaysia’s reputation) as a thriving destination for lifestyle/entertainment seekers,” said Cher Ng, its founder who is best known as the man behind Zouk KL.

TREC is a joint-venture between him and Dato’ Douglas Cheng Heng Lee of Berjaya Assets.

“TREC concept is in an outdoor environment and its architecture and landscape are specially designed and built for F&B purpose whereas the areas you have mentioned are very much retail mall centric. The feeling and vibe in both are very different. Another point to note is that TREC has five distinctive zones offering a variety and assortment of styles and ambiance according to our five different ‘experience zones’,” said Ng.

With Phase 1 to be completed in early 2015 and the grand opening slated for end–2015, TREC will have Zouk KL as its anchor tenant.

The current Zouk KL lease in Jalan Ampang will expire by end 2014 and will require a new site.

“The new Zouk @ TREC is a fantastic location and will benefit from a great frontage view of the golf course and it is also directly opposite the future Tun Razak Exchange (TRX),” said Ng.

According to Ng, TREC’s current take up rate is around 60 per cent.

“We expect to hit 85 per cent by the fourth quarter this year,” said Ng who is currently in the midst of negotiations with a number of local, regional and international brands – some of which come from as far as the UK.

Penang

Charming colonial buildings in Georgetown, Penang. Photo: Khalil Adis.

According to Ho Chin Soon, terraced homes in Penang enjoyed the most capital appreciation, increasing 187 points to reach 287 points in 2013 since NAPIC began tracking the price index in 2000.

Ho Chin Soon’s map for Penang also showed considerable land reclamations in Sri Tanjung Pinang that could block the sea views along Gurney Drive.

Eastern & Oriental Berhad is the developer for Sri Tanjung Pinang and plans for the reclamation is currently under discussion with the state government.

Market watchers, however, opined that a new hot spot is in Seberang Prai where property developers have been acquiring land parcels.

“As for Penang, investors should pay attention to the second bridge,” says the younger Ho.

The opening of the second bridge has seen Mah Sing Group acquiring land parcels in Jawi with a new integrated development called Southbay East to be introduced soon.

This article was first published by The PropertyGuru.

Small but extremely charming

Penang island is slightly smaller than Singapore but it beats Kuala Lumpur and Iskandar Malaysia hands down when it comes to attracting foreign retirees.

Words and photography by Khalil Adis

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

The playing field has now leveled across the property markets in Malaysia now that the federal government has implemented similar minimum purchase price policy that mirrors those in the opposition state of Penang.

The announcement by Prime Minister Dato’ Sri Najib Tun Razak in October last year follows closely what Penang had implemented in 2012 but without the RM2 million minimum purchase price ceiling for landed homes.

What this means is foreign property investors will now study the market carefully before deciding which areas to invest in.

Hot property destinations like Kuala Lumpur, Penang and Iskandar Malaysia will still be on the radar of foreign investors.

However, what could make or break the deal are the unique characteristics of each destination.

Market reacts to Budget 2014

Shortly after the Budget 2014 announcements, the National Property and Information Centre (NAPIC) released its data for the fourth quarter of 2014 which showed a subdued market which goes to show the measures have been effective in curbing excessive speculation.

For example, transaction for residential properties declined by 9.7 points.

Data from NAPIC also showed that huge drops were recorded in Kuala Lumpur, Selangor and Penang at 47.5 per cent, 16.2 per cent and 28.1 per cent respectively.

Johor was the only one that witnessed an increase of 4.9 per cent.

This decline came as a result of the new Real Property Gains Tax regime which will see Malaysians and foreigners paying 30 per cent tax should they sell within the first to third year and first to fifth year respectively.

A combination of the cooling measures and oversupply have resulted in the overall price index decline in Malaysia – something that the federal government has been wanting to achieve prior to the election period in 2013.

An oversupply situation is a conundrum as it means plenty of choice for investors and a softening market ahead.

However, it also means it will be challenging to find a tenant and rental yield may not be as attractive.

Kuala Lumpur, Iskandar Malaysia or Penang? 

View of Penang Komtar in Georgetown. Photo: Khalil Adis.

According to Malaysia Property Incorporated, foreign investor accounted for 5.5 per cent of the Malaysia market with Kuala Lumpur coming out top at 10 to 16 per cent followed by Johor and Penang at 10 to 14 per cent and 6 to 7 per cent respectively.

While Kuala Lumpur has always been a perennial favourite and will appeal to investors who want the excitement of city living, the city is notorious for traffic jams and high cost of food.

Another concern is the oversupply in condominium units that have seen increasing vacancy rates.

According to data from the National Property and Information Centre (NAPIC), as of the fourth quarter of 2013, Kuala Lumpur has an existing stock of 424, 324 units, incoming supply of 52, 714 units and planned supply of 22, 629 units.

Meanwhile in Iskandar Malaysia, the property market has finally woken up from its slumber.

For the first time, Johor has seen its property prices increasing at an alarming rate after Iskandar Malaysia was launched in 2006 by former Prime Minister Abdullah Badawi.

From RM250 per sq ft for the very first condominium, Ujana in Nusajaya in 2009 to RM1, 350 for Puteri Cove in 2014, the upbeat in property sentiment caused the state government to impose a new state levy for foreigners from RM10, 000 to RM20, 000 or 2 per cent of the property purchase price (whichever is higher).

However, the property market in Iskandar Malaysia is still in its infancy stage and while food is affordable, they aren’t as authentic and tasty as Penang’s.

Also, the only visible tourism landmark here is LEGOLAND Theme Park while the key industries in Nusajaya will take time to develop as Iskandar Investment Berhad (IIB), only started to bring brand names like Newcastle University of Medicine Malaysia (NuMED) in 2008.

The case of an oversupply is also a scary reality in Iskandar Malaysia as we are looking at almost a million units coming on stream (including existing stock).

Long snaking queue at the famous chendol store along Penang Road. Photo: Khalil Adis.

While Penang attracted the least number of foreign investors, its tourism industry is vibrant thanks to Georgetown being listed on the UNESCO World Heritage Site.

Tourists who come to Penang are often drawn by the cheap yet delicious street hawker fares, original drinks like nutmeg juice and Georgetown’s old world charms.

With The Guardian listing Penang as number 8 in the Top 40 global destinations in January this year, more tourists have fallen for Penang’s charm and see it as an ideal retirement place.

In fact, Penang is one of the top retirement destinations among foreign retirees under the Malaysia My Second Home (MM2H) Programme.

Since March 2013, more than 21, 000 applicants have been approved and Penang has always come out top due to the charming island life, scrumptious local food and idyllic beaches.

Penang property gets new attention

Delicious local fares, authentic culture and a slower pace of life are among the draw in the island of Penang, especially among retirees.

Words & photography by Khalil Adis

View of Penang KOMTAR and Georgetown. Photo: Khalil Adis.

Two years ago, Penang made a bold move to increase its minimum purchase price for foreigners from RM500,000 to RM1 million for condominiums and RM2 million for landed homes respectively.

The move in the opposition-held state of the Democratic Action Party (DAP) by its chief minister Lim Guan Eng in 2012 was a hotly debated topic as Penang became the only place in Malaysia to impose that ruling.

Many had speculated that the move will likely see waning interest among foreign investors in this island known for its delicious hawker fares.

Fast forward a year later, Prime Minister Najib Razak announced a similar move for the rest of Malaysia during his Budget 2014 speech in October.

His move seemed to mirror closely Penang’s policy but without the RM2 million threshold for landed homes.

Island effects

Land scarce Penang comprises 293 sq km.

Like Singapore, Penang is experiencing the “island effects” where a spike in property price has been noted since 2008.

According to the National Property and Information Centre (NAPIC), Penang has the second highest price index in Malaysia after Kuala Lumpur.

Since the first quarter of 2008 till the third quarter of 2013, the price index has been on an uptrend, increasing by more than 200 points.

The Malaysian House Price Index. Penang had the highest property price index in 2013. Source: National Property and Information Centre (NAPIC).

As most of the island is made up of hilly and forested interiors, land reclamation has been the way to go, particularly in the Seri Tanjung Pinang area where Eastern & Oriental Berhad has plans to reclaim even more land.

Foreigners to be blame for rising price index?

The DAP has said its reason for implementing the policy was to ensure locals will not be priced out from the property market.

However, data from Henry Butcher showed that a small portion comprising 2.98 per cent in 2010 and 2.26 per cent in 2011 respectively were from foreigners.

Nevertheless, Penang finally saw its property market softened in the first quarter of 2013.

Data from Henry Butcher showed that the total number of properties transacted in Penang recorded a significant drop of 18 per cent compared to 5,756 in the first quarter of 2013 compared to first quarter of 2012.

Combined with the supply of 367,158 residential units, this had caused price to drop in the first quarter.

The timing of the drop in price index is particularly significant as it was during the general election period where the DAP managed to maintain its seat.

Looking ahead, the property market is expected to soften even further due to the oversupply of 461,844 and 461,844 residential units in 2015 and 2020 respectively.

Where to invest?

Gurney Drive is famed for its breathtaking sea views. Photo: Khalil Adis.

If you are a foreigner, you might want to look into popular places such as Tanjung Bungah, Tanjung Tokong, Batu Ferringhi, Georgetown, Queensbay and Gurney.

Prices of condos in these areas can easily fetch above RM 1 million and are geared towards foreign investors from Singapore, Japan, United States and the United Kingdom to satisfy the minimum purchase price ruling.

For example, Boon Siew Group and Katana’s joint-venture project in Tanjung Tokong,  The Landmark ranges between RM1,677,500 and above RM3 million for a three-bedroom and five-bedroom respectively.

Over in the popular beachside tourist area of Gurney, SP Setia’s Setia Residences comprises two towers of 48 and 43-storey.

Tower A comprises units with a built-up area of 2,624 sq ft and 4,118 sq ft and penthouse units of 4,593 sq ft and 7,119 sq ft respectively.

Tower B has standard units of 3,158 sq ft and 6,019 sq ft while penthouse units are 5,647 sq ft and 6,019 sq ft respectively.

Nearby amenities include Gurney Paragon, Gurney Plaza and Gleneagles Medical Centre.

If you want to live away from the hustle and bustle of city life and near the airport, Trehause by IJM Land is located in Bukit Jambul near the lush acres of the Bukit Jambul Country Club.

Just five minutes away from the Bayan Lepas Airport, it comprises 46 units of condo villas and 26 units of semi-detached villas.

Built on an elevated ground, you can look forward to lush greenery and even your own durian orchard.

Locals and foreigners alike will appreciate MTT Properties and Development Sdn Bhd’s Botanica located in the suburban area of Balik Pulau where fruit farms and a slower pace of life beckon.

Comprising 300-acre of garden township, choose from two to three-storeys semi-detached homes with its own International Boarding School, Commercial Village, Retirement Resort, medical centre, clubhouse and health & spa resort.

Penang Asam Laksa along Macalister Road. Photo: Khalil Adis.

To experience the rich culture of Georgetown, Tropicana is offering 218 Macalister located five minutes to Komtar and the many arrays of delicious street hawker fares nearby.

This mixed use development comprises 208 hotel units, 211 commercial suits and 88 units of apartment.

Facilities include infinity pool, wading pool, multipurpose hall, gymnasium, landscaped gardens and 24-hour security.

Information for retirees

Retirees can apply for a long-term visa under the Malaysia My Second Home Programme.

Under 50 years of age:

• Proof of liquid assets of at least RM500,000 and offshore income of at least RM10,00 per month

Upon arrival:

• Maintain a Fixed Deposit (FD) of RM300,000(can withdraw up to RM150,000 after 1 year for approved expenses e.g. house purchase, children’s education and medical purposes In Malaysia)
• For above RM1mil property owner (cash purchaser) – only need to maintain RM150,000

Over 50 years of age

• Proof of liquid assets of at least RM350,000 and offshore income of at least RM10,000 per month

Upon arrival:

• Maintain a Fixed Deposit (FD) of RM150,000 or proof of government approved pension fund of at least RM10,000 per month (can withdraw up to RM50,000 after 1 year for approved expenses e.g.house purchase, children’s education and medical purposes in Malaysia)
• For above RM1mil property owner (cash purchaser) – only need to maintain RM100,000

To apply, go to http://www.mm2h.gov.my/

This story was first published by PropertyGuru Singapore in conjunction with the Malaysia Property Show 2014 on 7 June 2014.

Moving towards a more protectionist policy

Foreigners will have to purchase properties above RM1 million in Malaysia.

The new budget announced by Malaysian Prime Minister Najib Razak will have a significant impact on its property market, foreign investors and government coffers. The measures are multi-pronged which is meant to gain back ground that Barisan Nasional (BN) lost during the recent election. Foreign property purchasers will be significantly impacted as the real property gains tax (RPGT) hikes are quite hefty. The RPGT for the first two years has been increased from 15 to 30 percent. The rate has also been increased to 20 and 15 percent respectively from the fourth and fifth years. Previously it was 10 percent during the third to fifth year and no tax after five years.

These measures will deter speculation and will affect the subsale and resale markets. Foreign investors will have a hard time offloading their properties. Meanwhile, bumiputras can only sell in the resale market to fellow bumis and not foreigners. This will lead to a softening in the Malaysian price index. According to the last updated Malaysian Price Index from the Ministry of Finance’s Valuation and Property Services Department, in 2011, the Malaysian average was almost 140 points while those in KL are the highest breaching the 160
point mark.

There have been complaints from first-time Malaysian couples that they had been priced out from the property market and this was a contentious issue during the recent Malaysian General Election. So much so that it led to the fall of Gelang Patah in Johor to the Democratic Action Party (DAP). Also the “My First Home Scheme” proved to be unpopular with very little awareness and take up rates from locals. This caused a huge loss in votes for BN.

To correct the anomalies in the property market, BN appears to follow the policies in opposition-held states, like in Penang held by the DAP by increasing the minimum purchase price for foreigners from RM500,000 to RM1 million. It is also offering more help for low- to middle-income families. For example, families earning less than RM3,000 will get RM650 in cash, up from RM500. Individuals above the age of 21 earning less than RM2,000 will get cash hand outs up from RM250 to RM3,000. Middle-income families earning between RM3,000 to RM4000 are also not forgotten with RM450 in cash handouts. These measures will help first-timers to finally get their foot in the property market.

The budget specific to the property market will likely be temporary until the price index drops significantly so that property prices will be in tandem with wages. This is a win for Malaysians on the whole. Property markets that will be affected are those popular among foreigners like Penang, Kuala Lumpur and Johor, including Iskandar Malaysia. Moving forward, Budget 2014 is pro-Malaysia and is good for locals. For foreigners, those looking to invest long term should still continue by taking advantage of the “Malaysia My Second Home Scheme”. However, the resale market will be very challenging for them.

This article was first published on PropertyGuru Singapore.