Malaysia tempts buyers with incentives
Stronger growth prospects in Asia have seen global real estate investment gravitate towards the region, with the market recovering to 2007 levels, according to Real Capital Analytics.
Amid a more positive climate, the Malaysian government's moves to encourage real estate investment have put its capital, Kuala Lumpur, in the spotlight. Terry Hobbs, agent and media manager of Propertyshowrooms.com, says a number of recent initiatives favour foreign investors.
'The Malaysian government's decision to limit the reintroduction of capital gains tax [Real Property Gains Tax] on real estate is indicative of the favourable view it holds towards property investment,' Hobbs says. 'This means the only properties that will now be taxed are ones sold within five years of their purchase date.'
In an interview with the Overseas Property Professional website, a spokesman for Malaysia Property Inc, a government initiative set up to promote international property investment, says industry feedback has been factored in.
'This policy reflects the government's pro-investment [position] and yet would safeguard the Malaysian property industry against speculation. As serious property investors usually take a longer view of their investment horizon, the amendment to the Real Property Gains Tax would appeal to this target group of investors for the industry,' the spokesman says.
In addition, says Hobbs, the Foreign Investment Committee is making plans to deregulate investment guidelines to make it easier for overseas purchasers. There is also the Malaysia My Second Home (MM2H) visa programme, allowing foreign citizens to stay in Malaysia for up to 10 years at a time if they wish.
Most analysts agree that Malaysia's property market is in the early stages of a growth spurt. In Kuala Lumpur, notes property investment firm Pacific Star, home prices have bottomed out, but the rebounding economy and low interest rates should drive owner-occupier demand and create the backdrop for mildly positive home-price growth over the next two years.
Pacific Star sees the present time as 'the dawn of a new era' for the Asian property market. It says Asia's economic momentum is building thanks to a cyclical turnaround in exports and investment, and growing domestic consumption.
The firm expects foreign investors will become more active this year. This increased foreign demand, coupled with the growing purchasing power of domestic investors, should support price appreciation, it believes.
For Kuala Lumpur, the indicators are positive. Malaysia's economic growth rebounded late last year. A sound banking system and low interest rates should act as investment drivers.
The prime retail sector remains resilient, underpinned by limited supply and strong growth in tourist arrivals - up 13 per cent per annum over the past decade, outpacing the rest of Asia (ex-China and India).
Infrastructure development around the city, such as the Kuala Lumpur International Airport in Sepang, the creation of the Multimedia Super Corridor and the expansion of Port Klang, further supports its economic potential.
Ng Kok Siong, Pacific Star's executive vice-president of asset management, believes opportunities still exist in Kuala Lumpur. Prime retail malls, with a balanced mix of mid- to high-end retailers, are expected to benefit from robust growth in tourist arrivals. 'The relatively moderate retail supply pipeline expected over the next four years should also provide an upside for prime retail rents,' Ng says.
'Grade-A buildings in the central business district and the Golden Triangle area are poised to benefit from the progressive liberalisation of the financial sector over the next three to five years.'
Ng believes Kuala Lumpur's residential sector is also set for a boost, as better affordability and the anticipated influx of expatriates from foreign firms entering the market creates demand for high-end property.
He cites the recent marketing of Pavilion Residences in Bukit Bintang, Kuala Lumpur's most fashionable shopping and entertainment district. The property was launched in November last year and, within the first quarter, 70 per cent of the apartments were sold. The buyer group comprises 27 nationalities, including investors from Hong Kong.
Sitting on 12 acres of land in the Golden Triangle, the residences form part of a mixed-use development which includes a seven-storey retail podium, signature office tower and luxury hotel.
With brands such as Gucci, Ferragamo and Burberry, Ng likens the retail precinct to Hong Kong's Pacific Place, The Ginza in Tokyo or ION Orchard in Singapore.
For foreign buyers, he notes, residences here offer value for money: the equivalent of HK$3,000 to HK$4,000 per square foot, compared with HK$15,000 to HK$16,000 for luxury residences in Hong Kong Parkview.
Returns are an attractive 5 per cent to 6 per cent and, with the market not far above bottom, there is ample room for growth. Also, there is no asset bubble in Kuala Lumpur, Ng adds.
He says that the pro-business policies of the Malaysian government will have a knock-on effect in the prime office rental and luxury residential markets.