Nitty gritty of Malaysia property investment
“Why are the Chinese buying KL properties?” The headline on the flyer caught my attention. Now that mainland Chinese buyers are running out of easy property investment option closer to home, it makes sense that they would start looking seriously at Malaysia as a place to park their spare cash. Unlike most of the rest of Southeast Asia, the Kuala Lumpur residential market has remained fairly flat for the last several years. It could continue like this, or course, but it is also, like Tokyo, far from the top of a cycle.
What can you get?
So what can you buy? Kuala Lumpur estate agent Lim Eng Siang explains there are landed properties – gated and non-gated. Gated estates are increasingly popular for security purposes, he says.
Expect a choice of bungalows, semi-detached houses and terraced houses. Glancing at an ad for upscale new terraced houses in Putrajaya, the 2,000 square foot four bed, three bath, three metre ceilinged houses sit on up to 3,000 sq foot of garden, with two car ports and lots of playgrounds and family-friendly facilities. Prices range from MR680,888. It’s 20km from central KL on the expressway. There seem to be many such attractive developments this sort of distance from town.
Then, Lim says, there are apartments and condominiums. The market at the moment is “pretty buoyant and active at the moment,” he says - “for the Malaysian market.”
So where are the good areas to buy for investment? “Near an LRT station or a future MRT station,” Lim advises. You could look at Mont Kiara, Bangsar, Brickfields, KLCC, Petaling Jaya and Damansara in the Klang Valley, he suggests.
Rents, prices and yields
Rental yields are 2-4% for landed property and 4-6% for apartments. Rentals range from RM2-RM5 psf. Selling is between RM500-2000 psf. New developments start their prices from RM700 psf, he says.
Here’s an example of a typical big flashy city centre development, recently offered for sale to Hong Kong investors. This is an upmarket new build called Sastra at U-Thant, in central Kuala Lumpur. It’s freehold, as is most Malaysian property.
Located on Embassy Row, five minutes from KLCC, and five minutes from the Chinese Embassy, according to the blurb, the location is good. Developer CapitaLand is listed on the Singapore Stock Exchange. Terms are eight per cent down payment, with prices starting from the equivalent of HK$2,900 per square foot, with gross rental yield projected at a rather ambitious 6%. Foreigners can get mortgages of up to 75% for foreigners, with what’s described as a rebate/discount from the developer of 17%. Completion is pitched for the end of this year. The blurb boasts of low-density neighbourhood and lots of “very rare” greenery, but actually that’s par form the course in Kuala Lumpur where space is not under pressure yet. Each unit has its own private lift. The contact point for Hong Kong investors is Asia Bankers Club, which organised the recent exhibition.
Yesterday I mentioned a new 2,800 square foot apartment in a small eight-unit block in a good, but slightly less central location, priced at RM780 psf. This, I was given to understand, was on the high side, due to the high spec, so buyers are paying rather more for this new high rise at HK$2,900 psf, about RM1,160 at the exchange rate of 2.5.
And finally, the million dollar question, just who is buying in KL right now? “The majority of the purchases are local domestic demand,” Lim says. So no locust rush of mainland Chinese waving cheque books. Not yet, anyway.
Investing in KL vs Penang
The advantages of investing in KL is better rental yield, says Lim. “Penang’s capital appreciation has been pretty good the last ten years, probably due to scarcity of land on the island.” Next: how to buy as a foreigner.