Cooling trend in Malaysia

Property owners in Malaysia's hot spots, especially around Kuala Lumpur, enjoyed double-digit growth during a three-year bull run up to 2012. But, as the market comes down from a heady high, most expect a correction this year, and the next up cycle could be some time away.

For cashed-up investors in the post-crisis recovery years, it was easy to see the attraction. Malaysia's economy remains strong, expanding at a rate of 4.5 to 5 per cent last year, with 5 to 5.5 per cent growth forecast for this year.

Like Hong Kong, the city's business environment is well-developed, drawing thousands of foreign companies from around the world to establish operations there. And with that influx comes demand for housing. As IP Global's CEO Tim Murphy told potential investors last year: "In the next 15 years, Kuala Lumpur's population will grow by 40 per cent and, by the end of 2030, it will be bigger than the size of London."

And yet, it's one of the cheaper property markets in Asia. Direct foreign ownership is allowed, so unlike some other countries in the region, there are no entry barriers. If you're into real estate, what's not to like?

What has changed is not so much the fundamentals, nor even the demand. As Knight Frank points out, citing two recent developments, the market for high-end condominiums remains strong. "Both ViPod Residences and Quadro Residences have reportedly achieved 100 per cent and 96 per cent sales rates, respectively, indicating sustained demand for well-positioned high-end residences," the property consultancy says.

But last month saw the introduction of the latest round of cooling measures. Even though these are not as severe as in Hong Kong or Singapore, their weight "largely surprised" analysts, who were expecting a lighter touch, according to Empower Advisory.