• Malaysia Property Market Outlook in 2019: A Complete Overview

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    Malaysia is one of the most foreign friendly countries in Southeast Asia when buying property. Many expats favor Malaysia and other foreigners even decide to stay here permanently.

    If you plan to buy real estate in Malaysia, it’s important that you understand how healthy the market is and what you can expect in 2019.

    In this article, I explain what my predictions are for Malaysia’s property market in 2019. I’ve made a thorough overview of the market condition in previous years, the current economic climate, and used historical data.

    Let’s start and have a look at how the market has performed in the past years.

    Topics covered in this article:

    Malaysia’s property market in 2017 & 2018: A throwback

    Malaysia’s property market has been in decline since 2012. Even if prices still rise, we’ve seen modest increases in the past five years.

    In 2017, prices increased by 5% on average, the lowest rate since 2009. We see a similar trend in the number of transactions, with only 311,824 transactions in 2017, a record low since 2012.

    Below you can see a yearly comparison by Malaysia’s Valuation and Property Services Department, showing the approximate price increases in real estate since 2013.

    • 2013 – 13%
    • 2014 – 11%
    • 2015 – 9%
    • 2016 – 7%
    • 2017 – 5%
    • 2018 H1 – 4%

    Kuala Lumpur, Selangor, Negeri Sembilan, and Sabah has showed more positive results throughout 2017 and during the first half of 2018. Here, prices have remained above or around the national average.

    Cities like Pahang, Perak, and Terengganu, on the other side, have seen modest increases, well below the national average.

    Malaysia housing prices adjusted for inflation

    I want to mention that the price increases shown above aren’t adjusted for inflation.

    If we adjust the prices and take inflation into consideration, the prices have been in decline in many places throughout 2017 and 2018, including Kuala Lumpur, Selangor, and Penang.

    By the end of 2017, the average price for houses was around MYR 400,000, which equals to USD 96,000.

    Malaysia’s real estate market performance in 2018

    Market reports have shown unimpressive results during 2018.

    According to a report published by Edmund Tie & Company, we’ve seen small quarter-to-quarter price increases of high-end condominiums in Kuala Lumpur during the second quarter. Rents on the other hand, declined by 6.3%.

    The National Property Information Center backs this statement, claiming that Kuala Lumpur saw a 1.7% year-on-year increase of housing prices. If we adjust to inflation, there’s even been a negative growth.

    malaysia-ringgit

    The number of transactions, as well as the value of the transactions, declined in the first half of 2018 for the residential sector, compared to the previous year.

    The commercial and industrial sector has showed more positive results with increases in both the number of the transactions and the value of the transactions.

    Why has Malaysia’s property market performed badly?

    As mentioned, we’ve seen a decline in Malaysia’s real estate market since 2013, there are a number of reasons contributing to this negative trend. Let’s have a look at some of the major reasons.

    1. Malaysia has an oversupply of property

    According to Malaysia’s Deputy Finance Minister, Datuk Lee Chee Leong, there were 40% more new unsold residential units during the first half of 2017, compared to the first half of 2016.

    Simply put, Malaysia has experienced an oversupply of property, which has naturally resulted in a price decline.

    2. Malaysia has a slower economic growth

    Malaysia’s economy slowed down more than expected, which affected the median incomes as well as the local purchasing power.

    Buying property is too expensive for many Malaysians at the moment.

    Developers responded accordingly and reduced upfront payments to merely 1%. A few years back, developers required upfront payments of around 10%.

    3. Tougher minimum investment requirements for foreigners

    As explained in my separate guide about buying real estate in Malaysia, foreigners are subject to minimum investment requirements, leaving affordable properties to the local market.

    Until 2010, foreigners could buy property valued at as little as RM 250,000. This grace period ended the same year, as the government raised the minimum investment requirements to RM 500,000.

    In 2014, the government again decided to raise the minimum investment requirement to an astonishing level of RM 1 million, which naturally discouraged foreign buyers to invest in real estate.

    Even if Malaysia has raised the minimum investment requirements consequently, it’s still one of the most foreign friendly countries in terms of buying regulations.

    You can also apply for a renewable 10 year visa referred to as MM2H (Malaysia My 2nd Home), which allows you to buy property with a lower price tag in some states.

    The most expensive places to buy property in Malaysia

    Most expensive places to buy property in Malaysia

    Kuala Lumpur has remained as the most expensive place to buy real estate during the last two decades. It doesn’t come as a surprise as it’s the capital, financial hub, and the most popular city among expats and tourists.

    By the end of Q2 2018, the average house price was RM 772,000 (USD 186,000), which is considerably high compared to the national average. The price increase in terms of percentage is still on par with the national average of around 5%.

    Below you can find a comparison of average prices in different places during the second quarter of 2018:

    • Kuala Lumpur: RM 772,000
    • Selangor: RM 468,000
    • Sabah: RM 445,000
    • Sarawak: RM 437,000
    • Pulau Pinang: RM 424,000

    The cheapest places to buy property in Malaysia

    If you look for cheap properties, Kelantan should be one of your first choices. Here, housing prices averaging of RM 172,000 (USD 42,500). That’s less than half of the national average.

    Yet, keep in mind that price increases are comparatively low in places with cheap real estate. Below I’ve listed a handful of places with some of the cheapest properties on average in Malaysia:

    • Kelantan: RM 172,000
    • Perlis: RM 177,000
    • Melaka: RM 179,000

    How will Malaysia’s property market perform in 2019?

    There are mixed opinions about Malaysia’s economic growth and the property market in 2019. Many experts and real estate firms bid for a turnaround in 2019, while some remain doubtful.

    Malaysia’s economy improves, which often translates into a healthier real estate market. Well-known real estate firms and other organizations predict a gradual improvement in the property market in 2019.

    These real estate firms and organizations include MIEA, Savills, and Knight Frank.

    Malaysia’s economic outlook for 2019

    Malaysia’s GDP growth rate remained at around 5.4% in 2018. It’s expected to remain at a similar level, or improve increase further in 2019. This has resulted in improved labor market conditions, a lower inflation, and a stronger confidence among consumers.

    The unemployment rate gradually declines, while the mortgage approval rate mortgage is on the rise, averaging at around 71%.

    There’s more political stability in the country since the 2018 elections, even if the new leader Mahathir Mohamad has a more negative view of foreigners snapping up local properties.

    Overall, these are all positive signs for Malaysia’s property market.

    kuala-lumpur-real-estate

    Dealing with oversupply and unsold properties in 2019

    The Malaysian government has taken several steps to curtail the problems with the oversupply of real estate.

    In November 2017, the government decided to put a temporary ban on the construction of high-end condominiums worth more than RM 1 million (around USD 245,000).

    According to the National Property Information Center, the stock of residential units declined by 20% for completed projects, and 37% for newly planned projects during the first half of 2018, compared to 2017.

    This is a positive sign.

    In January 2018, the government again introduced new measures and increased the stamp duty from 3% to 4% of property worth more than RM 1 million.

    This pushed investors and buyers to look for more affordable properties, priced below RM 1 million.

    The government’s attempt to increase the amount of young first time home buyers

    The new regulations were also introduced to lure younger buyers, who are often first time buyers.

    The Malaysian government previously introduced other new regulations, for example, the Malaysia People’s Housing Bill 2011 (PR1MA), designed to facilitate younger people in buying affordable housing.

    With a stronger economic growth, and a stronger consumer confidence, it’s expected that young buyers can take advantage of benefits like:

    • A reduced stamp duty for houses worth less than RM 400,000 (USD 96,000)
    • Easier approvals of mortgages for anyone with a monthly income of RM 7,000 or more
    • A new end-financing scheme was introduced in 2017, allowing buyers to borrow more money

    Historical property price data in Malaysia

    If you check historical data, the current housing prices are still lower compared to the pre-Asian financial crisis, if adjusted for inflation.

    After the Asian financial crisis in 1997, property prices in Kuala Lumpur declined by 37% within a time period of just two years. Prices have still not recovered.

    There’s plenty of room for further price increases if we look at historical data.

    Increased interest for the MM2H

    Even if Malaysia increased the minimum investment requirements to RM 1 million towards foreign buyers, there’s still a surge in applications for the MM2H program, especially among Chinese buyers.

    As mentioned above, under the MM2H program, you get a 10 year renewable visa.

    In 2017, the number of applications for MM2H increased by 3.4%, with Chinese buyers making the biggest group of applicants (47%).

    Summary

    Despite the fact that Malaysia’s residential real estate market was weak in 2017-2018, and has followed a downward trend since 2012, many analysts and experts are optimistic and foresee a rebound in 2019.

    The industrial, commercial, and hotel sector grows at a steady pace, while the residential sector has started to improve, showing a decline in supply, and an increased interest of Chinese investors in the MM2H program.

    Malaysia’s economy is doing better compared to previous years, which is a healthy sign. With the new government’s promise of good governance and its anti-corruption drive, consumer confidence also improves.

    The current economic climate and historical data speak for a rebound in Malaysia’s real estate market in 2019.

    Want to buy property in Malaysia?

    Fill out the form to get in touch with a real estate agent

  • 1 Responses to “Malaysia Property Market Outlook in 2019: A Complete Overview

    1. Teddy Lam at 11:27 am

      Great review Marcus. Is Malaysia property worth the investment after the new gov took over? Would be great if you can review Country Garden new development https://lakecity-kl-north.com too. Thanks in advance!

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