Government looks to cool Malaysian property market

While the likes of Europe and North America continue to struggle with government budgets, increasing debt and lacklustre economies, the same cannot be said of Malaysia. Demand for property in Malaysia remains very strong and while the authorities have been looking to cool the sector and reduce the availability of finance in the short to medium term, it looks as though both domestic and overseas demand will maintain the forward momentum for the property market in the short to medium term.

This is an area of the world which is looking to achieve high income and developed nation status by 2020 and this seems to be fuelling interest in the economy, political policies and the short to medium-term outlook for the country.

Property prices in Malaysia

While Malaysia continues its move towards high income/developed nation status the property market is still centred upon some of the better known areas of the country such as Kuala Lumpur and Johor. Experts in Malaysian property believe that it is safer to concentrate upon these more developed areas of the country which attract businesses, overseas investors and expats.

Even though there are expectations of a 10% increase in property values in 2013 in some of Malaysia’s more developed cities there are no real concerns about a potential property bubble. The Malaysian government is looking to manage the economy and the property sector very tightly and recently announced the abolition of preapproved financial products and reduced the maximum length of personal loans from 25 years to 10 years and property loans from 45 years to 35 years.

Quote from PropertyForum.com : “I am about to buy a new house. My current home is under water so I will not be able to sell it at this time. I have enough in savings for the down payment on the new house plus to put away enough money to pay the mortgage on the current home for 1 year. (Possibly 2 years.) I know that in this area I can rent it out for enough to cover my mortgage. My question is would it be better to leave it empty (no potential risk of damages by renters) or rent it out?”

There is no doubt that these new finance arrangements will have an impact upon not only the property market but also the wider economy although in reality this is a very sensible move by the authorities.

The Malaysia economy

Gross domestic product growth of 5.5% in 2012 was impressive by any standards, especially when you bear in mind that inflation (while at a 12 month high) is only 1.8%, and the government fully expects this to increase in the short to medium term. The first quarter of 2013 saw slightly disappointing growth of just 4.1% although the government is adamant we will see a pickup in economic growth during the rest of 2013.

In many ways the fact that Malaysia is looking for high income/developed nation status by 2020 will dictate short to medium-term political and economic policies. The authorities will need to be aware of overheating in the economy and the property sector while looking to achieve this end by 2020 – although in all honesty the move to tighten financial arrangements in the commercial market shows the authorities are not wholly focused upon short-term targets.

Conclusion

Experts in the Malaysian property market are still adamant that you need to be selective with regards to areas in which you invest your property funds although the sector as a whole is certainly attracting the attention of overseas investors. There is ongoing interest from Singapore investors, who often own second homes in Malaysia, and there is also renewed interest from foreign investors looking for stable economies and possible property “safe havens”.

The only real concern in the short to medium term is a potential overheating of the economy and the Malaysian property market although a recent move to tighten financial arrangements, reducing maximum tenures for loans, has certainly taken some of the short-term sting out of the problem. Malaysia is a country which is highly developed in many areas but is relatively lacking in others and the spread of wealth, as with so many up-and-coming countries, is certainly not even across the nation.

Is Malaysia an emerging property market of the future?