Malaysia wooing Chinese property investors back with new measures

A year on from the COVID-19 outbreak, there is hope that a sense of normalcy can soon return to Malaysia’s real estate industry, as inoculations are gradually rolled out while stringent measures remain in place.

This has given the property market, which was heavily impacted by the pandemic, renewed optimism with capital Kuala Lumpur, Johor and Penang leading the recovery. The Malaysian government has made further tweaks, including lowering the threshold for foreign ownership of Malaysian properties, to attract foreign buyers.

And property investors – particularly from China – are drawn by the affordable cost of international education, a top-class healthcare system and Malaysia’s prospects as a retirement haven. According to 2020 data from a Chinese real estate platform, Malaysia was featured in the Top 10 popular countries for Chinese buyers.

China also became Malaysia’s sixth-largest foreign investor in 2020, with its investment rising by 43.8 per cent to RM5.8 billion. This is likely to increase as China, the only major economy that grew in 2020, could see its gross domestic product (GDP) surge by 8.4 per cent this year, according to the International Monetary Fund (IMF).

2020: SWIFT REBOUND AFTER A SHARP DIP

Malaysia’s property sector was on the rocks in the first half of 2020, as it recorded drops of 27.9 per cent in volume and 31.5 per cent in value compared to the same period in 2019.

The decline came on the back of the Movement Control Order (MCO) implemented from March to July 2020, which delayed property listings and stalled sales. Excess unsold property ballooned to nearly 32,000 units valued at RM20 billion in H1 2020 – a 3 per cent increase from end-2019.

However, the Malaysian government swooped in with key property measures to woo investors back. The market subsequently rebounded in the third quarter of 2020, recording a 7.4 per cent year-on-year increase.

Things have been looking up since then, as a better economic outlook and historically low interest-rate environment are set to make 2021 a bountiful year for the sector.

2021: BUOYED BY GOVERNMENT MEASURES

Property interest in the latter half of 2020 began to rise in tandem with the introduction of initiatives such as the Home Ownership Campaign (HOC), as well as Overnight Policy Rate (OPR) cuts by Bank Negara Malaysia.

Prospects remain strong in 2021. A recent survey by the Real Estate and Housing Developers’ Association (REHDA) showed that 20 per cent of respondents were positive about the property market and sales in H2 2021, compared to only 8 per cent in the first half. The National Property Information Centre also expects a gradual uptick in demand during the same period, citing confidence driven by the acceleration in vaccinations worldwide.

In fact, the latest PropertyGuru Malaysia Consumer Sentiment Study revealed that one in three younger Malaysians intend to own a home this year.

Meanwhile, the government has moved to support foreign home ownership to soak up excess units. This means a timely stimulus for the property market that is likely to see a surge in overseas purchases.

For example, the threshold for foreign ownership of high-rise property was lowered from RM1 million (US$240,000) to RM600,000 (US$144,000) in 2020 to whet the appetite for unsold stock.

And with Malaysia’s economy projected to expand between 6 and 7.5 per cent this year, general consumer sentiment is set to rise, along with an increased demand for property.

MALAYSIA IS STILL A POPULAR CHOICE

Chinese investors have remained enamoured with Malaysia despite the pandemic. The Asian giant’s Belt and Road Initiative, a massive infrastructure project that spans from East to West, will also spur more Chinese investments in Malaysia and the region.

Currently, Malaysia supersedes the United States and the United Kingdom on the Top 5 Countries for Chinese Investors’ Outbound Investment list – with Kuala Lumpur (50.1 per cent) as their most preferred city, followed by Johor (33.5 per cent) and Penang (8.2 per cent).

Unsurprisingly, Chinese citizens accounted for 30 per cent of more than 42,000 Malaysia My Second Home (MM2H) applications approved between 2012 and 2018. The scheme, which has been suspended since August 2020, provides a renewable 10-year, multiple-entry visa for successful foreign applicants.

Homebuyers are also increasingly interested in purchasing property for a better lifestyle and safety, instead of purely for investment.

“Malaysia is naturally well-endowed with beautiful beaches and mountains, moderate climate as well as good infrastructure including healthcare and education,” noted Winston Lee, Director of Special Projects at PropertyGuru Group.

“Hence, Chinese investors are naturally attracted to Malaysia for its high-quality lifestyle at very reasonable prices compared with the big cities in China.”

China’s property hunters are also partial to countries with a neutral stand on geopolitics and stable housing policy – two areas that Malaysia scores well in. It is no surprise then that Malaysia, which offers affordable homes and boasts high environmental and living standards, remains highly sought after.

EXTENDING STRATEGIC REACH WITH PROPERTYGURU’S DIGITAL SOLUTIONS

One-way Malaysian developers can reach out to a vast pool of suitors is through the digital sphere.

According to China’s Ministry of Commerce, outbound direct investment, which tracks all types of investments, fell much less than expected amid the pandemic – 3.3 per cent year-on-year from January to July 2020.

This is mainly because digitally savvy Chinese investors have been adopting Offline-to-Online solutions. These have allowed them to rapidly purchase property online, making it necessary for developers to build a stronger digital presence.

PropertyGuru’s China Solutions offers a one-stop online centre to connect with Chinese investors. Through live-streamed interactions with property agents, digital content on leading real estate platforms and direct access to prospective buyers, developers can stay agile and tap a huge market primed to splurge on Malaysian property. Contact us today for more information!