In Q3 2013, Malaysia's national house price index rose by 10.1% (7.8% in real terms) year-on-year. This year's price rise, nationally, was only slightly lower than last year's, which was 11.9% (10.4% in real terms).
Kuala Lumpur’s house price index rose especially dramatically, with nominal prices up by 14.4% (11.9% in real terms). Kuala Lumpur has the most expensive houses in the country, with an average house price of MYR 620,758 (US$ 189,342). It is followed by Sabah and by Selangor, with average prices of MYR 413,187 (US$ 126,030) and MYR 405,826 (US$ 123,784), according to the Valuation and Property Services Department (JPPH).
House prices also surged in Johor (20.4%), Pulau Pinang (14.3%), and Negeri Sembilan (6.3%). Selangor and Perak had the lowest annual price growth at 4.3% and 3.7%, respectively.
Recent anti-speculation measures are expected to lessen transactions volumes. But property prices in upcoming areas/hotspots are expected to continue rising, according to Knight Frank. Partly because the market overhang has diminished - the number of housing units launched in Q3 2013 fell to 3,736 units, 74.5% lower than the 14,662 units launched during the same period last year. The number of houses sold, relative to stock, was 18.7% in Q3 2013, up from 15.3% in Q2 2013, and 12.5% from the previous year.
Analysis of Malaysia Residential Property Market »
The extraordinary stability of residential property prices in Malaysia – rising in some years by 2% or 3%, falling in other years by a few per cent – means that the observer is never shocked by a sudden boom or price-collapse. In inflation-adjusted terms, prices have been almost completely stable for the past 15 years.
Given that Malaysia is a large place and relatively thinly populated, there are obvious limits to capital appreciation prospects (arguably, except in ‘dormitory town’ areas for neighbouring Singapore).
Therefore, the prime attraction of property ownership in Kuala Lumpur is income. Gross rental yields have fallen somewhat over the past year. Rents have not kept pace as nominal prices have risen. Yet the decline has been gentle, almost invisible. The 120 sq. m. condominium category remains the best-paying investment, with gross returns of 7%, but last year, our researchers found that rental yields averaged over 8% for this size.
Gross rental yields on condominiums generally range from 5% to 7%. Bungalows have lower yields, typically just over 4%.
Capital Gains: No real property gains tax (RPGT) is levied on disposals of properties held for more than five years for 2013. As of 2014, different RPGT rates apply for citizens, non-citizens, and companies.
Inheritance: No inheritance or gift taxes are levied in Malaysia.
Residents: Residents are taxed only on their Malaysian-sourced income at progressive rates, from 2% to 26%.
Rent: With the passage of the Control of Rent (Repeal) Act of 1997, rent control was abolished in 2000.
However although the law states that rents can be freely negotiated, rent increases can be appealed to the courts, if the tenant feels the increase is too high.
Tenant Security: At the end of the contract, the landlord has the right to vacant possession of the premises without payment of any compensation, though a notice to vacate must be given to the tenant three months before the expiration of the contract. Any rent adjustment must be mutually agreed upon. Tenancy agreements usually last for a year.
Recovering unpaid rent is difficult. The court system is inefficient and very costly compared to the amounts recovered.
From 2002 to 2008, the economy enjoyed growth rates averaging 5.7%, but growth fell sharply to 1.5% in 2009, during the global financial crisis. In 2010, GDP growth bounced back, surging by 7.4%, and was followed by 5.1% growth in 2011.
The IMF’s forecast of 4.9% GDP growth in 2014, but the Malaysian Institute of Economic Research (MIER) predicts growth of 5.5%, while Bank Negara Malaysia (BNM) expects 5.1% GDP growth.
In recent months, inflation has been rising. From 1.34% in January 2013, inflation rose to 3.4% in January 2014. The recent price hikes were partly due to the fuel subsidy cuts implemented by the government in 2013, which raised prices of some petroleum products and eventually lead to an increase in consumer goods. BNM expects higher inflation in 2014, possibly exceeding the 3.2% long-term average.
The Overnight Policy Rate (OPR) has remained at 3% throughout 2013. However, it is likely to increase to 3.25% in Q4 2014, according to Edward Lee, Standard Chartered Bank Southeast Asia’s regional head of research.
Unemployment was 3% in December 2013, down from 3.2% in December 2012, and from 3.4% in the previous month, according to Department of Statistics Malaysia.
In the recent May 5, 2013 elections in Malaysia, the federal ruling Barisan Nasional (BN) coalition, dominated by Prime Minister Najib Razak’s party, United Malays National Organisation (UMNO), took over 60% of the parliamentary seats, despite getting only 47.38% of the popular vote. The opposition Pakatan Rakyat (PR) coalition led by Anwar Ibrahim failed to win majority of the seats even though it won 50.87% of the popular vote.
Anwar accused PM Razak and the Election Commission (EC) of electoral fraud, but if so, fraud seems to have carried the day.