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Last Updated: Jun 15, 2014




House prices in Malaysia continue to rise, albeit at a slower pace following anti-speculation measures.

In the first quarter of 2014, Malaysia’s nationwide house prices rose by 8% (4.35% inflation-adjusted) from the same period last year, to MYR276,668 (US$86,027), the lowest year-on-year growth since Q4 2010, based on figures from the Valuation and Property Services Department (JPPH). In a quarterly basis, house prices increased 1.65% (0.73% inflation-adjusted) in Q1 2014.

By property type:
  • For terraced houses, the average price rose by 8.2% (4.4% inflation-adjusted) during the year to Q1 2014
  • For high-rise residential properties, the average price surged 9.1% (5.3% inflation-adjusted)
  • For detached houses, the average price rose by 8% (4.3% inflation-adjusted)
  • For semi-detached houses, the average price increased 6.6% (2.9% inflation-adjusted)

Malaysia’s residential construction activity is now declining. In Q4 2013, residential building plan approvals were down by 13.5% y-o-y to 33,859. Likewise, housing starts also dropped 13.6% and completions plunged by 15.8% over the same period.

Newly launched residential units totaled 48,617 in 2013. The total housing stock stood at 4,725,109 units by end-2013.

Property demand indicators were mixed. The total value of residential property transactions rose by 6.3% to MYR72.06 billion (US$22.4 billion) in 2013 from a year earlier, according to JPPH. However, the total volume of residential property transactions fell by 9.7% to 246,225 over the same period.

Malaysia house pricesRecent anti-speculation measures are expected to continue to impact transactions volumes.  But property prices in upcoming areas/hotspots are expected to continue rising, partly because the market overhang has diminished according to Knight Frank.

The Malaysian economy is expected to expand by a robust 5.2% this year, from an average real GDP growth rate of 5.7% from 2010 to 2013.

Analysis of Malaysia Residential Property Market »


RENTAL YIELDS
Last Updated: Oct 06, 2013



Condominium prices in Kuala Lumpur are reasonable at between US$1,500 to US$3,000 per square metre (sq. m.)

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%.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Mar 25, 2014



Rental Income: The net rental (and other) income of nonresidents is taxed at a flat rate of 26%, without any personal relief.

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%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Mar 26, 2014



Total round-trip costs are around 3.4% to 6.75% of the property value, inclusive of the estate agent's commission of 2.75% for the first MYR500,000 (US$152,905), and 2% thereafter. Roundtrip transaction costs in Malaysia are among the lowest in Asia.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jun 22, 2006



Malaysia luxury housesBecause Malaysia's court system is inefficient and slow, rental market practice is pro-tenant, even though the law is pro-landlord.

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.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Jun 15, 2014


Better Malaysian economic outlook in 2014

Malaysia gdp inflationMalaysian economic growth slowed in 2013, expanding by only 4.7%, after 5.6% growth in 2012, according to the Department of Statistics Malaysia.

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.

For this year, the IMF forecasts 5.2% GDP growth, but the Malaysian Institute of Economic Research (MIER) predicts growth of 5.5% in 2014, while Bank Negara Malaysia (BNM) expects 5.1% GDP growth.

In recent months, inflation has been rising. In the first quarter of 2014, inflation rose 3.4%, up from 2.1% in 2013 and 1.7% in 2012. 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.

BNM kept its Overnight Policy Rate (OPR) at 3% in March 2014, in an effort to support economic growth and domestic consumption, even as inflation quickened to the fastest in more than two years. 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 March 2014, unchanged from the previous quarter, according to Department of Statistics Malaysia. The country’s unemployment rate averaged 3.4% from 2000 to 2013, according to the IMF.

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.







  • Low transaction costs
  • High yields for luxury condos
  • Reforms improved rental market
  • High rental income tax
  • Pro-tenant rental market
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $2,616 For a 120 sq. m. property, usually an apartment.
Rental Yield: 4.57% For a 120 sq. m. property, usually an apartment.
Rent/month: $1,196 For a 120 sq. m. property.
Income Tax: 22.42% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 5.08% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

Malaysia Real Estate Highlights Q3-Q4 2013 - Knight FrankMalaysia Property Report 2013 - WTW International
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