Malaysia: Price History

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Impressive price increases in Kuala Lumpur

The past year saw a rise in property prices in Malaysia, after weakness during the first half. Press reports suggests the market has risen quite strongly, but it is difficult to substantiate this, as the market statistics provided by Bank Negara Malaysia are one year out of date.

The strong growth of residential prices has several causes.. One is strong economic growth, at 7.3% in 2007, following 5.9% growth in 2006. Low interest rates have also been pushing Malaysian households to look at putting their money elsewhere than in the bank. Recent volatility in the equity market is another factor. Finally, the Employees Provident Fund (EPF) now allows monthly mortgage withdrawals from Account II (a change which could potentially free inject RM9 billion cash annually into the housing market).

Foreign investors are still actively looking at buying property in Malaysia. Singapore and Hong Kong residential property are now both very expensive, and offer rather low yields, and Malaysia offers a much better-paying alternative, with gross rental yields at around 7%.

Another source of money is the US$900 million current account surpluses of the Opec countries, some of which are flowing toward Malaysia.

House prices in Kuala Lumpur increased by 6.9% in 2006, following price increases of 7.2% in 2005 and 6.3% in 2004.

The growing supply of high-end condominiums is something of a concern, as rental take-up rates have not matched supply, as noted recently by CLSA. The firm suggests that some discrimination is likely to take place between iconic projects in prime locations, with some pressure on the prices of other projects.

According to a Global Property Guide study on housing affordability, Malaysia has the lowest house-price-to-income ratio in Asia. This is largely because of the delayed effects of the Asian crisis. From 2000 to 2006, price of detached houses increased by a relatively modest 28%, with semi-detached housing rising 21%, terraced houses 15.9%, and high-rise units 15.5%.

Active luxury rental market

In the early 1990’s there were two peaks in housing – 1991, when 26% y-o-y real price growth was achieved, and in 1995, with 18% real price growth. After the Asian Crisis hit Malaysia, prices fell 39% between 1997 and 1999 for luxurious detached houses in Kuala Lumpur.

Malaysia’s rental market is small, only 6% of the housing stock is in the private rental sector. About 85% of the total stock is owner-occupied, while government-provided housing accounts for 7% of the housing stock.

The active luxury rental market caters mainly to expatriates, centered on Kuala Lumpur. Rental yields in Kuala Lumpur are healthy, ranging from 7% to 8.7%.

Ownership limits eased, CGT abolished

Foreign ownership rules were relaxed in Dec 21, 2006. Foreigners no longer need to ask permission from the government when buying properties worth MYR250,000 (approx US$74,000) or above. Further, the limit on the number of properties foreigners can buy has been removed. There are also no more restrictions on the use of property. Before, foreigners could only buy at most two units, and they could not use them investment purposes.

The relaxation of the foreign ownership limits is in line with “Malaysia: My Second Home Programme.” The programme allows people who fulfill certain criteria to stay in the country as long as possible on a social visit pass with a multiple entry visa.

In addition, the government abolished capital gains tax in April 2007 to boost the property sector. Previously, non-resident individuals were charged Real Property Gains Tax (RPGT) at a flat rate of 30% on gains made on the disposal of real property within the first five years, and 5% thereafter.

Malaysia - more data and information

• Malaysian house prices, rents, and letting income - real data!
• How expensive are houses in Malaysia, compared to the rest of Asia?
• How much rent can be earned from Malaysian property, compared to the rest of Asia?

Your Comments

posted by steven Teo | 2007-10-13

Retired, Singapore

posted by Teo Hock Hoe | 2007-10-17

Retired, Singapore

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