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Malaysia, The Most Ideal Country to Invest
Malaysia is similar to Singapore in the sense that the ratio of ethnic Chinese population is higher than any other South East Asian country. The influence of the Chinese culture is prevalent in these countries. As such, the Malaysian market, including the property market, appeals to investors from China.
The Prime Minister of Malaysia, Dato’ Sri Najib Razak, has made 3 official visits to China. This, coupled with leveraging the business relationships of China nationals with the ethnic Chinese in Malaysia, Malaysia’s trade relations with China has been further strengthened. It is common knowledge that the property prices in China are rapidly rising and the China government has introduced policies to curb the rising property prices in China. In contrast, the Malaysian government has loosened property market controls since 2006, and this in turn has drawn many foreign investors to the Malaysian property market.
Malaysia is the only country among South East Asian countries that allows foreign investors to purchase property under their own names. There are several reasons as to why Singaporean, Middle Eastern, Japanese and Chinese investors have started investing in Malaysian property—A strong network among ethnic Chinese, the fact that Malaysia is an ideal country for Chinese investors due to the country’s comprehensive legal system set up during her British colonial days, the fact that Malaysia offers property prices more attractive than those of Hong Kong, Singapore and Australia, etc.
With ever rising property prices in China, Hong Kong and Singapore, it is good to know that the price per square meter of high-class residences in Kuala Lumpur is only about one tenth of the price per square meter of high-value properties in Hong Kong, Singapore and Tokyo. Malaysia also boasts property prices lower than countries with comparatively lower GDP per capita and national income per capita, such as Bangkok, Manila and Jakarta.
If we compare the high-in-demand luxury condominiums in Kuala Lumpur to luxury condominiums in Hong Kong and Singapore, the Malaysian condominium prices are much lower. Before 2006, the Malaysian government imposed strict policies on foreign property investors, preventing the flow of foreign investment into the Malaysian property market. Actually, there is no reason for property to be expensive in Malaysia, with cheap land prices, no earthquakes, typhoons or natural disasters, no stringent anti-earthquake measures and non-complex structures.
Forget the notion that low prices reflect low quality—see for yourself the luxury apartments in Malaysia and be pleasantly surprised.
As Malaysia’s economy continues to expand, so does the country’s population—the nation’s population has grown from 23.3 million in 2000 to 28.3 million in 2010. Unlike China’s one child policy, Malaysia has a very young population, forming an ideal population pyramid. Those currently in their teens or twenties are set to join in the pool of property buyers in a few to ten years time. As the economy continues to develop, the demand for property in Malaysia will gradually increase. On another note, according to a census report released by the Malaysian government in December 2011, the Malaysian population is set to rise to 57 million by 2090, doubling the current population in 2011.
As the economy and population continues to grow, this has far reaching implications. With the property price index in 2000 at 100 points, the growth rate of Kuala Lumpur has far exceeded other Malaysian cities. The Malaysian government estimates that the Kuala Lumpur population will rise to 10 million by 2020, with a 65% increase from the current number. As the population and density in cities increase, coupled with the growing number of property buyers, the growth in demand for apartments is inevitable.
On 3 April 2012, Deputy Finance Minister Senator Dato’ Donald Lim Siang Chai said that the property market would continue to be active this year, supported by various government initiatives under the 10th Malaysia Plan and Budget 2012. With regards to real estate bubble concerns, Lim remarked that it is normal to have an annual price increase of 10-15%. He also added that the National Bank of Malaysia has implemented measures to control inflation and the situation is under control.
Since the introduction of pre-sale properties to the Malaysian property market, and with the progress of the construction, property sale prices are rising. There is usually a 20-30% price increase between the pre-sale stage right up to completion, and it has become a trend in the Malaysian property market to have price increases upon completion. It is recommended that you purchase pre-sale property from established developers in the early stages to secure the most ideal location. By owning excellent property, you stand to enjoy capital gains and reap profits from your investment. With new transport networks and development in the city, it is important to note that the property prices of surrounding areas will rise.
In Kuala Lumpur, the average profit rate gained from rent is about 7% (2010). It is also important to note that Malaysia boasts more stable rental rates than her other Asian counterparts. Should you plan to settle down eventually in Malaysia and get capital gains from selling your property, but have not chosen to settle in Malaysia just yet, you may want to consider renting out your property and enjoy rental income. Also, for pre-sale properties, some of which come complete with interior decoration and furniture similar to that of hotels, there is about a 10-year rental guarantee.
A country that takes the lead in development, Malaysia’s economic development model is an example to her Asian counterparts. Together with Singapore, Malaysia is the model country for other South East Asian countries. In order to fulfil the vision of being a developed nation by 2020, Malaysia started to push for industrial development from early 1990. In the past 20 years, the Malaysian economy only showed signs of negative growth during the 1998 Asian Financial Crisis and the worldwide financial crisis in 2009 stemming from the Lehman Brothers crisis.
In these 20 years, the average annual economic growth rate has exceeded 6%, garnering recognition that the nation’s economy is sustainable for development. With an unemployment rate between 3-4%, there is almost full employment status in the country.
In 2008, state-owned national oil and gas company Petronas contributed some 45% to the nation’s revenue collected via taxes and dividend income. Apart from that, the country is rich with natural resources—natural gas, palm oil and tin contribute to the country’s revenue.
The Malaysian government imposes strict price guidelines and subsidies on wheat, rice sugar, other food items and petrol. With a relatively stable prices of goods compared to China, there is no need to worry about inflation like Chinese nationals do.
Citing Korea and Japan as model nations, Dr. Mahathir Mohamad, the fourth Prime Minister of Malaysia (1981-2003), launched the “Look East” policy. This brought about a stable economy and government. Hence, Malaysia, a South East Asian country, is recognised and accepted worldwide.
Compared with other South East Asian countries such as Thailand and Indonesia, Malaysia presents an ideal environment for investment, with no military coups, a stable government and conducive business environment.
During her British colonial days, English was the official language of Malaysia. Although the Malay language was established as the official language of the nation in 1967 to unite the multi-racial country through one common language, English is used by about 90% of Malaysians. As the second official language, English is used in trade agreements and everyday conversations. In fact, when international language centre English First ran English tests for non-native speakers in 44 countries, Malaysia ranked first in the whole of Asia.
Malaysia’s potential cannot be denied—with education funds making up 25% of the country’s budget, comparatively higher education standards than most South East Asian countries, human capital with high English proficiency—Malaysia has an competitive edge over other countries.
Kuala Lumpur (the Klang Valley) has evolved into an international metropolitan city. As one of the leading developing economies, the Prime Minister of Malaysia, Dato’ Sri Najib Razak announced the “Greater Kuala Lumpur” project in June 2010 as part of the 10th Malaysia Plan (2011-2015). A large-scale national project, the “Greater Kuala Lumpur” project includes the construction of a Mass Rapid Transit (MRT) rail network which has since commenced. The 10th Malaysia Plan aims to put the country at the forefront of several sectors, with the target of Malaysia being a developed nation by 2020.
Dato’ Sri Najib Razak mentioned that the construction of the MRT will lead to income per capita growth, more job opportunities and further expedite the economic growth of the nation.
The Kuala Lumpur population is expected to grow from 6 million (2011) to 10 million (2020)—as such, there will be a need for more residential units. On another note, with the MRT plan, the Malaysian government has set a target for public transport usage to increase from 18% in 2009 to 40% in 2020. It is expected that there will be an increase in property prices for residential areas located along the underground MRT tracks.