10 Reasons to Invest in Malaysia’s Real Estate
10 Reasons to Invest in Malaysia’s Real Estate
The value-driven real estate market with sustainable growth potential has made Malaysia an attractive property investment destination and option for investors.
1. Demographic Bonus
Most of the developed countries are facing aging population problem which will affect the economic growth. Malaysia’s demographic context gives no concern to these issues and is supportive to real estate investment. In 2015, it has about 31.19 million of population with 1.5% growth rate and a median age of 28.5 year-old, which is relatively younger to other developed countries. A peak of 69% total population will be employable in 2040 when the median age is only 38.3 year-old. As Malaysia is expected to enjoy demographic bonus in the next ten year, we see a bright prospect for property investment in Malaysia.
2. Politically Stable
Unlike its other ASEAN neighbours, Malaysia is politically stable and has been free of any major political disruption over the past forty years. Since Independence from the British, the country has been a Parliamentary democracy with a stable government in most years. Hence, political risk is low and this is favorable for investment.
3. Positive Economic Outlook
Malaysia has recorded a spectacular GDP growth from 1957 to 2005 with an average 6.5% which provides Malaysia a solid base to continue its promising economic outlook. In 2016, the economy of Malaysia was the third largest economy in South East Asia behind more populous Singapore and Brunei with 367.7 billion USD of GDP and 2.1% of inflation rate.
4. Supportive Initiatives by Government
Malaysian Government has put its effort in creating a better investment environment and achieving the economy goals.
Along with the 10th Malaysia Plan by government, efforts of improving the infrastructure system have been done. More than RM 30 billion was spent on rail infrastructure development over the past 4-5 years. More recently, the high-speed rail (HSR) plan between Kuala Lumpur and Singapore has just been formalised with a bilateral agreement inked between the two neighbouring countries, with the cost estimated to be in the range between RM40bil and RM45bil. All these rail developments in recent years are a boon for the construction sector in Malaysia, which brings a bright prospect for the property sector.
5. Appealing Monetary Policies and End-Financing Condition
The Malaysian Government implemented a moderate monetary policy to encourage private investment activities.
Bank Negara Malaysia has maintained a very stable OPR at 3.00% from May 2011 to Jun 2014 and raised 25 basis points in July 2014 due to the level of increased inflation rate (3.2% in May 2014). The OPR rate was restored back to 3.00% in July 2016 and had since then remained at a stable level.
Being a highly open economy and to attract local and foreign investments, banks in Malaysia do not have extra restrictions on foreign investors who enjoy the relatively easy end-financing condition with Malaysian citizens.
6. Transparency in Legal Framework and Property Valuations
The Malaysian land law is based on Australian Torrens system which provides transparency and protection for investors whose rights to seek legal redress in the courts is guaranteed under this law.
Malaysia also has a complete land administration system that every land transaction is recorded and registered. The land ownership is clear to be verified from local authorities so that the information of property and investors are both protected.
7. Low Investment Barriers
Malaysia is very liberal in terms of ownership of property for foreigners.
Foreigners are allowed to any kind of properties except for: (a) Properties valued less than RM1,000,000; (b) Properties built on Malay reserved land and those allocated to Bumiputeras’ interest; and (c) Land zoned as “agriculture”.
In addition, foreigner investors are allowed to purchase freehold land in Malaysia without additional restrictions.
8. Friendly Investment Environment
In World Bank’s Doing Business 2016, Malaysia was ranked at 23rd of Ease of Doing Business, 3rd in Protecting Investors and 20th in Getting Credit. And Malaysia improved 57 ranks from 99th to 42nd in Dealing with Construction Permits.
The taxation framework for real estate investments is relatively transparent and easier to apply. Bank Negara Malaysia does not impose any restriction on the repatriation of profits, rental or proceeds from divestment of investments in Malaysia by a non-resident.
9. Favorable FDI Destination
Foreign Direct Investment (FDI) in Malaysia rose to RM504.9 billion in 2015 from RM467.5 billion in 2014, an increase of 9.7 per cent. The continuous increase of FDI shows that other countries have their faith in the growth of Malaysia.
10. Comparable Property Price and Potential Growing Market
Compare to other Asia countries like Hong Kong, Japan, Singapore and Taiwan, property prices in Malaysia is much more favourable to investments. The price advantage offered by Malaysia is significant especially for the high-end apartments in cities.
Although Malaysia property price has risen with an average of 6% annually from 2004 to 2013, the property price is rising at a decreasing rate from 2014 onwards. Given strong economic fundamentals and demographic bonus that Malaysia will enjoy in the future, the property market in Malaysia still possesses a lot of potential.
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