How competitive are Malaysian properties in the global market?

Wednesday, April 21, 2010


How competitive are Malaysian properties in the global market?


StarProperty.my asks CB Richard Ellis Malaysia Sdn Bhd managing director Allan Soo on how Malaysia can enhance its competitiveness in the property industry.


CB Richard Ellis Malaysia Sdn Bhd managing director Allan Soo will be speaking at the REHDA Property Leader Forum, which will take place on 22 – 23 April.

Malaysia’s place on the Global Competitiveness Index (from the Global Competitiveness Report, a yearly report published by the World Economic Forum) had dropped to 24th in 2010 from 21st previously, indicating that the country is becoming less attractive as an investment destination. How much has this affected the property sector?
Soo: Actually for a while after the Lehman Bros crisis, most of the investment funds who were here left Asia, not just Malaysia. Now some have come back but there is still some difficulty in raising capital, particularly in Europe, so the numbers are substantially less compared with 2007.

Malaysia was also not immediately back in the map as many funds moved into new areas like Vietnam and India. However, now they are back here as we have a larger and better quality asset base to invest in, compared with Vietnam which is still so young as a market.

What has contributed to the decrease or increase in Malaysia’s attractiveness,
in terms of property investment?
Soo: There is no change in our attractions in terms of assets but the fact that there is now no requirement for FIC (Foreign Investor Committee) approval and that foreign funds can acquire 100% equity in a property has made Malaysia certainly very attractive.

Where are most of the foreign investors from?
Soo: Many are regional funds, mainly from Singapore.

Why are they the largest percent of investors in properties in Malaysia?
Soo: The original restrictions on local funds by our authorities limited their ability to compete with international funds, particularly our REITs (Real Estate Investment Trusts). Pricing was a problem as foreign funds could offer lower yields than our REITs.

As a result foreign funds have been leading the market as far as yields and prices are concerned. Now our local funds are still looking at 7% and above, and this may be an obstacle if foreign funds start pushing the yields down.

What types of properties do most foreigners invest in?
Soo: Mainly retail centres and commercial buildings with running income streams. Most would prefer prime assets although some individual funds have appetites for even assets in smaller towns.

What are the key reasons foreigners invest in Malaysian properties?
Soo: They are investing here as yields are attractive and as the rents are steady. Plus many of our buildings are of international quality.

What are the important drivers or determinants of making Malaysia a more property-competitive country?
Soo: We need a comprehensive public transport now, to make properties more attractive. Properties in Singapore which are near MRT (Mass Rapid Transit) stations actually showed the highest price growth rates in the last 5 years and some even went up during the global crisis.

We also need to reduce the crime rate for the cities here to be more liveable. On top of this, we need to cut the red tapes and improve our IT connectivity. This will attract more FDI’s (Foreign Direct Investment) and increase our expatriate market, which in turn will increase office and condo rents and then prices. It’s really not about the properties themselves – we are already pretty good in design and construction. It’s more about the supporting amenities and infra(structure).

There have been some changes in our regulatory framework (such as RPGT, FIC guidelines). Did it impact the property industry?
Soo: The new RPGT caused some confusion initially but that has now cleared and has had almost no effect on foreign acquisition. FIC has now been disbanded and that has made us very attractive.

How do the regulations in foreign ownership compare to our neighbours?
Soo: We are much more attractive compared to the rest of the region.

Some argue that high-end properties will rise because that is the segment foreigners will invest in. Should there be substantial restrictions in the residential and/or commercial sector for foreigners?
Soo: No. We need a bigger share of the FDI’s and foreign investments to make our market more robust. Remember it is because we are part of a regional map that we are attractive.

It is reported that there is a decrease of expats in Malaysia. Has this impacted the property industry in any way?
Soo: Rents have started to come down for high-end condominiums.

In Singapore, the high price of quality residential projects is the result of foreign purchasing, which has pushed properties beyond a lot of Singaporeans' affordable level. Will this happen to Malaysia?
Soo: This could happen here and in fact KLCC(Kuala Lumpur City Centre) prices are beyond the reach of ordinary Malaysians. But we have 1.63 million housing units and only 5,600 of these are in KLCC. That is a small percentage going to foreigners and a small percentage beyond ordinary Malaysians. I don’t see areas like Puchong attracting foreigners and becoming impossible for Malaysians.

REHDA Property Forum 2010
Allan Soo has a laudable record in retail, research and development consultancy. He is a regular contributor to trade journals and will be speaking on “Competitiveness of Malaysian Properties in the Global Market” at the REHDA Property Leader Forum 2010. The forum will take place on 22 – 23 April (Thursday and Friday).

For inquiries or registration, call 03-7803 2978, email syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com, or visit www.rehdainstitute.com

By The Star (StarProperty.my)