Home sales in Malaysia are sliding and foreign investors are making fewer trips as an investment-for-visa programme is suspended, while a topsy-turvy political environment has given the nation poor publicity overseas.
Malaysian real property agents, facing one of the toughest lockdowns during the pandemic, are now clamouring for an overhaul in market policies to revive sagging demand and halt a housing glut.
Their wish list includes eliminating or reducing stamp duty on purchases, enhancing support for first-time buyers, and a lower property gains tax, according to a study conducted by property portal Juwai IQI. They are hoping the government will deliver the goodies on November 6, when it presents the budget plan for 2021.
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“The situation with housing supply did not improve significantly in the first half because of Malaysia’s relatively long and strict lockdown,” said Georg Chmiel, executive chairman at Juwai IQI. “New launches dropped even faster than transactions.”
Home sales fell 25 per cent in the first half to 75,318 units from a year earlier, while the current glut worsened by 31,661 units or 3.3 per cent from the end of 2019, according to government statistics. Some 13,924 new units entered the market, a 44 per cent drop from a year earlier.
All told, residential prices are likely to fall by about 5 per cent over the next 12 months, the firm forecasts, as foreign investors appear to have looked elsewhere after the government halted its Malaysia My Second Home (MM2H) programme towards the end of last year.
The programme offers 10-year renewable visas to non-Malaysians, with which they are allowed to buy residential property costing at least 600,000 ringgit (US$145,000). Since 2002, fewer than 3,000 MM2H visas per year have been issued on average, Chmiel added.
Foreign purchasers accounted for 14 per cent of Malaysian property sales in the third quarter, compared with 21 per cent in the second quarter, according to Juwai IQI’s estimate.
It does not help sentiment that the government of Muhyiddin Yassin, formed by defections from the coalition that won the last general elections, is purportedly facing its own defections.
While the pandemic lockdown has affected property launches and sales, the suspension of the MM2H programme has had a bigger impact in eroding demand from investors in Greater China, particularly Hong Kong.
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“Even though the MM2H programme only encompasses a relatively small number of individuals, it is an important driver of foreign buyer demand,” Chmiel said. “Without it, you would need other factors to be put in place to support foreign demand.”
The pandemic and the suspension of the MM2H programme pose short-term challenges, according to Asia Bankers Club, a real estate agency which is marketing TRX Residences on the outskirts of Kuala Lumpur business district to Hongkongers.
The project, jointly developed by Australian developer Lendlease and local firm TRX City, has been promoting it online to reach a wider audience, he said.
“With this kind of launch event, sales of Malaysian property can start again and we are also planning to host seminars and exhibitions next month to complement their efforts,” said Kingston Lai, founder and chief executive officer at the agency.
He believes the MM2H will be revived in a new structure that offers better benefits,” Lai said. It has not been ended for good, he said.
In the meantime, the signs are less than encouraging. Exhibitions for Malaysia property in Hong Kong have declined by about 30 per cent in January to August, compared with a year earlier, said Eli McGeever, vice-president of international property at SohoApp.com.
“September is set to be worse with an expected drop of 80 per cent,” he said. “This is not strictly Covid-19 related as UK exhibitions in the city have soared by 94 per cent in the same period,” which suggests a change of investor preference.
That is in line with the UK’s plan for Hongkongers who hold British National (Overseas) passports, offering them and their dependents eventual path to citizenship. The move was triggered by Beijing’s imposition of national security law in Hong Kong on June 30.
The Malaysian government reportedly began rejecting most applicants in late 2019 before suspending the program in 2020, killing a major incentive for Hong Kong residents in 2019.
“As a result of the uncertainty, many Hong Kong buyers lost interest,” McGeever added. “This has led to many agents reporting record sales for UK property.”