The Malaysian property market has traditionally been a hotspot for Singaporean property investors. Its proximity to Singapore made it attractive for a multitude of reasons, from family connections, to short travel times, to owning a property as a holiday or retirement home.
In the second half of 2015 however, currency fluctuations, political instability, and uncertainty around the general economy contributed to dampened investor interest.
With these developments still in play, there are opportunities for property investors who are willing to look beyond the gloomy headlines and instead focus on Malaysia’s property market over the longer-term.
Opportunities for the savvy investor
Between April and September 2015, the ringgit weakened against major currencies, including the Singapore dollar. On 1st April, the ringgit was at 1SGD:2.70MYR. By 30th September, it had dipped approximately 15.6 percent to 1SGD:3.12MYR. While property in Malaysia became even cheaper for Singaporeans as a result of favourable exchange rates, property investment began to be perceived as a risk, given continued ringgit declines.
On top of currency volatility, the political environment in Malaysia has also contributed to a general sense of uncertainty in the country, especially with support for the ruling party seemingly shaken.
The iProperty Asian Property Market Sentiment Report for H2 2015 – released in October – saw Singaporean investors’ interest in Malaysian residential property dampen from 46 percent to just 6 percent between April 2015 and October 2015. Malaysia has historically been a top property investment destination for Singaporeans. Prior to H2 2015, interest levels hovered between 31 and 42 percent.
The 2016 opportunity
As we welcome 2016, it might be time to re-examine Malaysian properties, especially with the ringgit’s recent strengthening. Since 30th September, the ringgit has steadily found its feet, with a 2.9 percent hike to 1SGD:3.03MYR as of 4th January 2016. This presents investors with an opportunity to stretch their dollar. When the ringgit is weak, property purchases are cheaper in Singapore dollars. As the ringgit strengthens, you gain on the increase in value.
While the political issues in Malaysia are by no means resolved, the outlook is not all overcast – Malaysia is expected to see 4.5 percent growth in 2016, slightly slower compared to the expected growth of 4.9 - 5.0 percent for 2015, but still a growing market.
The investment potential of KL
These factors are helping the property market in Malaysia, especially its capital Kuala Lumpur (KL), regain its appeal as an investment destination.
Future infrastructure developments such as a planned High Speed Rail (HSR) connecting Singapore and Malaysia, improvements to transportation networks within the city, including the existing Light Rail Transit (LRT) and Mass Rail Transit (MRT) infrastructure, contribute to KL's long-term investment potential.
Malaysia is already a top tourism destination, and with continued government efforts to attract 16 million international tourist arrivals by 2025, visitors can be turned into an opportunity to earn income.
With the rise of online sites such as Airbnb, short-term rentals are fast gaining popularity among travelers. Property investors can take advantage of the flexibility of short-term rental contracts, while still enjoying rental income. In fact, such rentals are increasing exponentially, with a recent report by Airbnb showing a 353-times increase in short-term stays from 2010 to 2015.
Investors can find opportunities and good deals with the potential for long-term yields in Malaysia’s property market as long they do their due diligence; researching and understanding the risks involved. For those who are able to look beyond the negativity of the past half year or so, the prices are good, the exchange rate better, and the long-term view positive.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Sean Tan is Singapore General Manager and Chief Business Development Officer at iProperty Group. He has extensive overseas exposure and has worked in several multinational and cross-culture corporate environments. Sean holds a Master of Project Management from the University of Adelaide, Australia.