Its supporters argue that those looking to make an investment in Asia should opt for Malaysia’s real estate market. The fundamentals are good – the economy grew by 5.9% in 2006 and is expected to continue growing – and the multi-faceted country offers a range of real estate prospects, from cosmopolitan big city living to tropical beach-side dwellings. And Malaysia is particularly well placed to attract all kinds of investors, from Gulf Arabs who want to reinvest petrodollars in foreign ventures, to Asians keen to tap a neighbouring emerging market before it gets too hot.

In December, the government announced new property laws that further open the market for foreigners: all residential properties priced at more than RM250,000 ($71,255) can now be purchased without the Foreign Investment Committee’s approval; the FIC is the section of government that oversees all foreign ownership of property.

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The new law also lifted restrictions on the number of properties that foreigners can buy, and on limitations on the purchase’s intended purpose. This means that foreigners can now buy property purely for investment. The government has set up the Malaysia My Second Home scheme allowing foreigners a 10-year renewable visa – a sign it is serious about attracting foreign investment.

The authorities are concerned, though, that less well-off Malaysians are overwhelmed in a property boom. To protect local interests, the government capped low-cost housing at RM42,000; foreigners may not purchase any property placed in the low to medium-low cost housing bracket.

Steady growth

The real estate market has grown steadily in the past year. According to one developer, core factors driving this trend include Malaysia’s young demographic profile – with 20% of the population aged between 30 and 45 years, and thus especially prone to buying homes – and rapid urbanisation growth of 3.3%.

Both the public and private sector overachieved on their housing targets in the 2001-05 phase of the Ninth Malaysia Plan – targets set out by the government to ensure economic growth – and the next phase is expected to be just as prosperous. According to data from the ministry of housing and local government, the public sector’s housing schemes achieved 214% of their targeted low to low-medium cost housing, and the private sector over-achieved in all areas, but one.

While the government’s focus remains on providing low-cost housing during the 2006-10 phase, private developers are driving at full speed towards targeting the high end of the market, with a closer look at attracting foreign investment ahead of the new law for foreign ownership.

The 2006-10 target is for the public sector to provide 197,805 housing units, of which the largest segment (85,000 units) is low-cost. The private sector is to provide the bulk of housing – 511,595 units – of which high-cost housing is the largest segment (199,095 units).

Development is concentrated in what the government has identified are key economic growth areas: the Klang Valley, which covers Kuala Lumpur and surrounding suburbs in Selangor state; Johor, the southernmost state closest to Singapore; and Penang, a touristy island state on the northern tip of Malaysia.

The Singapore factor

Michelle Liew, spokesperson at local developer SP Setia, says that commercial and residential property is attractive because of its affordability, in contrast to neighbours. “A top-end residential property in Kuala Lumpur sells for RM500-RM1000 per square foot, but a property of similar size and location in Singapore and Hong Kong costs eight to 20 times more,” she told fDi.

This is particularly pertinent because some areas of southern Malaysia are only a 20-minute drive from Singapore through a link crossing, which opens up the possibility of commuting. Consequently, developers are moving into previously ignored areas.

UEM Land is undertaking a massive project in south-west Johor, called Nusajaya, which is planned to be a 24,000-acre mixed-use development. It is to be set in the Iskandar Development Region, an emerging economic zone in south Johor. Nusajaya will have seven components, which include residences catering to low, middle and high income buyers, recreational facilities, an education city, medical city, industrial park, and integrated development of Johor government offices. Horizon Hills, one of the three residential components, is estimated to be worth RM2.6bn and will feature a golf course. The property’s target group is said to be anyone working in Singapore, including Malaysians, who would look to Horizon Hills as a base from which to commute – it is only 20km from the second link.

Horizon Hills’ first phase, called the Gateway, will consist of 400 freehold units with a total value of RM200m and is due to be complete by year-end.

Other residential developments in Nusajaya are Ledang Heights and Nusa Idaman, the latter including commercial units, schools, a mosque and recreational facilities.

Living the high life

 

Now competing as a business hub with Singapore, Kuala Lumpur is getting ready to become one of the world’s most attractive property destinations, with ambitions to graduate to the status of a regional

London or Dubai. Private property developers have swarmed into the capital to build luxury housing in anticipation of the expected boom.

“Malaysia is a growing country with an exciting and vibrant property sector, which is in for a boom period caused by an improving economy, buoyant stock market, and positive consumer sentiment,” says Ms Liew. “The recent stock market rally has bolstered wealth creation, so that money earned is spilling over into the physical property market, and fuelling demand. High-end properties are expected to benefit the most as incomes rise and people start to upgrade their homes.”

Most expensive, and popular, is the Kuala Lumpur City Centre (KLCC), where the Petronas Twin Towers, home to national oil and gas company Petronas, rise to a world-beating (for now) 452 metres above street level.

Developers say that location is everything in Malaysia, and any residence that overlooks the towers will fetch the highest prices. Specialist in luxury developments E&O Property is building its Dua Residency apartment towers in KLCC with clear views of the towers. Dua Residency is made up of two 20-storey condominium blocks with a total of 288 units, due for completion in the next year. One, two and three-bedroom apartments are on offer with floor space of up to 6000 square feet, and prices range from RM1m-RM4.5m.

May Lee, E&O’s group communications manager, says: “Prices have lagged considerably compared with regional counterparts, even in Kuala Lumpur and other key urban centres, notably Penang Island, and Johor. The fact that Malaysian properties are grossly undervalued is an investment opportunity that many are beginning to wake up to.”

E&O has two more developments in Kuala Lumpur’s other hot destination, Damansara, which neighbours the former official residence of Malaysia’s prime minister. Seventy Damansara involves 12 units of three-storey detached homes in the RM5m-RM8m range. And Idamansara will comprise 82 units of semi-detached and nine units of detached homes.

Lush surroundings

SP Setia’s KL project is Setia Eco Park, which includes semi-detached houses and bungalows set in lush surroundings of lakes and greenery. Semis start at RM760,000 and bungalows at RM1.2m. In Klang Valley, SP Setia is developing the Setiahills resort in Ampang. Not short of ambition, the developer claims: “The homes are designed to emulate six-star holiday resorts.”

E&O is developing Seri Tanjung Pinang on Penang Island. Designed to be the island’s largest seafront project, it is a massive integrated development that is best understood when compared to the island projects that have become fashionable worldwide, and particularly in Arab Gulf states. Designed by US architects Wimberly, Allison, Tong & Goo (WATG), the 980-acre project is being constructed in two phases. WATG’s past architectural projects include Four Seasons resorts, Hyatt Regency Maui Resorts and Spa in Hawaii and South Africa’s Lost City.

Phase one, a mixed-use development said to be worth RM2.3bn, will span 240 acres, and phase two will take the form of multi-linked islands covering a total 740 acres. Both phases will be linked via two bridges.

E&O is working with Bahrain’s sharia-compliant Al-Salam Bank to develop 73 of the scheme’s seafront bungalows. The joint venture is expected to generate sales of RM200m, with show houses to be launched in July and completion scheduled for end-2009.

In return, E&O has expressed an interest in Bahrain’s property market, and may have a venture there within the next year, underlining the growing links between the booming Gulf economies and the arrival as a major player of Malaysia’s robust emerging market.