Why real estate prices in Malaysia a thorny issue

Foreign buyers who have invested
in property in Malaysia in recent years have seen good capital growth.  However, while rising house prices in
the country are great news for foreign investors, they are a thorny issue for
politicians.

A recent report has found that
house prices in Malaysia have ‘risen to a level that has created some
concern’.  Keep reading to learn
about how this may affect property prices in the Asian country.

‘Soft landing’ expected for Malaysian house prices as affordability
issues bite

Ratings Agency Malaysia Holdings
Bhd (RAM) chief economist Dr Yeah Kim Leng said: “We have computed the
affordability (issue).  Prices have
risen to a level that has created some concern.  In fact the International Monetary Fund (IMF) in its Article
4 consultation report has mentioned that this is the main risk or vulnerability
facing the Malaysian economy: overvalued house prices.”

Prices of property in Malaysia
have increased over recent years due to increases in both domestic and
international demand.  While
foreign investment remains good – particularly with buyers from neighbouring
countries – rising prices are making it more difficult for Malaysians to buy a
home.

Dr Yeah told journalists at a
press briefing after RAM’s annual general meeting: “It is not a bubble yet
largely because for certain segments the income level is sufficient to absorb
those kind of (high priced) houses. 
But there comes a point where you will find declining demand largely
because of rising vacancies or declining rental yields that will help to cap
property prices.”

However, the economist doesn’t
expect there to be a property crash in the country.  He believes that Malaysia will see a ‘soft landing’ but
urged developers to be mindful that they should be prepared for a slowdown
without causing a market crash.

It seems that Malaysia has without doubt allowed overseas property investors feel safe away from the political turmoils in Thailand. Political stabilty and ease of buying are key for international  investors.

Author: Nick
Marr

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