The beginning of a new year is often the time for big decisions. One of the recurrent topics is property. To buy or not to buy? The Malaysian property market has never been as active as Singapore or Honk Kong. However, after a stable year 2010, what will 2011 be like?

The overall perception today is that there is an oversupply of condominiums and serviced apartments, especially in Kuala Lumpur. Because of this, the market is expected to disappoint those who were anticipating a massive hike, although some analysts are expecting a mini boom in the second quarter of 2011.

Areas like Mont Kiara or Hartamas are the best examples. Rental rate has dropped slightly and in some cases, building occupancy rate never exceeds 60%. However, property developers are now focusing on quality and service, and this will take the market forward.

According to the National Property Information Centre (NAPIC), new housing unit launches have dropped by a significant 54.1% as compared to the previous quarter, as most developments are still in the planning stage and preparing for the following year while those that were approved are already on the market.

The bulk of residential property coming on-stream in Penang, Selangor and Kuala Lumpur are condominiums. However, investors in high-end units may have difficulties finding tenants as there is currently a scarcity of those willing to pay high rentals. Also, there are more attractive investment options offered by overseas properties where prices have dropped significantly and currency exchange rates have become more favourable.

However, for the Malaysian market, the projects to be implemented under the Economic Transformation Programme (ETP) are expected to provide a positive impetus in a mid-term basis to the property market.

“The high-end condominium market will see an uptrend by 2012 as the projects to be implemented under the ETP would make city living more vibrant,” according to the Chairman of Rahim and Co, Datuk Abdul Rahim Rahman. He said the market trended sideways or flat due to oversupply and general lack of interests by investors and purchasers last year as the effects of the 2008 global financial crisis continued to be felt.

“Demand was noted to be selective. Developers with good track record offering good design, high quality materials and professional property management continued to attract buyers.”

Datuk Abdul also expects the outlook for the local retail industry to be positive with total retail sales in Malaysia forecast to increase to RM227 billion in 2014 from RM 137 billion last year.

“Such optimism is driven mainly by relatively low unemployment rate of 3.6 percent, higher disposal income of the working population and the growing tourism industry,” he said.

Outside the Klang Valley, areas like Penang, Johor, and on a slightly lower level, Langkawi, are safe destinations. Penang benefits from a massive trend of Malaysia My Second Home benefactors. Numbers show that the general market on the island is higher than in Kuala Lumpur.

Johor, with the development of the Iskandar Region, can only benefit from its proximity to Singapore. We are starting to see a flux of factories relocating their activities from the state island to Iskandar. However, the next couple of years will be crucial for the entire area, as incentives still need to be implemented on both sides of the border.

And last but not least, Langkawi. Although 95 percent of the island is Malay Reserve, there are legal ways for foreign investors to purchase property on the idyllic island. One willing to do so will have to enter the tiring and sometimes gruesome process of land conversion. However, with a good lawyer, it is doable – especially as the Malaysian Government has declared its will to make the island more open to foreign investment.

In sum, Malaysia’s property market is not as buoyant as one could expect. However, is it safe and sound way of building a properties portfolio. Yes, there might be some hitches here and there, but over the years, it has shown steady growth. And maybe it’s time to look further south or north of Klang Valley!

By Antoine Commare

+ The Malaysian Property Market [ more info ]
+ To Buy or not to Buy [ more info ]
+ Where to Invest [ more info ]
+ Renting a Property [ more info ]
+ Furniture [ more info ]
+ Second Homes [ more info ]
+ Serviced Accommodation [ more info ]