A popular place in Asia to retire, Malaysia’s once booming housing market is suffering from a glut of homes on the market.
Malaysia is a Southeast Asian country just north of Singapore with a mix of Malay, Chinese, Indian and European cultures. The country is home to approximately 32 million people, of which almost 25% live in the capital, Kuala Lumpur. Malaysia’s economy is one of the most competitive in Asia and was ranked 20th in the world in 2015. In 2019, the country had a GDP at purchasing power parity of nearly $1 trillion.
Malaysia is rated as the best place in Asia to retire as it has a warm climate, rapidly growing tourist industry and well-developed infrastructure among newly industrialized countries in Asia. Foreign investors can buy real estate in Malaysia, subject to certain conditions set by the government with a property price over $250,000.
Glut of Homes
As a result of many major development projects in the last few years when the economy was booming, there is now a severe glut of homes in the market which has resulted in today’s sluggish market conditions. Unsold apartments and single-family homes in Malaysia’s major cities are currently valued at nearly $2 billion. The government has recently introduced multiple measures to discourage developers from embarking on new construction.
Malaysia’s house price index rose by a minuscule .41% in 2019, according to the Valuation and Property Services Department, down from an average price growth of over 8% in the previous five years. Kuala Lumpur has Malaysia’s most expensive housing with an average price of $175,000 while the cheapest homes are in Melaka with an average price of $45,000.
In order to stimulate demand for the unsold residential units, the government—in conjunction with the Real Estate & Housing Developers’ Association (REHDA)—introduced the Home Ownership Campaign with its stamp duty exemptions and discount on certain selling prices. This is in addition to the current low interest rates on borrowing. While the short-term effect is a drop in sales volume, the long-term effect of COVID-19 will impact consumers’ lifestyles leading to the transformation of how they work, shop, live and changing real estate preferences. Many developed real estate markets around the world such as United States, Australia, New Zealand, South Africa and Britain experienced a strong rebound in real estate volumes post COVID-19, but Malaysia has seen volumes go in the opposite direction.
The housing market is expected to remain a challenge in the near future with over supply of residential property taking time to be absorbed. As with many other countries, housing affordability remains a hot topic. Malaysian developers are directed to incorporate more affordable housing units into future developments.
Peter Gilmour is REAL Trends chief foreign correspondent and Chairman Emeritus and co-founder of RE/MAX of Southern Africa.