THERE HAS NEVER BEEN A BETTER TIME TO BUY
Savills Malaysia would like to reiterate that 2018 will be significant for the Malaysian property market, particularly with the new government’s promise of clean and fair governance. We anticipate the markets to have a knee-jerk reaction this week, and the 2nd quarter of 2018 to be relatively quiet for property transactions, with the onset of the Ramadhan fasting month next week. However, the outlook for Malaysia appears to be promising, as the new government sets to work to address some of the institutional problems that have held back Malaysia’s long-term prospects and deterred foreign investment.
We anticipate that renewed confidence in the market will encourage buyers who have been holding back. However, there will be a period of adjustment and consolidation required to clear existing stock before we see much evidence of price increases. Generally, we foresee that prices will firm up in 2019, and it will be early 2020 before developers can respond by stepping up supply. In short, particularly in Greater KL and Penang, there has never been a better time to buy.
Sadly, not even the new government has much influence on low global crude oil prices – and oil & gas players make up 33% of the office market in KL city center. While it will still take some time to absorb the 16.9 million sq ft of new space to be completed by 2020 – in the short term, we anticipate that with the uncertainties of the elections behind us, more potential upgraders will see their way clear to invest in a move to new premises. This could lead to an absorption of more than the 1.9 million sq ft we saw in Greater KL last year. In the medium term, we anticipate that new office take-up will increase in tandem with a growing economy and more foreign direct investment. Datuk Christopher Boyd (Chairman of Savills Malaysia) does not think that abolition of GST will have any meaningful impact on office rentals.
While the market is likely to remain well supplied in Greater KL, we see the likelihood that retail turnover will pick up in areas where GST is lifted from merchandise, and not replaced by a sales tax. We hope that luxury goods will fall into that category, making Malaysia a major tourist shopping destination. Mr Allan Soo (Deputy Executive Chairman of Savills Malaysia) opines that the groceries, food and beverage, and mass prestige fashion brands will see positive impact from the lifting of the GST.
Datuk Paul Khong (Managing Director of Savills Malaysia) believes that renewed market confidence will boost foreign direct industrial investment. Coupled with surging domestic consumption, the prospects for the industrial and logistics market are very positive.
Look out for rising industrial rents which have lagged behind recent strong increases in industrial land values. Good news for REITS and other funds which are focused on this market sector.
THE INVESTMENT MARKET
Institutional investors, particularly overseas investors, dislike uncertainty. With GE14 behind us, we are preparing for a major uplift in domestic and foreign interest in commercial investment properties. Malaysia has extremely liberal policies related to foreign investment in commercial property and can offer attractive yields. The prospects of appreciation in the Ringgit and strong economic growth will now make Malaysia an outstanding regional investment opportunity.