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Malaysia keen to attract overseas property investors as analysts predict steady real estate recovery

The country’s Foreign Investment Committee said that a comprehensive deregulation of investment guidelines is aimed at making it easier for foreign buyers.
‘The most important aspect in purchasing Malaysian real estate is the land law system that allows for transparency and enforceability of ownership. Foreigners also have no impediment to buying freehold Malaysian real estate and to sell when the need arises without restriction,’ said Kumar Tharmalingam, member, board of governors, Malaysia Property Incorporated.

To date investors from Singapore, UK, Korea and India have been the biggest buyers in the country, spending around $150,000 to $300,000 with Kuala Lumpur, Penang and Johor being the most popular locations.

The real estate sector will benefit in 2010 from rising demand and an improving economic outlook, according to a recent research note from Malaysian Industrial Development Finance.

But it warned that despite encouraging sales demand and improving economic sentiment, the fear of demand sustainability, of the withdrawal of cheap credit, absence of attractive promotions and favourable regulations may take its toll on the property sector.
‘Sales demand for residential properties is expected to remain buoyant as investors continue to deem it as one of the more liquid hedging asset. Speculators are also taking advantage of the current market sentiment to lock-in on gains,’ the report said.

A survey of key property players revealed that none was slowing down their pace of project development, with many taking advantage of the current discounted valuations to replenish land banks and were not holding back new launches.

The research said key players have indicated that take-up rates of residential properties have remained strong between 80 and 90% in the last quarter. As such, it was expected that residential property sales will remain buoyant, at least within the first half of 2010 with estimation of at least 25,000 new units to be launched over the first quarter.

Prices of properties nationwide declined 9.8% due to the economic crisis, but gained 1.4% year on year due to renewed interest emerging in the second quarter of the year. ‘Assuming the presence of cheap financing, attractive promotions and favourable regulations continue into 2010, coupled with new launches and delivery in 2010, property prices may face an upsurge,’ the report said.

However, there are concerns about a potential reintroduction of the Real Property Gains Tax (RPGT) aimed at controlling the secondary sales market amid fears that rising prices may create a real estate bubble. But Prime Minister Datuk Seri Najib Tun Razak announced last week that RPGT of 5% will only be applicable to properties that are sold within five years of their purchase.

But the report says that as bubble is unlikely. Indeed it favours a boost to the sector in terms of incentives, including tax reductions for sub-urban developments, cheap credit, continuous efforts to draw FDI and for local small players to have joint-ventures opportunities with state governments.