As the economy faces the pandemic’s backlash, learn what it means for property investment. 

We’re facing some of the most turbulent times in Malaysia’s history now. As you probably know, we are talking about the COVID-19 crisis and the Movement Control Order (MCO) that followed. The government has taken steps since the MCO took effect on 18 March 2020, with a range of initiatives with the potential to act as catalysts for financing. The current economic climate has likely impacted how many people in Malaysia reassess their goals related to personal finance.

So, if your intention this year was to accumulate a few (more) assets in Malaysia, is this still the right time for you to proceed?

Predictions cut investments in half

Throughout the primary sector, approved investments have all but vanished, plunging to only RM0.3 billion by 91 per cent year on year. The mining, plantation and commodities, as well as agriculture sub-sectors, compose this sector.

Economists expect total-year investment approvals to reduce to RM100 billion, from RM211 billion in 2019, given remaining downside uncertainties and risks due to Covid-19 and the related Movement Control Order.

According to the Malaysian Investment Development Authority ( MIDA), Malaysia’s total approved investments in the manufacturing, services and primary sectors reached RM64.8 billion between January and June 2020, despite multiple headwinds on the global front.

Domestically, five states, Sabah, Selangor, Penang, Kuala Lumpur, as well as Johor, contributed RM47.1 billion or 72.6 per cent to the majority of the overall accepted investments.

Foreign interest in property

With the advent of some bargain hunting options in Malaysia’s still soft property market, there’s been a new surge of interest in Malaysian property by international property investors. The government has agreed to lower the criteria for high-rise buildings in city areas for foreigners in Malaysia after the introduction of Budget 2020. Nevertheless, only the Federal Territory of Kuala Lumpur, not the other State Governments, are actually pursuing this declaration.

Investing in property located in central areas like Selangor or KL could lead to good capital gains and healthy returns. This is due to the steady economic growth of Malaysia, a fairly young working population, and the growing connectivity of infrastructure in Malaysia, including the near future high-speed rail link with Singapore.

However, when looking for Malaysian property to buy, foreign investors who plan to invest in Malaysian property should be aware of certain limitations and conditions relevant to them. Do your research before digging in.

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Long-term property players might benefit

In general, investors can now restructure their portfolios in order to handle some risk. Those with leverage, meanwhile, can reap the benefits of lower than average (undervalued) priced homes on the market. Are you capable of weathering a variety of shocks (such as dropping property prices), but able to hold on before prices recover? Or maybe you’re someone who doesn’t want to sell over the next 3, 5, or 10 years?

If you can relate to all of the above, then yes, it’s a great time for you to play in the game of real estate.

You see, not only are real estate developers adding value to their unsold properties at present to make them more appealing, asking prices are declining and it is conducive to the financing setting.

Thanks to BNM’s OPR cuts, interest rates would be very forgiving, relative to the 8 per cent -9 per cent or double-digit rates in the past.

Penang’s flourishing manufacturing investments

In the first quarter of 2020 (1Q2020), amid the difficult global macroeconomic climate, Penang reported a positive RM7.1 billion of approved manufacturing investments. Driven mainly by foreign direct investment ( FDI), the output of RM7.1 billion in 1Q2020 (QoQ: +97.2 per cent, YoY: -19.3 per cent) reflects 42 per cent of the manufacturing investments approved for the full year of 2019.

Penang successfully obtained 32 manufacturing projects in 1Q2020, according to the Malaysian Investment Development Authority ( MIDA), which is expected to generate 4,035 new job opportunities in the province. Penang seems to be playing a pretty vital role in Malaysia’s contribution to the global supply chain and the deep confidence of multinational corporations in the state as a favourable and sustainable investment venue.

Malaysian investors have their sights on gold

The gold price has ranged from RM220 to RM280.0 in the past 6 months. While it has been quite unpredictable, the price of gold in September 2020 is much stronger than RM206 in the previous year (2019). As a safe-haven currency, gold is considered popular in times like this. It’s because the gold price is supposed to go up or sometimes even higher if there’s a crisis. Many investors prefer to invest in gold because, in the case of any economic risks, they want to minimise their exposure to losses.

For instance, because of Covid-19, this year is extra difficult. Thus, several investors began investing in gold when the MCO commenced back in March 2020. Well, that is not shocking, since the economy was fragile and declining at the time.

 

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