Will the Malaysian election hurt overseas property investment?

Will the Malaysian election hurt the property market

Now the dust has settled on the Malaysian election with Mahathir Mohamad sworn in as the new prime minister, many overseas property investors are wondering what the result will mean for them. Demand from Chinese investors has been waning recently, sparking some worries, according to Cushman & Wakefield Singapore.

Of course, this alone isn’t really cause for concern. In the build up and immediate aftermath of nearly every major political event, the real estate market tends to go quiet.  Things will usually pick back up once it is clear stability in the country won’t be interrupted. Carrie Law, chief executive of Juwai.com, noted that she doesn’t believe the election results will have much of a long-term impact.

“Buyers motivated by pure investment may hold back to see how events play out,” she told the South China Morning Post. “However, most buyers are end users purchasing to study in Malaysia, work here, or retire here. They will continue to buy as long as visa and education policies remain favourable.”

And while Mahathir has criticised Chinese investments in the past, taking a veiled swipe at the controversial Iskandar projectduring his campaign, experts believe he will protect the country’s pro-foreign investment stance.

Malaysia-based political commentator Phoon Wing Keong was quoted as saying, “Most existing Chinese-invested projects, including those by China-based developers, would continue unchanged because the new government in Kuala Lumpur needed to send a positive signal to businesses and foreign investors.”

Glut, not Malaysian election, a problem

While the Malaysian election isn’t likely to burden the country’s property market, a glut of unsold residential units is something to keep an eye. Late in 2017, Bank Negara Malaysia (BNH) found the glut reached its highest point in a decade with high-end units struggling to find buyers.

“Supply-demand imbalances in the property market have increased since 2015. Unsold residential properties are at a decade high, with the majority of unsold units being in the above MYR 250,000 (USD 63,873) price category,” officials from BNM explained.

Renting could prove to be a solution. Home ownership in Malaysia is viewed as extremely important, but it may not be as big of a priority with the younger generation. This group may be willing to choose location and lifestyle over ownership. This is likely to create a robust rental market and that would bring in more real estate investors looking for yields.

“It could be time to move away from the Asian mindset on home ownership as the absence of home ownership does not imply welfare deprivation,” CBRE-WTW managing director Foo Gee Jen explained to The Sun Daily.