Improved Outlook for Malaysian Real Estate in 2016
According to a survey by Malaysian property portal iProperty.com, 2016 is set to show significant improvement in the country’s ailing property markets. The iProperty.com Asia Property Market Sentiment Survey (H2) 2015 reveals that Malaysia’s domestic market is still hampered by affordability issues and many respondents indicated they are most likely to have saved a down payment within the next two years.
Malaysia’s property market has softened considerably this year due to cooling measures implemented by its government including stricter and more stringent loan requirements. According to a report published by Malaysia’s Real Estate and Housing Developers Association (REHDA) , loan rejection rates in the country have been reported to be as high as 70%, negatively impacting the country’s property market.
REHDA suggests buyers are finding it difficult to purchase affordable homes. Apart from narrowing down the selection criteria where the margin of financing (MOF) is often below 90%, the debt servicing ratio (DSR) has also been made more restrictive by central bankers Bank Negara Malaysia (BNM).
Goods and Services Tax (GST) was implemented across the board on 1st April 2015 and while a pre-GST sales rush was anticipated, property transactions in the first quarter of the year fell by 4.6% from 92,900 for the same period in 2014, based on year-on-year transactions.
New property prices are estimated to have increased by 3.97% due to higher material costs and developers are estimated to have increased their prices by approximately 4%. A new government ruling allows developers to claim a 6% rebate for GST while still being able to pass the surcharge on to purchasers.
While Malaysia’s property market has achieved relative stability compared with the bull run of recent years, it is perceived that this is largely due to the economic situation in the country and not because of the implementation of GST. Domestic buyers are increasingly unable to enter the property market at affordable levels which has resulted in market stagnation in certain regions of Malaysia.
However, respondents to the iProperty.com survey were largely of the opinion that economic recovery will continue at a modest pace, allowing them the opportunity to purchase property in the next 1-2 years. The government has stepped up construction activity to meet the critical demand levels for affordable housing and when supply increases, prices should ease a little in the domestic market.
In terms of foreign investment in Malaysian real estate, the fall in the ringgit in recent quarters has attracted considerable investment in the country. However, foreigners are only allowed to buy high-rise units priced at least €200,000, reserving availability of family homes for local homebuyers.
REHDA President Datuk Seri F D Iskandar said that Malaysia’s property market should take advantage of increased interest from foreign buyers and promote their properties in overseas markets. He feels that as foreigners look for upmarket properties in specific areas, their value will remain buoyant, he told a media briefing on the property industry in September.
Meanwhile, Iskandar expects property price hiccups for high-rise buildings, apartments and condominiums due to the weakening of the ringgit. ” The prices of certain construction materials have actually gone up but that of residential buildings shouldn’t as most of the components are locally sourced. However for high-rise buildings, components like lifts, escalators and air-conditioning are still imported. Definitely, there would be hiccups in terms of prices for high-rise projects, ” he said.
Article by +Roxanne James on behalf of Propertyshowrooms.com
Demand Remains High for Thai Real Estate
Despite the sluggish economy, demand for real estate remains strong in Thailand with the nation currently leading the region in the hotel residence boom, the property investor’s vehicle of choice in 2015.
Economists predict the real estate market will grow by 5%-10% this year after receiving a boost from the government’s property stimulus measures, implemented to stimulate interest from property buyers overseas.
The stimulus measures include reductions in housing transfer and mortgage fees, personal income tax deductions for those purchasing a property for less than €75,000 and soft loans amounting to €250,000 offered by Thailand’s Government Housing Bank, (GH Bank) .
Last Tuesday, the cabinet approved cuts in housing transfer and mortgage fees to 0.01% each for six months for homes priced at €75,000 or less, down from 2% and 1% respectively. Also approved was a proposal allowing first-time buyers who purchase a home below the same threshold to deduct 20% of the value of the home from their annual personal income tax over a five-year period.
The cuts will take effect this month for both new and resale properties in Thailand .
Thai Condominium Association president Prasert Taedullayasatit said the tax incentives, if they took effect this month, would boost the overall housing market in the fourth quarter by 20%-30%, boosting full-year housing market values 12.6% from last year.
Investment in hotel residences has surged in Thailand in 2015, with many opportunities falling well below the new threshold for tax incentives. The sector has a significantly improved outlook on the back of the Thai government’s stimulus measures and construction has been stepping up to meet rapidly increasing demand for robust, income-generating assets in branded hotels.
According to new research by Thai-based hospitality consulting group C9 Hotelworks, there are currently more than 28,000 hotel-branded residential units for sale across the region overall, representing almost 120 projects. In Thailand, there are 44 developments on the market, representing 4,775 units, with the top three locations for hotel residences being Phuket, Bangkok and Pattaya.
The average price per square metre for urban properties in Thailand is €5,960, while in resort destinations it is €3,283. One key catalyst for the rising tide of buyer interest has been an increasing number of mixed-use projects that contain hotel and real estate components. Recognised hotel brands are being tapped to help engineer pricing premiums for property sales, which in market-wide terms has equated to 26% in urban locations and 14% for resort products.
Commenting on the research, C9 managing director Bill Barnett said: ” The historic pattern of hotel and real estate marriages has moved away from the beach and leisure destinations and is gaining traction in urban city offerings. Traditional lifestyle buyers are being supplanted by end users, with Asians representing the largest transaction segment. Bangkok’s stirring success story at the St Regis Residences demonstrated this, while the more recent Four Seasons offering has struck a chord with both local and overseas buyers “.
The two leading Southeast Asian real estate marketplaces are Thailand, offering 37% of the region’s hotel project residences, followed by Indonesia with a 22% share.
Article by +Roxanne James on behalf of Propertyshowrooms.com
Egypt Lures Foreign Investors with Currency Devaluation
Egypt has allowed its currency to weaken to a record low, seeking to attract foreign capital and replenish reserves that dropped the most in almost four years during September, while the black market premium to buy dollars surged.
The Egyptian pound weakened 1.3% to 7.9301 per dollar after the country’s central bank devalued it by the same margin at a regular dollar sale to local lenders, according to prices compiled by Bloomberg. That takes the currency’s decline for the year to 9.8%, making it the worst performer in the Middle East behind Algeria’s Dinar.
Foreign reserves in Egypt plummeted last month due to one-time expenses such as expanding the Suez Canal, upgrading the country’s electricity grid and repaying debt to foreign oil companies, central bank governor Hisham Ramez said in a televised interview on Saturday. Egypt has burned through just under $6bn of loans received from Gulf Arab allies in April and is now seeking $3bn from the World Bank to support its budget.
” The central bank needed to allow the pound to lose some value as a basic step toward correcting the decline in its foreign currency base, ” said Hany Farahat, a senior economist at Cairo-based CI Capital, a unit of the Egypt’s biggest listed bank, adding that the devaluation ” should continue throughout this week, otherwise the move would be just insignificant “.
Outside the banking system, the Egyptian pound tumbled to a record 8.484 to the dollar, according to the average quote of seven currency dealers surveyed by Bloomberg last week in Cairo, Alexandria and Aswan That compares with 8.204 on Thursday and represents a 5.6% premium over the official rate, the most since January, according to the weekly surveys.
The devaluation of Egypt’s currency has been predicted by analysts since the beginning of the year and there is rising opinion that it has still to reach fair value for foreign investors. There is a common belief among real estate buyers in Egypt that there is another anticipated decline of the pound’s value, but the timing is unknown which has consequently delayed investment due to uncertainty of future impacts on cost and revenues.
Investors are also concerned about existing restrictions on US dollar deposits in Egypt’s banks and the complex process of transferring foreign currencies from inside the country, which represent the most significant challenges facing investments, over and above currency declines.
On the second day of Egypt’s Economic Development Conference back in March, Egypt signed agreements and memoranda of understanding with international companies worth $158bn, signalling one of the best years for foreign direct investment to come. However, subsequent large-scale investment has been delayed while international investors eye Egypt’s market with uncertainty as to where its currency will find its level.
Egypt’s government has made considerable investment into its domestic residential market in attempts to satisfy the need for more than half a million homes for its rapidly expanding population , contributing to the woes of its currency last week. The strategy was for foreign investment to step up to support government spending, with a balanced injection of capital in the nation’s real estate markets.
However, as a wait-and-see attitude prevails among foreign investors at least for a few weeks, it is difficult to say which way Egypt’s property market will go. Recent real estate market activity has seen shortage of housing supply pushing up property prices, although transaction volumes have been high among foreign buyers nevertheless. At the current time, investors are reluctant to make decisions borne out of uncertainty, particularly due to the considerable impacts further currency devaluation may have on margins and capital value.
Article by +Roxanne James on behalf of Propertyshowrooms.com
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