Fears of restrictions on foreign property ownership in Malaysia are cooling demand from buyers in neighbouring Singapore, despite record exchange rates, says OPP Asia’s Managing Director, Harlow Russell
Despite a high in Singapore dollar exchange rates, investors are becoming more wary of buying Malaysian real estate, say market experts.
The Singapore dollar yesterday (Tuesday 11 February) hit a 16-year high against the Malaysia ringgit to 2.6328, due to capital flowing from emerging markets to developed markets, say analysts.
One example is the special Iskandar Malaysia economic zone, which has been popular with Singapore investors, who have been responsible for around one-third new-build sales, until recently, when buying has slowed.
Agents and market experts say investors have become increasingly cautious about property investments in Malaysia because of uncertainty over possible restrictions on foreign property ownership.
OPP Asia’s Managing Director, Harlow Russell, who is a licensed real estate agent in Singapore, says its investor demand for Malaysian property has quickly changed.
He tells OPP Connect, “The government in Singapore issued many new restrictions and controls in 2010 through the present to limit both domestic and foreign speculation and ‘cool’ the domestic property markets. Many Singapore investors started buying “cheap” Malaysian properties in large numbers starting in 2011 and 2012.”
Now, because of the rush of Singapore speculators, the same government concern and action appears to be happening in Malaysia. However, the government process in the two countries differs, he explains.
“The new Malaysian restrictions about foreign ownership, minimum prices for foreigners to buy, and potential capital gains taxes when selling have not been defined clearly or with the same precision as in Singapore. This leaves Singapore investors a bit ‘in the dark’ at present to guess as an individual about what will happen and most importantly how that affects their decision to invest or not.”
Another source of concern from Singapore buyers, especially buy-to-let investors, is that property maintenance and management of investment properties in Malaysia can differ from what is expected in Singapore.
The falling value of the ringgit to the Singapore dollar may not be enough in itself to stimulate demand from Singaporean investors, says Mr Russell.
“There can be some more motivation to buy Malaysian projects now if the investor feels the softening of the ringgit is short term. Otherwise, a Singapore investor may delay a buying decision because he/she feels they can get a better value in future months or years, since they will be most likely converting their Singapore cash into Malaysian ringgit to buy an investment property.”
Johnny Chng, Head of International Projects for Singapore-based agent OrangeTee, agrees that investors are more cautious. ”Investors in general would want a clearer picture. They would be scrutinising every project, and they will be very selective when they do their investment,” he has told the Channel News Asia website.
Nicholas Mak, Executive Director at SLP International Property Consultants, says the weakening Malaysian ringgit may be a short-term issue, but if it continues for three to six months, interest from Singapore investors may increase.
Mr Russell, who heads up the new OPP Asia office in Singapore, says advice for investors is the same wherever in the world they are considering buying property – “buyers beware and do your homework.”
He is a key figure in the organisation of the new OPPLive Asia overseas property trade show, which is being held from 23-24 April at the Marina Bay Sands resort, in Singapore and the expansion of the OPP brand in the region.
OPPLive Asia 2014 is aimed at agents, developers, financial advisors and other overseas property professionals who want to take advantage of the booming Asian overseas property market. The event includes a host of business and networking opportunities, a packed programme of events and a lively exhibition.
* OPPLive Asia is offering half-price delegate rates until the end of February, reducing registration from the standard price of SGD$395 to SGD$195. To obtain the special early bird admission rate, go to: http://www.opp-connect.com/register-2/
By Adrian Bishop, Editor, OPP Connect