Lowering of foreign buyer price thresholds could boost property sales

KUALA LUMPUR (June 13): A balancing act is what governments must do when they attempt to strike a balance between the social and economic impact that the foreign ownership of properties will have on their respective countries, The Edge reported today.

Closer to home, even though Putrajaya lowered the foreign ownership price threshold in Budget 2020 to RM600,000 from RM1 million effective this year, state governments have jurisdiction over property and they have their own price caps in this matter.

For instance, Selangor has retained its RM2 million minimum threshold for foreign buyers — now the highest among the states — following a move by Penang last Thursday to tweak its price floor.

Penang has reduced its price threshold for foreigners by up to 40% in a bid to clear RM2.6 billion worth of overhang units in the state.

The revised pricing, which includes reducing the ceiling price of landed properties to RM1.8 million from RM3 million, is valid for one year starting from June 11.

For stratified properties, ceiling prices will be reduced to RM800,000 from RM1 million on the island and to RM400,000 from RM500,000 on the mainland in a 20% reduction.

Sunway Bhd managing director of property division Sarena Cheah told The Edge that she believes that respective state governments “are aware of this issue and are reviewing the thresholds”.

“Given the still-large overhang of properties across the country, a further relaxation of the thresholds would not result in foreigners competing with locals for property purchases. Instead, the property sector needs more foreign investors and buyers to help reduce the overhang and reinvigorate the sector. Furthermore, when foreigners purchase properties in Malaysia, it would certainly spur them to spend more in the country as they come to stay and visit,” she added.

The issue of foreign ownership of property is often a very emotive one, observed Datuk Chang Khim Wah, president and CEO of Eco World Development Group Bhd, who believes there is room for policies to be put in place to ensure that locals are not crowded out, to The Edge.

While this was the rationale behind the imposition of the thresholds, Chang says the existing limits are likely too high in the current climate.

“To a certain extent, this has contributed towards the property overhang statistics, which remain intractably high to this day. Clearly, the billions stuck in such properties can never be resolved through local investment alone. Lowering the threshold and making the unsold units available for purchase by foreigners can help clear the overhang and free up a substantial amount of cash to be redeployed for productive use by the country in this time of need,” he said, describing the current levels of foreign property ownership in Malaysia as “very low”, at less than 5% in total.

“As a nation that actively seeks to attract quality FDIs (foreign direct investments) and foreign nationals of good standing to make Malaysia their second home, a proactive and investor-friendly real estate investment policy can be a big plus for us to positively differentiate ourselves from regional competitors,” Chang says.

“Further, we need to appreciate that, apart from bringing in much-needed funds to the country, foreign property investments can contribute substantially to domestic consumption, increase job creation in the case of those investing for business purposes as well as enhance cultural ties and improve educational exchanges and technology transfer.”

Read the full report in this week’s The Edge Malaysia