KUALA LUMPUR: Property-related outbound capital from Malaysia amounted to just under US$5 billion (RM15.8 billion) in 2012 compared with US$1.15 billion in 2007 with the UK, Singapore, Australia and the US as the main recipients of the funds, according to real estate agent and global property consultancy, Knight Frank.
Knight Frank head of international capital markets Jeremy Waters told a press conference yesterday that these were the key destinations for Malaysian investors, with the UK being the biggest recipient.
“We still see very high interest in investing in London… People are constantly travelling to the UK to look at the market and to understand it.”
Waters pointed out that Malaysia’s outbound capital already hit US$5 billion in 2011 and came just under US$5 billion the following year.
Looking ahead, Waters said, “I think it [London] will remain the main destination for Malaysian investors because of their understanding and knowledge of the UK property market.
“I think it is the key criteria [understanding the UK property market] because if you are investing your money in the long way, you do really need to be comfortable with the legal structure [in the country].”
Knight Frank Malaysia managing director Sarkunan Subramanian said the company has seen capital flowing out of Malaysia towards safe havens such as London and Australia.
“We have also seen waves of Malaysian developers going overseas to London to build properties such as Royal Mints by IJM Bhd, the Battersea Power Station project by S P Setia Bhd, Sime Darby Bhd and the Employees Provident Fund.”
The cooling measures announced under Budget 2014 for the property sector would make the overseas market even more attractive and contribute to more Malaysians investing overseas, said Sarkunan.
Budget 2014, which was tabled in the Dewan Rakyat last Friday by Prime Minister Datuk Seri Najib Razak, also proposes to raise the real property gains tax (RPGT) to between 15% and 30% from the current rate of between 10% and 15%, depending on the year of disposal.
By raising the RPGT, the government hopes to curb speculative activities in the property market.
“The increase in the RPGT this time is quite substantial,” said Sarkunan, adding that this would affect the property market, as investors who intend to purchase properties) would have to take this into account. “But we will still see some genuine second home buyers.”
He, however, does not see house prices falling even with the hike in the RPGT. “We may see fewer transactions [in property purchases] but the only way to bring prices down is to flood the market with properties.”
Other cooling measures introduced in Budget 2014 are increasing the minimum threshold of foreign ownership of residential properties to RM1 million from RM500,000 and abolishing the developer interest bearing scheme (DIBS).
On the hike in the minimum threshold, Sarkunan said: “It is a non-issue as foreign buyers are already buying properties at above RM1 million.”
He pointed out that the cooling measures are only applicable to residential properties.
As such, he said, there would be a shift in buying interest from residential to commercial properties. In fact, he added, there has been a shift with more investors buying commercial lots as the returns are higher compared with residential properties.
“The returns for a residential property stand at 3% to 4% [per annum] while the returns from a commercial property could be higher, at 6% to 7%.”
This article first appeared in The Edge Financial Daily, on October 31, 2013.
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