GPG said properties are over-valued in Asian most countries, except Malaysia. “Malaysia is also very stable and its properties provide reasonable returns," said the research house in its Mid-2010 Property Recommendations report.
It added that Malaysia exhibited macro-economic stability and consistently strong gross domestic product (GDP) growth, despite “submerged ethnic tensions”.
Malaysia is a relatively small economy, and exports represent as much as 120% of GDP. Although its GDP fell by 3.5% (according to IMF estimates) in 2009, growth in 2010 is likely to be positive, variously estimated at 2.5% (IMF), 4.5% (ADB), or 3.7% (Malaysian Institute of Economic Research).
“Malaysia chugs along with GDP growth of around 5.5% per annum, except in major global or regional downturns.
“Besides that, budget deficits are small, debt is low and the economy is a picture of stability, though central government debt as a percentage of GDP rose to 48% in June, leading to the country's first debt downgrade since the 1997-98 Asian financial crisis.
“The banking system seems sound, and international reserves are at a healthy nine months of retained imports,” said GPG.
However, GPG noted that there was a dip in foreign investment flows into Malaysia. In 2008, Malaysia experienced a US$6 billion (RM19.6 billion) net outflow of foreign direct investment. Capital outflows continued in the first half of 2009, with direct investments outflows exceeding inflows by RM4.9 billion (US$1.4 billion) in the same half.
“Whether the capital outflows are a significant sign of economic trouble ahead is not yet clear,” it said.
GPG also noted that it was a good time to invest in the US housing market.
“The housing market is not the stock market. There is time. Yields are low so there is little out there that's so attractive. In our view, the US is an exception, because in some parts of the US, residential prices have fallen so much,” it said.
GPG also recommended properties in Latin America as well as other high-growth economies as the leading emerging economies are experiencing another kind of boom.
“Many Latin American countries are seeing the sort of institutional reforms that grew the mortgage markets in Eastern Europe, and raised valuations so much.
House prices tend to revolve around a range. The house price cycle can be viewed as a kind of circle, with house prices moving from yields of 4% to 11%, for example.
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