‘Cautious recovery’ for Malaysian housing market

Malaysia’s housing market is expected to recover in 2010, after falling house prices and low sales during 2009.

According to the Real Estate and Housing Developers’ Association (REHDA) of Malaysia, 50% of members expect property prices to rise by up to 20% during the first half of 2010. Price stability is expected by 30% of respondents, while less than 5% anticipate price falls. Transactions in the first half of 2009 were 30% down on the same period in 2008, according to the Valuation and Property Service Department (JPPH).

This “cautiously optimistic” outlook is due to an expectation of a stronger economy in 2010. Low interest rates, better access to loans, and favorable taxes are also expected to stimulate the housing market.

Malaysia’s housing market was hit by the global economic slowdown in 2008 and 2009, with political instability and roiling business confidence. Average property prices fell -0.9% in 2009 when adjusted for inflation. Some developers deferred project launches, while others scaled back. Malaysia’s GDP contracted 3.6% in 2009, due to the global recession, after rising 5.75% annually from 2002 to 2008. Consumption growth slowed sharply.

Although foreigners have long been allowed to directly own real estate in Malaysia, the government imposes restrictions on the minimum price level at which they can buy without permission from the Economic Planning Unit (EPU). Effective January 2010, the price floor was hiked to MYR500,000 (US$145,383), twice the previous level. Application for properties below the ceiling is almost always rejected.

Further, foreign purchases of residential units worth MYR 500,000 or above have been placed under the “purview of the State Authorities” under the new regulations. Approval is expected to take one to two months.