Malaysia invites foreigners to make themselves at home

International Herald Tribune – 11/5/2006

Like many Southeast Asian nations, Malaysia has two primary property markets that are attractive to overseas buyers: the area around the capital's central business district and the resort properties on the coast. 
 
But unlike some of its neighbors, Malaysia makes it fairly easy to buy property. Thailand, the Philippines, Indonesia and even Singapore all prevent foreigners from owning land, restricting them to buying apartments or to using leasehold arrangements. 
 
"In Malaysia, you've got a government that is really trying to improve the environment for people looking to invest in the country," said Darien Bradshaw, regional director of business development for Colliers International real estate brokerage. 
 
That was not always the case. In the 1990s, the country feared that foreign buyers were driving prices beyond the reach of locals and, in reaction, it set up a Foreign Investment Committee and enacted restrictions. Now, however, the country even has a program aimed at overseas buyers, "Malaysia: My Second Home." 
 
Malaysia's real estate market is considered transparent in comparison with other Southeast Asian countries. And owners can avoid a 30 percent capital gains tax by holding their property for at least five years, after which they pay 5 percent on any gains. 
 
Brokers and buyers alike say Malaysian banks are eager to issue mortgages to overseas citizens. Mortgages are generally issued up front. "In terms of financing ability, compared to other countries, the banks are very liberal," Bradshaw noted. "People can secure up to 90 percent finance." 
 
Although recent increases have pushed interest rates to 6.75 percent from about 6 percent at the start of the year, Kuala Lumpur has seen a boom in the kind of high-end condominium development that expatriate buyers and renters demand. Construction standards have improved, as have living conditions in the city. A light rail system opened in 1998, and a thriving business hub is developing around Kuala Lumpur's city center and the KLCC Park at the foot of the Petronas Twin Towers. 
 
The buzzing local economy, fueled by the global boom in oil and commodities, has drawn an increasingly discriminating breed of renter who works for one of the multinational natural resources companies. 
 
According to a recent study from ING Real Estate, Malaysia will be the Asian country with the biggest increase in its work force from 2003 through 2013, with the number of workers expected to rise to 13 million, a 27.9 percent increase in the 10-year period. 
 
With strong demand for apartments at the market's top end, developers are in various stages of construction on a series of projects around KLCC Park. The catalyst was The Binjai, a condominium development by KLCC Holdings, the property development arm of the oil company Petronas and the developer of the Twin Towers. 
 
The Binjai, which was started in 2003 and is expected to be ready by the end of the year, will have 171 apartments divided between two towers. They are expected to set records. The company has not issued a final price list, but it says apartments will sell for more than 1,000 ringgit, or almost $260, per square foot. The smallest units, starting at 2,300 square feet, or 214 square meters, are likely to sell for more than 2.5 million ringgit. There also are 14 penthouses of as much as 10,000 square feet. 
 
"The Binjai has created a new market essentially, with the view of the park and the view of the towers," said Rohan Padmanathan, who works in the investment department of Jones Lang Wootton brokerage house. 
 
Upscale condos in the city's central area had been selling at 450 to 500 ringgit per square foot, but the developer expects the average sale price of The Binjai to be double. "One thousand ringgit per square foot started at Binjai," Padmanathan said. "At the time, that was unheard of. Now it's becoming quite common." 
 
The Troika, a three-tower project designed by the company of the British architect Norman Foster and developed by Bandar Raya Developments, has similar pricing, with apartments also topping the 1,000 ringgit per square foot mark. Its sales have been split roughly evenly between people who intend to live there and those buying apartments as investments. 
 
Nearby, and also with views of the Twin Towers, KL Landmark is developing K Residence, a 50-floor luxury residential complex. The two- and three-bedroom apartments, most of them around 2,500 square feet, are due for completion in the first quarter of 2008. The asking prices are 816 to 942 ringgit per square foot. The developers tout touches like a contemporary design partly by Christian Liaigre, who created the interiors for Valentino Couture in Paris and private residences for Calvin Klein, Karl Lagerfeld and Kenzo, among other projects. 
 
Some of the new construction is not so costly. The 100 serviced apartments being built at the 32-floor Binjai Residency are selling for just half what those at The Binjai are expected to fetch. (The projects have similar names but are not associated.) 
 
David Neubronner, residential department director for Savills real estate in Singapore, said his office sees 50 to 100 buyers a year in Malaysia, most from Singapore but also from Hong Kong, Europe and Australia. Only the Singaporeans have been interested in Malaysian property in places like Penang or Johor Bahru, he said. "Generally, Malaysian resort properties have not been very well received," he said. 
 
That may be changing, however, as resort construction standards are improving and new projects are springing up along the coast. 
 
Over all, Malaysia is still an emerging market, so despite all the positives, buying property is not without risk. For example, brokers warn of annoyances like developers' trying to avoid receiving the final payment on properties so they can hold on to the titles. ING rates the Malaysian property market as a medium risk, the only developing nation in Asia not rated a high risk

Source: www.iht.com