By Datuk Paul Khong
Last year, I predicted a bumpy ride for the real estate market. Indeed, 2023 was really challenging but it still ended with a better report card generally. The first half started off slow with the continuous revisions of OPR rates (which was stabilised by Bank Negara at 3% pa); the Russia-Ukraine war and the worsening market sentiments, compounded by the Israel-Palestine war, made the ride more bumpy.
Into 2024, I foresee that the various challenges will persist with peaking inflation, rising crude oil costs and more global uncertainties. It will be a roller-coaster ride, but one with plenty of promises. The Malaysian property market will be cautiously optimistic. We expect prices to continue their upward movement due to the base costs push factors and rising interest rates and inflation.
Budget 2024 did not have many property goodies in place except for a continuous focus on affordable segments driven by various government initiatives. With new supply in the pipeline, the office market segment will continue to battle for tenants as most companies are rationalising their spaces with hybrid work arrangements.
Flight to quality and ESG are the keywords for 2024. Industrial logistics and data centres should outperform again for 2024 (though it is everybody’s guess); they have been the market’s top darlings since the start of Covid 19. @YTL Power is making headlines with the AI Data Centre deal powered by Nvidia Corp (US). – Dec 2023
Capital market transactions should be active as well and involve office buildings, hotels, key development lands in high-demand city areas and agricultural lands suitable for land-banking purposes. The latest deal concluded is the sale of W-Hotel (Tropicana) to IOI group at RM270mil. – Dec 2023
Budget 2024
MM2H is revised for 2024 to bring more foreign applicants to live and invest in Malaysia. This will be for a one-year trial period subject to standardisation of criteria and requirements. This revision will be introduced to Chinese citizens before expanding further (in conjunction with the 50th anniversary of the Malaysia-China diplomatic relationship).
It is understood that the minimum age requirement has been reduced from 35 to 30, 60 days residency in Malaysia (previously 90) and applicants on the platinum tier are eligible for PR status once application is approved. Higher withdrawal deposit amounts are also allowed for property purchases, medical treatment and local travel.
The introduction of a 4% flat rate on stamp duty (memorandum of transfer) on foreign purchases [RM16k max] contradicts the spirit of improving the MM2H though it has a marginal/negligible impact.
Redevelop / Repurpose / Rebuild
Land is becoming a scarce commodity and prices are rising. Redevelopment within the city will continue to be more relevant moving forward. However, it has been a painful experience for the redevelopment of en-bloc strata title properties where a 100% consent was required (which is usually an impossible task). The proposal to follow international standards (eg Singapore at 80%) will be well accepted by most.
Budget 2024 will address this issue with a new law to speed up redevelopment, regeneration, revitalisation and conservation. It may take some time for such changes to bear fruit but it sets the right tone for the future.
The ESG factor
Environmental, Social and Governance (ESG) factors have become key for institutional investors when making decisions. This is an increasing trend, plus the number of mandatory ESG regulations worldwide is growing. Although there are no consistent ESG reporting frameworks mandated, this trend is continuing in Malaysia into 2024 and beyond.
Plenty of promises
Our consensus views are that we are cautiously optimistic for 2024. We expect to see a continual surge in the industrial sector especially in the data centres, logistics and manufacturing front. This sector proved to be resilient throughout 2023 and we expect it to continue in terms of demand and land values.
ESG and sustainability angles and green features with renewable energy sources (solar) in all sectors will be key while green financing from banks at better interest rates is here to stay. With no goodies from the national budget, the local property sector will brave through 2024 on the condition that there are no new unforeseen global events such as geo-political tension or pandemics.
Budget 2024 provides a new platform for the redevelopment of dilapidated strata development, with a majority vote from unit owners (100% consensus needed previously). It is proposed here that international practices (probably 75% here) be adopted to help revive blighted parts of the city.
With the Sultan of Johor becoming Yang di-Pertuan Agong on Jan 31, 2024, development will focus on the south of the peninsula. Keep an eye on the Forest City and the High-Speed Railway (HSR) projects. Malaysia and Singapore have set up a Special Economic Zone (SEZ) with the signing of an MoU on Jan 11; this will enhance the ecosystem in the Iskandar region. We believe that 2024 will be a better year despite some uncertainties.
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