More foreign real estate investment in Malaysia expected in future, says JLL

KUALA LUMPUR: International real estate services provider Jones Lang LaSalle (JLL) foresees more foreign investors putting their money in Malaysian real estate in the next 6 to 12 months.

JLL Property Consultants Pte Ltd Singapore and Southeast Asia managing director Christopher Fossick told TheEdgeProperty.com that foreign investors are ready to invest in Malaysia’s real estate market.

“For institutional investors, they are waiting for the ringgit to be more stable. The government predicted that the ringgit will average at the RM4.20 level against the US dollar this year, so I think in the next 6 to 12 months, we will see real estate investors gradually coming back into the Malaysian market,” Fossick said.

The ringgit has been weakening against the US dollar since November 2016. It plunged to RM4.4675 on Nov 24 and marked a new low since the Asian financial crisis in January 1998.

In December, the ringgit inched to the RM4.50 level before hovering between RM4.40 and RM4.45 since the new year.

“Although Malaysia has strong fundamentals, currency fluctuations have kept institutional investors away because currency hedging is very crucial for them. No businessman wants to do business at a loss or at a high risk. After all, there are more promising options for returns while waiting for the Malaysian currency to be stable,” said Fossick.

Nevertheless, he added that foreign investors are also concerned with the oversupply issue in certain property segments. “Some of them will wait a bit longer for supply to come down.”

He said many foreign investors like Malaysia for its population size, demography, urbanisation, stable economic growth and its real estate growth potential.

“Malaysia is one of the fastest growing economies in the region. Even if there are many headwinds, it has maintained at least 4% GDP (gross domestic product) growth. That is stronger than many nations in the current environment filled with uncertainties.

“It is also an open economy [which makes it] very easy for foreigners to invest here,” Fossick explained.

He believes that the current volatility of the ringgit is temporary.

“What’s crucial in a long-term real estate investment is sustainability,” he said.

In the short term however, while the backdrop sounds good, people cannot decide when to go in. “Currency fluctuation is one thing, the transparency of laws as well as what returns they can get in the investment are the things that are holding people back,” Fossick stressed.

On the overall real estate sector in Asia, he believes there will be more foreign investment in the region over the next decade.

“When you look at the total volume of property transactions in Asia, Australia probably has the most outer region investors right now. I think investors from outer regions are more familiar with Asia nowadays. There are a lot of opportunities here even during such difficult times. We shall see more outer region real estate investors coming in to Asia gradually in the next 10 years,” he noted.

This includes Malaysia which he said will catch the eyes of outer region investors. “No one country can stay at the top forever,” he added.

According to Fossick, besides strong fundamentals, Malaysia is in a strategic location and offers attractive real estate investment opportunities. “It could be one of the most popular real estate investment destinations in the coming years,” he offered.

Meanwhile, on a not so bullish note, JLL Malaysia country head YY Lau said people will continue to delay their property purchase decisions in the first half of this year.

“The first half will be confusing and uncertain, and it will be quiet. We will also see people taking their time to make purchase decisions as we saw last year. No one knows what will happen in the second half, but new infrastructure, such as the MRT (mass rapid transit) system, will create a buzz. Besides that, I think office and retail properties will do well this year,” Lau said.

This story first appeared in TheEdgeProperty.com pullout on Feb 17, 2017, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com pullout here for free.