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Kuala Lumpur Property Market is Still Hot

The past year saw grown in property prices in Malaysia, after weakness during the first half. A press report suggests the market has risen quite strongly, the growth of residential prices has several causes, and one is low interest rates have been pushing Malaysian households to look at putting their money elsewhere than in the bank. Finally, the Employees Provident Fund (EPF) now allows monthly mortgage withdrawals from Account II (a change which could potentially free inject RM9 billion cash annually into the housing market).

Foreign investors are still actively looking at buying property in Malaysia compared to Singapore and Hong Kong residential property are now both very pricey, and offer rather low yields, and Malaysia offers a much better-paying alternative, with gross rental yields at around 7%.

According to a Global Property Guide study on housing affordability, Malaysia has the lowest house-price-to-income ratio in Asia. This is largely because of the delayed effects of the Asian crisis. From 2000 to 2006, price of detached houses increased by a relatively modest 28%, with semi-detached housing rising 21%, terraced houses 15.9%, and high-rise units 15.5%.

Malaysia’s rental market is small, only 6% of the housing stock is in the private rental sector. About 85% of the total stock is owner-occupied, while government-provided housing accounts for 7% of the housing stock.

The active luxury rental market caters mainly to expatriates, centered on Kuala Lumpur. Rental yields in Kuala Lumpur are healthy, ranging from 7% to 8.7%.