Asian investors still looking but in no hurry to buy

Australia, Singapore and the UK are top choices

This article by OPP Connect editor Adrian Bishop was originally posted on OPP Connect.

Asian property investors are still mainly looking to Australia, Singapore and the United Kingdom, but most are in no hurry to buy, a new survey reveals.

Hong Kong image via Shutterstock.
Hong Kong image via Shutterstock.

Despite that, most respondents to the iProperty.com 2014 semiannual Asia Property Market Sentiment survey, which centers on Malaysia, Indonesia, Hong Kong and Singapore, are more likely to purchase in the medium term, rather than the long term, suggested in the previous iProperty.com survey.

“For overseas property, all countries surveyed are consistent with their top choices,” says the report. “Most respondents are in no hurry to purchase when it comes to investing overseas, though they are more likely to purchase in the medium term, as compared to the long term in the previous survey. Those who find overseas property attractive are looking to purchase for investment, financial and/or migratory purposes.”

There is increasing interest in overseas property by Hong Kong buyers, with demand steady among Singapore buyers and falling in Malaysia.

In all countries surveyed, affordability continues to remain a major concern and market cooling measures mean a tough year ahead, says Shaun Di Gregorio, chief executive officer of the iProperty Group.

“All these countries have introduced multiple new measures to cool the property market and/or are looking into providing more affordable housing to the low- and middle-income group via various schemes.

Buyers from China view Singapore as a favorable property investment destination despite the latest rounds of property cooling measures."

“These measures have shown its bite especially in Singapore, while the Malaysian market is expected to digest and react to the latest cooling measures soon, and Indonesia seems to be the healthiest market among the three. A tough 2014 awaits, and slower sales are expected for these markets.”

The comprehensive 122-page report features online responses from around 20,000 from across Southeast Asia.

Malaysia

In Malaysia, there is a large increase from 40 to 51 percent saying they are not considering investing in overseas properties.

“This could possibly be due to all the recent price hikes and reduction of subsidies for consumer goods. Respondents are being more cautious about spending and investing,” according to the survey.

“Respondents have been very consistent in their preferred overseas property destinations. Australia, Singapore and the United Kingdom are still the top three choices — and have been for three consecutive surveys.

“The weaker ringgit might have contributed to the reasons that overseas properties are seen as good investment by respondents. The second reason that respondents are considering overseas properties is migration or retirement purposes,” says the survey.

Most international searchers look for properties online, with “newspapers and magazines” and “talking to real estate professionals” both at 27 percent.

The most popular destination, outside Selangor, is Iskandar, where prices are expected to stabilize following the cooling measures announced in October 2013.

“With growth averaging 8 percent a year, Iskandar has attracted over $40 billion (U.S.) of investment since 2006. Property and manufacturing account for 80 percent of the total investment. Buoyed by foreign buying, especially by Singaporeans, property prices in some areas have quadrupled. With cooling measures, the state authorities expect prices to level off.”

In Malaysia, with the banning of Developer Interest Bearing Scheme (DIBS), developers will have to work much harder to gain more sales in 2014, the reports suggests. “They would need to provide higher-quality products and more modern developments to entice buyers, and buyers can hopefully enjoy greater value for their money.

“The market is likely to take a breather as new supply and launches might be delayed in the first few months of the year as developers tread cautiously to test the impact of the cooling measures. Branded residences with good amenities, such as nearby [mass rapid transit] stations and fully fitted/furnished units, might appeal more to buyers. The market can expect more projects that cater to the family and for owner-occupation.”

Almost half of the respondents (46 percent) feel that DIBS will help to curb speculation in the market. The removal of DIBS, which enables buyers to pay a 5 or 10 percent down payment with mortgage payments kicking in until the property is completed, would also stamp out bulk-buying by foreigners.

Additionally, the ringgit, which dropped to a 3 1/2-year low against the U.S. dollar at the end of January 2014, will continue to be under pressure in 2014 amid a volatile global market. This might have influenced 47 percent of respondents to think that the increase of minimum price for foreign property purchasers, from RM500,000 to RM1 million, will not deter potential foreign investors.

Other factors that might affect the property market include the increase of the foreign ownership threshold from RM500,000 to RM1 million across the board and the implementation of a goods and services tax (GST) in April 2015. “With slightly more than a year before the implementation of GST, it will give sufficient time for the industry to work with the Ministry of Finance in fine-tuning the implementation details of the taxation.”

The substantial leap in real property gains tax (RPGT) rates from Jan. 1 — from 15 percent for two years to 30 percent for three years — is expected to slow down the property market, and there is likely to be delays in the disposal of properties. “This will affect property supply in the market, which in turn will increase its costs. Property ‘flippers’ are the ones who are expected to feel the pinch most.”

According to industry officials, the Malaysia property market might need at least two years to digest and recover from the various cooling measures that came into effect, but expect it to surge again in 2016, says the report.


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