EVEN though China’s borders remain closed at this time, we believe 2022 will see Chinese buying of Malaysian property begin to climb again. Psychologically, people are moving beyond the Covid-19 pandemic. When China’s borders reopen to free travel, the rebound in Chinese property acquisitions will gain pace as visits climb.
How has Chinese buying of Malaysian properties changed in the past half year and how many Malaysian homes were sold to Chinese buyers in H2’21?
Chinese buyer demand for Malaysian homes is at about one-third the level it was before the pandemic, but will begin climbing back up in 2022. The drop has been due to the reduction in travel between the two countries. After Malaysia reopens its borders sometime in the second quarter of the year, travel will remain limited by China’s zero-Covid policy. Chinese who want to travel to Malaysia have to undergo an extended quarantine upon returning home. As a result, most Chinese have avoided overseas travel.
Why is the Malaysian property market getting more or less appealing to China buyers?
The Malaysian home market remains appealing to Chinese buyers due to the high quality of life on offer, its proximity to China, and relatively low prices. Some buyers will be seeking bargains, and hoping to buy unsold new units from developers at a discounted price.
Another factor motivating Chinese investors is the market in China, which is lacklustre at the moment. Restrictions on investing and on the development industry have some Chinese buyers looking overseas for alternatives.
What about Malaysia My Second Home (MM2H)?
There has been anxiety about MM2H, but we believe it will continue to be a successful if smaller programme under the revised policies. Authorities announced in January that they had received 111 applications.
Even with fewer applicants, the new MM2H will provide more benefits for Malaysians. If all 111 of these applicants are approved, that could result in new fixed deposits of RM1 billion, which is more than triple what the amount would have been under the old conditions.
The top source of MM2H applicants is China, including Hong Kong. There are more than twice as many applicants from China from any other country. This data is based on the programme under the old conditions, as new applicant country data is not yet available.
Which Malaysian cities are most attractive and for what reasons? How much are foreign buyers investing?
In the first half of 2021, foreign buyers accounted for 13% of new home purchases. Foreign buyers accounted for the largest share of new home buying in Sarawak at 15% and Kuala Lumpur and Selangor at 13%. Those statistics come from the Q3 2021 Juwai IQI Property Survey & Index – Malaysia.
The National Property Information Centre reports that RM18 billion of residential property sold in the third quarter. The Q3 2021 Juwai IQI Property Survey & Index – Malaysia found that foreign buyers accounted for 10% to 15% of new and second-hand transactions in Malaysia’s largest cities. Working on the back of an envelope, you can estimate that foreign buyers purchase in the range of RM1.8 billion of real estate a quarter, or RM7.2 billion a year.
If they are buying for their own use, Chinese buyers choose to purchase where they intend to live or use the home. If they’re buying for investment, they seek good yields, easy maintenance, and likely capital gains.
This article is contributed by Juwai IQI group co-founder and CEO Kashif Ansari.