Real estate industry leaders IQI Global and Juwai.com expects Budget 2020, set to be unveiled on 11 October 2019, to be people-centric, growth focused and confidence driven.
According to Shan Saeed, Chief Economist for IQI Global, which has more than 6,000 real estate agents in Malaysia, Southeast Asia, and the rest of the world, “This is the second budget the government of the day will be delivering since they came into power in 2018.
“With threats of a global recession knocking on the doors of many advanced economies, the trade war disrupting exports, the rising cost of living, and income supplements for B40 households, this is perhaps the most important budget in several years. The real test for Budget 2020 will be how the government addresses these vital issues while also maintaining fiscal discipline.
With a prudent economic strategy, we forecast a GDP growth of between 4.4% and 4.9% in 2020. Price inflation should remain stable under 2% and the budget deficit should remain manageable. We hope the government will continue to maintain prudent monetary policy, propel the current good economic trajectory, and bolster business sentiment at the macro-level.”
He added, “We also hope that the government will propose structural reforms to pass on the benefits of economic growth to the public in general. Establishing a stronger balance sheet, solid fiscal side, and healthy current account surplus should be on the government’s agenda.
“The trade war is hurting global trade, but it is also an opportunity for Malaysia. If the government can help the country capture elements of the supply chain that is moving out of China, then Malaysia could benefit from the trade war. That would create more employment, drive innovation, fuel economic growth, and create a confidence driven progression.
Adding on, he said that general theme should be to maintain solid macro fundamentals that will keep Malaysia on the radar of global investors in the long run. “We expect the discount rate to hover around 2.5% to 3% in 2020.”
When asked about the wish list on the property market, Saeed said the government should do more to ensure the creation of affordable housing in places where people want to live.
“The data shows that a significant number of unsold units are priced affordably, but too often they are located out of the city centre. Malaysia has a growing urban population. Our young adults want to buy a home in established areas that are well connected to public transportation,” explained Saeed.
According to data from National Property Information Center’s (NAPIC) First-Half Property Market Report, the number of overhang residential units priced from RM200,001 (approximately $47,760) to RM300,000 (approximately $71640) were at 7,328 units (22.3%), followed by units priced at RM300,001 (approximately $71640) to RM400,001 (approximately $95,520) at 5,731 units (17.5%).
Applauding the Government’s call to want to sell the unsold residential units priced above RM1 million (approximately $238,800) to foreigners, Juwai.com's Executive Chairman said, “This is a good move. There is a steady increase in demand from mainland Chinese Hong Kong Chinese buyers wanting to invest in property in Malaysia. Our data shows that Malaysia is the number-one destination for buyers from Hong Kong. Data from NAPIC has shown that there are 4,213 unsold units priced above RM1 million(approximately $238,800), accounting for 12.8% of unsold supply.”
Chmiel also added that Malaysia is especially appealing to buyers in Hong Kong that are looking at retiring or even sending their children for education. "The Malaysia My Second Home Program, affordable standards of living, high quality of life, medical facilities and accessible educational institutions, all contribute to the country’s appeal.”
Aside from the protests, The Global Real Estate Bubble Index for 2018 has revealed that Hong Kong had the world’s most overvalued housing sector.
“That real estate prices in Hong Kong are astronomical. A 250 square foot apartment in Hong Kong costs RM3 million (approximately $716,400), which makes Malaysia property a bargain in comparison,” shared Chmiel.
"Buyers from mainland China purchased RM9.5 billion (approximately $2 billion) worth of Malaysian residential and commercial properties last year,” Chmiel said. “More than four-fifths of the investment was in the residential sector.”
“These buyers are a wealthy group of buyers eager to seek out opportunities across Asia. By buying in Malaysia they create local economic growth and jobs for Malaysians. They would open businesses, pay local taxes and fees, spend money in local stores and restaurants, and boost the tourism industry. It is all very good for Malaysia. If we can showcase these properties for them to purchase and have a faster approval process on the scheme, the number of overhang properties can be reduced,” shared Chmiel.
Chmiel also stated that a review of the MM2H scheme’s current process was needed. He hopes that the Budget will also have more schemes to attract foreign buyers to the country.
ON THE OVERALL ECONOMY
A recent report released by McKinsey Global Institute (MGI), entitled The Future of Asia, revealed that Malaysia is located at the heart of Asia, one of the world’s largest regional economy. Economic power is expected to grow as Malaysia integrates more deeply with other Asian economies in trade, innovation, culture and tourism, and people flows. Asia will fuel and shape the next phase of globalization.
“This is the Asian Century and Malaysia is one of the four or five most important countries in Asia,” said Chmiel.
“The biggest opportunities for Malaysia are in other parts of Asia. Fifty-nine percent of foreign direct investment in Asia comes from other Asian countries. Three quarters of air travelers in Asia are traveling within Asia, and 71% of investment in start-ups comes from other Asian countries. There is so much potential in Asia in the digital economy.
“The opportunities in Asia are tremendous. Even in these uncertain times, a smart budget can ensure Malaysia in 2020 sees more investment, more local employment, and stable economic growth,” said Chmiel.
Join us November 12-15 for the Property Portal Watch Conference Madrid 2019.