We talked to MPI (Malaysia Property Inc) top guns, Kumar Tharmalingam, Chief Executive Officer and Veena Loh, General Manager on current issues affecting foreign property investment in Malaysia
RED: Why are foreigners not investing in Malaysian properties in a big way like in Singapore and Hong Kong?
Kumar: The Singapore and Hong Kong situations are very different from Malaysia. Firstly, in terms of size, Singapore is smaller than Perlis, Malaysia‘s smallest state but its population is 20 times bigger. This is in contrast to Malaysia which has a low population density but large land size.
Malaysia, on the other hand, is a long way from achieving the 10 million population it plans to attract to Greater Kuala Lumpur from the present six million by 2020. The country has only started to embark on this high income path two years ago.
Results cannot be seen in this short time. With the right eco-system in place, Malaysia is on the way to a more robust real estate market in the future.
Loh: Singapore has been very successful in attracting talent and expatriates to work there since 20 - 30 years ago. The policy has obviously benefited the nation’s GDP growth. Through liberal immigration policies and providing affordable and comfortable properties, Singapore has increased its population from 4.0 million to 5.2 million in 2011 over the past decade. The increase includes foreigners (10.2 per cent permanent residents and 26.8 per cent non-resident foreigners) who arrive in Singapore for work and study.
Like Singapore, Malaysia wants to embark on a high income path. The roadmap includes attracting 100 MNCs (multinational corporations) in Greater KL. To be a regional hub for these MNCs, KL requires talent pool and professionals. As it is not possible to generate as many professionals by 2020 based on our population num- bers, liberalising expatriate immigration is the fastest route. Thus, plans to increase the population in Greater KL from six million 10 million in 2020. Of the 10 million, 12 per cent will consist of top foreign talent that will help turn the city into a world-class metropolis.
But Malaysia is a long way from achieving the 10 million population. In contrast to Singapore, Malaysia has only started to embark upon a similar route two years ago.
According to EPU statistics, expatriates have been falling at a CAGR of -9% pa since 2000 - 2008 over the past decade. Expatriates working in Malaysia are among the lowest paid compared with regional peers, according to a HSBC Bank survey. Our exchange rate is weak compared to the Singapore dollar. Top foreign talents are used to a high standard of living such as first class hospitals and nice theatres etc.
At the same time, we don’t want foreigners to come to speculate and make our property market volatile like in Singapore. We want foreigners to buy properties to contribute to our economy by creating jobs and passing the knowhow.
RED: What are the improvements that need to be made in order to attract more of them?
Kumar: Malaysia needs a sizeable talent pool to attract MNCs to relocate their outsourcing industries here. We need to further reduce the cost of doing business, liberalise equity requirements for listed stocks as well as property.
Loh: We have made the right moves in reducing the cost of doing business, liberalising equity requirements for listed stocks as well as property. All these have gradually made an impact on foreign investors. Last year, Malay- sia moved into the international investors’ radar and the nation’s FDI (Foreign Direct Investment) hit an all-time high of RM33 billion.
We are trying to make KL a more livable city. We have to raise the stan- dards, encourage international schools to grow as well as improve on our public transportation and infrastructure.
The government should also not backtrack on its more liberal policies as this would simply douse the rene- wed foreign interest in Malaysia that all quarters of the Government have worked so hard for. Further, it would give the perception that the government is flip-flopping on its policies.
RED: Is the anti-foreign sentiment (from some quarters) justified?
Loh: Not at all. Malaysia is not experiencing Singapore’s situation. Only two per cent of properties are owned by foreigners compared to Singapore’s 25 per cent. Our expatriate population is declining, and we have a large land size which is about 600 times bigger than Singapore. Regionally, we have the lowest population density.
Comparatively, Singapore has a high density area with limited land size and high expatriate population comprising a quarter of Singapore’s population. They are some of the highest paid expatriates in the region.
Foreigners are not allowed to buy agricultural land in Malaysia. At the national level, foreigners comprise only two per cent of total residential house buyers.
Contrary to what some believe, the property price rise is contributed more by local buyers, developers and land owners [and not foreigners].
RED: Being nearest to Singapore, what is the property buying trend in Johor in terms of foreign purchase?
Loh: By state, the largest foreign home owners in Johor are Singaporeans. No surprise since the largest diaspora of Malaysians is in Singapore. Given the proximity, close investments and business ties Malaysia has with Singapore, Singaporeans are the biggest real estate investors in Malaysia and vice versa.
RED: Does Malaysia need expatriates?
Loh: Ultimately, every Malaysian wants to enjoy a higher income per capita. As Malaysian wages are no longer competitive compared to China, India and emerging Asean member countries like Vietnam and Indonesia, the only route for the future of this country is to embark on a path towards a high-income nation, or be stuck in the middle-income trap.
In order to do this, Malaysia needs a sizeable talent pool to attract MNCs to relocate its outsourcing industries here. Malaysia needs to attract both returning diaspora and foreign talent because of our very small highly skilled population in contrast to those availa- ble in India, for example. Expatriates can provide skills that our local population may not have. If we want our universities and research to be ranked anywhere within the top 50 globally, we need foreign lecturers, scientists and etc. Foreign businessmen and entrepreneurs create jobs when they come here.
RED: How has MPI helped to increase the number of property buyers?
Kumar: At the Malaysia Property Gallery in Singapore, RM106 million sales was transacted from October 2010 to October 2011. The pie chart (see Chart 1) reflects sales at the said gallery during the period in question. Most of the Johor new property launches were snapped up immediately before they got to brand it in our Singapore gallery.
MPI has made strides in marketing Malaysian real estate overseas through consumer property shows. There are many foreign investors who are keen to invest but lack proper and timely information on Malaysian real estate. We have participated in the following: Malaysia Property Seminar in Seoul, Korea in December 2010; Malaysia Property Showcase in Shanghai, China in September 2011 and Malaysia Pro- perty Showcase in Jakarta, Indonesia in November 2011.
MPI increased its coverage of mar- keting to the B2B real estate category in 2011. To create a larger presence and awareness with this investor set, MPI will continue to push for higher exposure of Malaysia as well as its representing companies across various major events.
Some B2B events that we have participatedincludeRECInstitutional Investments B2B Conference, Seoul, Korea in Nov 2010, APREA Business Leaders Forum, Beijing, China Property Showcase and Malaysia Pavilion @ MIPIM Asia 2011 in November 2011.
MPI is a public-private entity set up by the Economic Planning Unit of the Prime Minister’s Office. It aspires to be the first port-of-call for foreign investors interested to do real estate investments in Malaysia. It matches investors and owners for real estate sales and development and provides exposure for property investments into Malaysia.