New investment threshold for foreigners to have minimal impact on Iskandar Malaysia properties

The increased floor price of MYR1 million (USD306,000) threshold for foreign investors is expected to have a limited impact on Iskandar Malaysia projects when it takes effect on 1 May, according to real estate consultants.

Loo Kong Hoe of Rahim & Co (Johor), who spoke at last Monday’s 2014 property outlook briefing of the Malaysian Institute of Estate Agents (MIEA), said that foreign investors tend to buy properties that exceed the updated minimum purchase price, adding that only one out of every five purchases is currently made by an overseas buyer.

The new ruling depends on where the property is located, as different states have control over their land, such as Sarawak, where the investment requirement for non-Malaysians remains MYR350,000 (USD107,000). Johor State, where Iskandar is located, however, has decided to levy a 2 percent approval fee to help curb rising prices.

Meanwhile, more than 4,000 units are slated to be added to Iskandar’s upscale housing stock through 2014, with additional supply projected to accelerate over the next three years, according to consultancy firm HwangDBS Vickers.

Although the influx of new properties has raised concerns about a potential oversupply in the market, MIEA president Siva Shanker expects it to be a temporary situation.

“Mont Kiara [excluding the surrounding Segambut areas] has in the last 20 years built an estimated 20,000 units. Iskandar Malaysia, on the other hand, has built some 40,000 units in the last three years. Many units that will be placed in the market won’t sell,” Shanker said. “But in the second half following this period of consolidation, people will come to terms with the market, so 2015 will see an upturn in the property sector, which will continue into 2016. Even in the medium term, much of the oversupply will sort itself out.”

Rahim & Co’s Loo echoed these sentiments, stating that the area’s 5.5 million residents would be in need of housing, while Zerin Properties managing director Previndran Singhe also considered the growing supply “sustainable”, adding that demand will increase in line with growing employment opportunities.

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