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Showing posts with label investments. Show all posts
Showing posts with label investments. Show all posts

Saturday, January 18, 2025

2025: A really bad year for non-property owners

Wealth gap could widen for those without homes

As we usher in 2025, Malaysia’s property market is on a bullish trajectory. However, while this spells good news for property owners and investors, it is shaping up to be a tough year for those who have yet to get on the property ownership ladder.

Let’s explore why this year might be a turning point for tenants and non-property owners—and why waiting any longer to invest could widen the wealth gap even further.

Setting the stage

The year 2024 marked the beginning of the property market’s recovery after the pandemic-induced slump. Several key factors contributed to this rebound:

  • Low inflation and unemployment: Inflation remained at a modest 1.9%, while the unemployment rate dropped to its lowest since the lockdowns at 3.2%.
  • Foreign direct investment (FDI) growth: Malaysia’s government actively pursued policies to attract foreign investment, bolstered by political stability and a weak ringgit, making Malaysian assets more appealing.
  • Stable interest rates: The US Federal Reserve’s decision to cut interest rates by 0.25% helped usher in a lower-interest environment globally.

These factors collectively fuelled a surge in property transactions and higher rental rates. The National Property Information Centre (NAPIC) reported that property transactions reached record highs in Q1 to Q3 2024, with 311,211 units sold, valued at RM162.96bil — a 6.2% increase in volume and a 14.3% increase in value year-on-year.

Why 2025 could be worse for non-owners

With property prices and rentals on the rise, non-property owners face a growing challenge. In some areas, rental rates have increased by as much as 20% year-on-year. The Home Rental Index rose by 5.5%, reflecting sustained demand, especially in urban centres like the Klang Valley.

These rising costs are driven by several factors:

  • Undersupply of New Launches: Developers have slowed the pace of new launches due to heightened scrutiny following recent structural issues, such as the sinkhole incident. This supply constraint is expected to persist for the next few years, driving rental demand higher.
  • Rising Demand from Foreign Investors: With the ringgit at a historic low, foreign investors are snapping up properties in Malaysia, particularly in prime areas like KLCC, Bangsar and Bukit Bintang. This influx has increased rental yields, making it harder for local tenants to afford.
  • Infrastructure Projects: The government’s ambitious infrastructure projects, such as Bandar Malaysia, will further boost property demand. KLCC Properties has been appointed as the master developer for this project and I anticipate that it will replicate its successful development model from Kuala Lumpur City Centre.

Economic stability driving confidence

Malaysia’s improving economic fundamentals continue to drive property investment. Household debt remains manageable at 70% of GDP while loan approvals for personal loans, vehicle financing and credit cards are at their highest levels in years.

This strong credit environment indicates that Malaysians are financially equipped to invest in property, despite rising prices. Personal wealth growth, coupled with a stable government and promising job market, provides further confidence.

NAPIC’s Q3 2024 data paints a clear picture of the market’s momentum:

  • 112,000 property transactions in Q3 2024: This represents a 3% increase year-on-year.
  • Total transaction value of RM57.3bil: Up 13.7% from Q3 2023.
  • Residential sub-sector growth: Property sales reached 192,484 units valued at RM78.17 billion in Q1 to Q3 2024, marking a 4.9% and 6.9% increase, respectively.
  • Overhang properties reduced by 15.2%: The total overhang dropped to 21,968 units, down from its peak in recent years.

Despite these gains, Kuala Lumpur, Perak and Johor respectively remain the states with the highest overhang units, highlighting that not all markets are equally buoyant.

Rental market trends

Rental rates have been steadily climbing, driven by increased demand and a constrained supply of new properties. In Klang Valley, rental yields have risen dramatically as workers return to the city post-pandemic and international tenants seek accommodation in prime locations.

The short-stay rental market, such as Airbnb, has also rebounded. Weaker ringgit values have increased domestic tourism, further driving demand for short-term rentals.

Based on current trends, the property bull run is expected to begin this year and continue beyond. Key predictions for this year include:

  • Transaction volumes: Maintaining a 10% variance compared to the average of 2022–2024 transaction levels.
  • Rental growth: Particularly in Tier 1 areas, where undersupply continues to push prices up.
  • Property values: Anticipated to rise to their highest rate in four years.
  • New launches: Expected to return to pre-pandemic levels as developers regain confidence.

Bad news for tenants

For tenants and those without property assets, 2025 looks set to widen the wealth gap further. Rising rental rates, increasing property values and constrained supply mean that the cost of not owning property will only grow over time.

With mega infrastructure projects like Bandar Malaysia set to transform the landscape and foreign investment continuing to flow into the country, the property market’s upward trajectory shows no signs of slowing down. Property ownership is no longer just about having a home—it is about securing financial stability and capitalising on Malaysia’s growth story.

For those still sitting on the sidelines, the window of opportunity is narrowing. The longer one waits to enter the property market, the more expensive and challenging it will become to catch up. In 2025, not owning property could be the biggest financial setback for Malaysians.


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‘Good year for property’


Frank Knight Malaysia's Wong said Johor is an obvious market that is expected to grow.

KUALA LUMPUR: The property market is poised for growth in 2025, with a significant focus on industrial property which will be underpinned by supporting government policies and increase in foreign direct investments (FDIs), says Knight Frank Malaysia executive director of research and consultancy Amy Wong Siew Fong.

The increase in FDIs will lead to a higher number of multinational companies opting to kick start operations and thus drive the economy.

Citing a recent report conducted by Knight Frank titled “Real Estate Highlights”, Wong said respondents had ranked data centres, industrial and logistics as the top three growing real estate investment sectors for 2024.

“Moving into 2025, the green light is for data centres, industrial and logistics, while office, hospitality and retail are rather stagnant,” she said during a panel session at the 18th Bursa-Hong Leong Investment Bank (HLIB) stratum focus series here yesterday.

She highlighted that aside from the Klang Valley, Johor is an obvious market that is expected to grow, especially considering the development of the Johor-Singapore Special Economic Zone (JS-SEZ) followed by Penang.

However, in terms of investment, Wong pointed out that despite the Iskandar region playing a huge role for the JS-SEZ, the market may not be as exciting as the Johor Baru City Centre area.

“If you are talking about the JS-SEZ, I think the industrial sector will continue to be a key sector to look at and manufacturers will continue to look into areas surrounding Senai and Kulai – which always have consistent demand due to its good fundamentals,” she said.

Wong said there has also been an increase in interest in the Sarawak and Sabah region, considering its strong drive towards the green agenda.

Asked about expected downside risks for the year, Wong said there are factors that are impossible to predict such as changes in policies and rate cuts.

“With all these chess pieces in place, I think 2025 is going to be a good year for the property market,” she said.

Sharing the same optimism, HLIB group managing director and chief executive officer Lee Jim Leng said affordability remains a key factor for the property market moving forward.

“In 2025, we are expecting higher wages for civil servants and the introduction of a higher minimum wage.

“The incremental increase in disposable income is a much welcome factor in catalysing demand and raising affordability for properties across the country,” she said, adding that the current 3% overnight policy rate and stable mortgage rates are also expected to bode well for the property sector.Positive indicators such as stable employment growth rate and an expected gross domestic product growth of 4.9% for 2025, are expected to provide the right conditions for sustained growth within the property sector.

According to the National Property Information Centre, Malaysia’s property transaction values soared to RM105.65bil in the first half of 2024, marking an impressive 23.8% year-on-year growth and the highest in five years.

As of the nine months of 2024, the number was noted to have increased to RM162.96bil.

The Kuala Lumpur Property Index has increased by 31.17% in 2024 and the residential overhang situation was noted to have improved, with a 12.3% reduction in volume of unsold properties.

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Malaysian property market poised for steady growth in 2025






Sunday, August 4, 2024

Property market and affordability

 

Affordability goes hand in hand with income.

Affordability goes hand in hand with income.

THE older wisdom believes that a market cycle typically lasts about 10 years. While this is not set in stone and social media has somewhat disrupted this timeframe, one sector that seems to have moved in tandem with this timeline is the property sector.

The Malaysian property market has been on a downtrend for close to a decade. Take the KL Property Index (KLPRP). It has not revisited its peak in 2024. From a high of 1,524 on Aug 18, 2014, it fell to a low of 495 on March 23, 2020, during the Covid-19 lockdowns.

However, this past year, the KLPRP has performed extraordinarily, rebounding to 1,132 as at July 31, 2024, delivering a yearto-date return of 31%.

Is this the sign that our property market is truly on the path to recovery? It the worst over for the sector which has been in the doldrums for over a decade?

The peak of the property market was marked with the rollout of the popular “Developer Interest Bearing Scheme”.

This scheme essentially allows purchasers of property to pay only the initial deposit, with the developer absorbing the interest throughout the construction period until vacant possession.

This eased the entry for many first-time homebuyers who were previously deterred by deposit and interest repayment obligations.

However, as the market overheated, the government abolished the scheme. Nonetheless, various modified schemes continue to exist in the market.

We started witnessing many businesses diversified into property development.

Firefighting equipment manufacturers, confectionery makers and even textile companies entered the sector and became property developers overnight.

This led to a surge in the supply of properties. We must remember, in the past, properties were built sideways.

With advancements in technology and new regulations such as higher plot ratios, properties started being built upwards, unlocking a significant number of units and pushing up land costs.

There was also the mushrooming of “property gurus” who conducted seminars on property investment, which spurred speculations further.

The worst were those that propagate “compressed loans”, where buyers exploited a loophole in the banking system by submitting multiple loan applications at the same time to various banks for several properties.

This allowed them to borrow loans for several properties as the system then was not able to catch these simultaneous submissions.

All was well and good when the market was hot, as buyers could do a quick flip.

But when the market turned, many of these buyers could neither find buyers nor rent out the properties. Without the financial ability to service multiple loans at the same time, their properties were auctioned by the banks.

This led to a huge number of property units being put on the auction market. The situation was further exacerbated when the pandemic hit, causing many people to lose their income.

At one point, there were more than 200 listed companies on Bursa Malaysia involved in property development. As the supply of unsold units far outpaced demand, there was a compression in margins and write downs for many listed developers.

Sales were affected and many projects which were launched could barely achieve 50% of the sales threshold.

The situation was further complicated by delayed project completions, leading to liquidated ascertained damages (LAD) claims piling up.

The verdict of Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar [2020] 1 MLJ 281 led to many homebuyers filing suits against property developers, with the estimated claims reaching Rm48mil due to the extension of time (EOT) granted between 2016 and 2020.

The property market was indeed plagued with many challenges to a point where a veteran industry leader publicly commented that “the golden age of property sector is gone”.

As with all cycles, there is always a turning point. It seemed from the start of 2024, green shoots appeared for the property sector.

Firstly, the catalyst came when the government unveiled the potential of setting up a special economic zone for Singapore and Johor.

Secondly, the inflow of data centre investments drove up land transactions, with many property developers which had landbanks in Johor starting to cash out at significant premiums to their entry prices.

The average transaction price of agriculture land suited for the data centres was in the range of RM60 per sq ft.

Most of these land were less than RM30 per sq ft a year ago. This led to investors paying attention to the market down south.

Furthermore, banks’ appetite for end-financing picked up in the past two years, with an increase in both loan application submissions and approvals.

The latest Federal Court decision in Obata-ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd and two other appeals, which discussed the Ang Ming Lee case, stated the ruling on the EOT shall only apply prospectively and not retrospectively.

This was the cherry on the icing, allowing many developers faced by mounting LAD claims to breathe a sigh of relief. It is quite clear that 2024 is an important year for property developers, with the sector seemingly to be firing on all cylinders.

Yet, the Khazanah Research Institute director in a webinar last week, highlighted that our housing market is consistently unaffordable and was against offering “affordable financing” with long tenures.

She proposed for the migration from the current sell-then-build model to the buildand-sell model like other developed countries.

In my view, this policy idea is regressive in nature and not suitable to the current economic structure of Malaysia.

It is too shallow as the crux of the problem of property ownership in our country is due to low wage growth rather than high property price.

Affordability goes hand in hand with income. If the people’s incomes do not increase, affordability will always be a problem, regardless of whether there is affordable financing or otherwise.

Similarly, the migration to build-and-sell will not help the property market pricing in any way apart from reducing abandoned housing or “Project Sakit”.

The repercussion of a migration in model is far-reaching.

While I do agree that this would weed out many incompetent property developers and offer better protection to homebuyers, the downside would be the impact on the supply of property to the market and risk of financially strong property developers cornering the market, leading to oligopolistic or cartel behaviour.

This would eventually drive asset prices up further due to supply scarcity.

At the end of the day, I believe the rationale for property ownership differs from one person to another.

Some believe that real estate is among the safest and most reliable asset classes for investment purposes and hedging against inflation.

Others believe that real estate has limited upside, hence renting is more practical without the long-term loan commitments affecting their lifestyle preferences. This is especially prevalent among the youth today.

My personal view is that the property sector, like any other sector, has its own cycles, and depending on which point one enters the market, there will be different outcomes.

This will shape individual perspective when it comes to property ownership.

Whether the sector remains positive in the long term depends heavily on two key factors – population growth and a burgeoning middle-income society.

By Ng zhu hann Ng zhu hann is the chief executive officer of tradeview Capital. he is also a lawyer and the author of Once upon a time in Bursa. the views expressed here are the writer’s own.

https://www.thestar.com.my/business/insight/2024/08/03/property-market-and-affordability

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Tuesday, September 5, 2023

NIMP 2030 Sets Breakthrough Agenda, poised to attract more investments

 


PM Launches Malaysia’s 4th Industrial Master Plan

IT is a pivotal moment for Malaysia’s industrial development.

Malaysia’s manufacturing sector has to accelerate the Fourth Industrial Revolution, taking advantage of smart technologies to move its production base up the value chain while conforming to environmental, social and governance and meeting net-zero target.

Amid increasing geo-economic complexity and the escalating impact of climate change, Malaysia needs a new generation of sustainable industrial transformation to lever up the economy to sustain resilient and competitive advantage internationally.

The manufacturing sector remains one of the primary engines of growth (2022: 24.1% of gross domestic product or GDP: 84.2% of total exports and 16.8% of total employment) and had expanded at steady rate of 4.8% per annum in 2015-2022 (4.9% per annum in 2011-2015).

The New Industrial Master Plan (NIMP) targets to increase the manufacturing sector’s value-added by 6.5% per annum to RM587.5bil by 2030 (RM364.1bil in 2022); employment growth of 2.3% per annum to 3.3 million in 2023 (2022: 2.7 million persons); while median salary will increase by 9.6% per annum to RM4,510 in 2030 (2021: RM1,976).

The country has prematurely deindustrialised since early 2000s, mainly due to increased global competition and slow progress in moving up the value chain.

Malaysia’s Economic Complexity Index ranking (24th in 2021), which indicates the productive capability of an economy, was lagging behind advanced economies (first for Japan, fourth for South Korea and sixth for Singapore); other developing regional peers are fast catching up (29th for Thailand); and labour productivity growth has moderated and stagnated (2.3% per annum in 2013-2022).

Our regional peers are receiving more foreign direct investment (FDI) inflows in recent years.

During the period 2017-2022, Malaysia registered FDI inflows of US$9.4bil per year compared to US$96.4bil per year for Singapore, US$20.9bil per year for Indonesia and US$15.8bil per year for Vietnam.

The Philippines is catching up fast (US$9.2bil per year) while Thailand’s FDI has dwindled to US$7.1bil per year.

The NIMP 2030 sets the breakthrough agenda for Malaysia’s manufacturing sector’s next take-off in the new green industrial age.

The NIMP maps out a comprehensive industrial direction, strategies and enablers with the aim of positioning Malaysia for new growth catalytic sectors and industries in the decades ahead.

The NIMP 2030 calls for a “Whole-of-Nation” approach and adopts a mission-based approach to drive the manufacturing transformation in four ways:

> Advancing economic complexity,

> Tech-up for a digitally vibrant nation,

> Pushing for the net-zero target, and

> Safeguarding economic security and inclusivity.

The master plan will chart a new generation of sustainable industrial policies, underpinned by four enablers, 20 strategies and 56 action plans.

Domestic manufacturing industries have to strengthen their resilience and competitiveness to counter operational challenges caused by geo-economic conflicts that disrupt supply chains, resource scarcity that threatens energy and utilities security, and adverse climate change disruptions.

The identified five pivotal sectors are:

> Electrical products and electronics,

> Chemical and chemical products,

> Advanced materials,

> Aerospace, and

> Healthcare (including medical devices and pharmaceuticals).

All industries will be driven strategically to embrace these four missions for reconstructing and developing a solid and sustainable manufacturing sector and also for exporting resilience.

The services sector must also move up the value chain to support the manufacturing sector.

While the lead agencies and parties involved were identified to implement the mission-based projects, accountability and responsibility are therefore critical to ensuring a successful implementation of the mission-based projects.

We need a strong accountability to ensure alignment and coordination among the stakeholders and parties to clearly define the project scope and deliverable.

Roles and responsibilities across ministries on investment issues tend to be unclear and sometimes lack co-ordination.

Hence, an effective implementation of a one-stop centre is a crucial investment facilitation mechanism whereby relevant ministries and government agencies are coordinated at a single point to provide prompt, efficient and transparent services to investors to shorten and simplify administrative procedures and guidelines ultimately, thereby removing bottlenecks faced by both local and foreign investors in establishing and running businesses in Malaysia.

Investment climate reforms are necessary. While the government has made efforts on transparency, the rule of law, weeding out corruption and strengthen the quality of institutions, they have not been sufficiently consistent to improve investor confidence and ensure responsible business practices by both foreign and domestic companies.

The government has to bolster collaborations between the federal government, state governments and local authorities to facilitate investment.

We support the Investment, Trade and Industry Ministry’s efforts to streamline the 31 Investment Promotion Agencies, with the Malaysian Investment Development Authority leading the way.

Domestic direct investment (DDI), especially by micro and SMEs (MSMEs), are crucial for supporting industrial ecosystem.

The inclusion of DDI as a key performance indicator is a positive step to facilitate and raise the quality of domestic investment.

MSMEs should be provided with opportunities to gradually scale up their industries through horizontal and vertical integration as well as to embrace green practices.

This necessitates capital investment in advancing technological and digitalisation capabilities, ensuring an ample supply of highly skilled and knowledge-based human capital, and more importantly, access to financing, grant and development fund.

It is estimated that a total of RM95bil will be invested throughout seven years to implement NIMP, predominantly coming from the private sector.

We support the action plans to mobilise the financing ecosystem (financial institutions and capital market), including the introduction of the NIMP Strategic Co-Investment Fund and NIMP Industrial Development Fund to support strategies, action plans and mission-based projects as well as for industries and businesses, especially MSMEs.

However, the NIMP did not provide an estimation of the amount of financing and funds needed to support the industrial transformation.

As SMEs often encounter challenges in accessing financial resources and credit facilities, it is therefore necessary to broaden the range of financing instruments available to SMEs and entrepreneurs, by improving understanding about a full range of financing instruments they can access in varying circumstances, and by encouraging discussions among stakeholders about new approaches and innovative policies for SMEs and entrepreneurship financing.

For SME green facilitation, we proposed:

> The creation of a web-based tool in partnership between the industry associations and environmental regulator to provide free environmental guidance to SMEs; and

> The provision of an ESG assessment toolkit to guide SMEs embark on their ESG journey by identifying gaps in their management system based on the 12 ESG indicators identified.

Manpower and integration with technology is integral for the industrial transformation. Swift action must be taken to review and address the manpower planning and development programmes.

These include the supply of skilled manpower; adaption; and reskilling and upskilling of workers that are future proof, including the hiring of foreign talent to supplement domestic pool of workforce.

The quality assurance of Technical and Vocational Education Training has to be revamped and enhanced.

We support the implementation of the multi-tier levy model to reduce over-dependency on low-skilled foreign workers, but the levy must not be too steep during the transition period as it would be significantly burdening the employment and operating costs of MSMEs.

The implementation of Progressive Wage System on a voluntary basis and incentive-based approach for MSMEs for the skill set categories along with the minimum wage must be productivity-linked.

We support the action plans to drive promotional activities of Free Trade Agreements (FTAs), including the Regional Comprehensive Economic Partnership (RECP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and export consortia, given the low utilisation rate and awareness among the business community.

We propose:

> The design of a tariff finder to support traders to maximise benefits from the RCEP and CPTPP to help businesses, to get up-to-date information on the preferential tariffs and the rules of origin criteria used to determine a product’s eligibility for preferential tariff treatment, and

> The setting up of a one-stop advisory centre for all FTA-related enquiries from businesses; gather feedback on tariffs and non-tariffs issues for better trade and investment facilitation.

Strategic planning is hard but the real challenge is execution. Without a careful and planned approach to execution, strategic goals cannot be attained.

Hence, we need a pragmatic approach to monitor and track the progress of the proposed action plans and mission-based projects; and make timely interventions and facilitation across collaborations between ministries and agencies as well as provide resolutions to achieve the deliverables.

- Lee Heng Guie is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

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NIMP 2030 Sets Breakthrough Agenda For Manufacturing ...


NIMP 2030 poised to attract more investments



PETALING JAYA: The current investing focus on environmental, social and governance (ESG) and sustainability will likely help the New Industrial Master Plan 2030 (NIMP 2030) attract further targeted investments into the country.

The plan also appears to aim to capitalise on the opportunities from the recent shift in investments away from China due to the global trade tensions.

According to CGS-CIMB Research, the NIMP 2030 is a comprehensive plan, noting that the government appears to understand the limitations and hurdles of the current industrial setting such as the reliance on cheap foreign labour and low research and development adoption.

“If this strategy works, ESG-conscious companies could be more interested in investing in Malaysia such as Tesla.

“We also see a new set of industries being emphasised, in particular electric vehicles (EVs) and carbon capture, utilisation and storage, which capitalise on Malaysia’s existing strength and advantages,” CGS-CIMB Research said.

However, it also noticed certain sectors were receiving less emphasis than in previous plans such as biotechnology, although pharmaceutical, a subset of biotechnology, was highlighted in the report.

“A few policy suggestions in the NIMP 2030 are not new, for instance, the multi-tier levy system for foreign workers, which has been delayed, given the pushback by industry players. Hence, successful execution is key,” it said.

“Thus far, the NIMP 2030 certainly improves the long-term prospects for gross domestic product (GDP) growth, but we maintain our 2023 GDP growth forecast at 4% year-on-year and 4.6% in 2024,” the research house added.

Meanwhile, UOB Kay Hian (UOBKH) Research said it believes the electrical and electronics (E&E) industry is poised to be the largest beneficiary of the plan.

“The NIMP 2030 is a catalyst for trade diversion for foreign direct investment, the creation/entrenchment of regional champions, and new emerging industry clusters such as EV and renewable energy (RE),” UOBKH Research said.

It noted the E&E industry, which accounts for some 40% of the country’s exports, is poised to grow further from the NIMP 2030 catalyst.

“The well-strategised plan targets to enhance the sector’s value-add, employment and wage dynamics by deepening the economic complexity of the supply chain, upskilling and support for small and medium enterprises,” UOBKH Research said.

“While we await the granularity of incentives and rollouts, our top manufacturing picks include Cape EMS Bhd, Inari Amertron Bhd and NationGate Holdings Bhd,” UOBKH Research said.

These companies are noted for their alpha growth on strong visibility of better order loadings from their new and key customers from the supply chain reconfiguration amid the trade diversion, it said.

For the outsourced semiconductor assembly and test players, it likes Inari for its strong growth trajectory premised on its new flagship programme, inventory replenishment and the fruition of its new business collaboration.

Other companies such as Greatech Technology Bhd are noted for their solid order-book backlogs with more than 50% exposure to the high-margin EV and RE sectors alongside their unique value proposition while other beneficiaries include packaging company L&P Global Bhd, it said.

Meanwhile, Hong Leong Investment Bank Research said the NIMP 2030 is a positive move, but noted the key to its success will depend on the strong cooperation across multiple key stakeholders that cuts across federal and state governments as well as agencies.

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