Last updated February 8th, 2022.

 

Real estate prices remain stagnant in Kuala Lumpur and Penang, Malaysia’s two largest cities, which are suffering from oversupply.

Meanwhile, the Malaysian Ringgit is hovering at around its lowest level against the U.S. Dollar since the 1980s. Investors who bought property in Malaysia several years ago are now sitting on steep losses in terms of other currencies.

Casual observers would probably think they shouldn’t buy Malaysia real estate because of all this.

Reaching that conclusion is easy when you’re looking at numerous problems including Malaysia’s housing oversupply, a struggling currency, and immense competition from nearby countries in Southeast Asia.

With all that said, I think Malaysian property is now undervalued – especially in terms of most global currencies. Foreign buyers have a more enticing entry point than they’ve seen in awhile.

Malaysia certainly faces several important challenges. Natural market forces can overcome a lot of them with time and patience though.

 

Demographics Drive Malaysia’s Property Market

Malaysia’s largest real estate markets, in particular Kuala Lumpur, Johor Bahru, and to a lesser extent Penang, are suffering from an oversupply problem.

Simply put, there are too many expensive condos and housing projects – more than any foreign or local investors want to buy. This is causing a glut of unsold real estate inventory.

Malaysian property developers and re-sellers alike are facing difficulties finding buyers. In particular, condo construction has slowed down to a halt in much of KL and Johor Bahru.

Yet this issue should eventually fix itself. Malaysia enjoys a young and growing population that will increase by 20% by the year 2030.

Unlike other countries in Asia such as China, Japan, or even neighboring Thailand, demographic trends are in Malaysia’s favor.

 

Six million new Malaysian citizens, many of them part of a rising middle class, will drive real estate demand. Central locations in cities like Kuala Lumpur and Penang should benefit most from these demographic trends.

 

Malaysia’s increasing population will help a lot when it comes to soaking up excess supply in the long-term. That’s especially true in desirable areas with limited space, such as KLCC and Georgetown.

Furthermore, Malaysia’s rising urbanization rate will also support demand as locals continue moving from rural areas into cities like Penang and Kuala Lumpur.

 

Strong Malaysian Economy Shows Promise

Ranked Southeast Asia’s third richest nation on a per capita GDP basis, Malaysia’s living standards are similar to those of a developed country. Yet their economy enjoys better performance than some emerging markets.

Falling oil prices and weak exports caused problems in the late-2010s. However, the Malaysian economy overcame this temporary stall in growth through further diversifying outside of its dependence on commodities.

The World Bank predicts Malaysia’s GDP will grow by 5.8% in 2022, which is higher than its less economically developed neighbor Indonesia.

And compared to an expected rise of just 3% in Thailand, Malaysia’s economy looks downright impressive as an investment destination.

Of course, a growing economy usually equals greater purchasing power. This translates to a higher number of Malaysians having the financial means to afford real estate.

That will, in turn, mean stronger demand and rising home values in cities across the country.

 

Competitive Real Estate Prices in Malaysia

As we noted above, Malaysia is one of the richest countries in the region. Property values are among Southeast Asia’s lowest though.

You can still purchase city-center condos in Kuala Lumpur for under RM12,000 (US$3,000) per square meter. That’s even cheaper than in Bangkok or Hanoi which are less developed cities.

It probably won’t matter if you’re a local buyer. But the Malaysian Ringgit is also near multi-decade lows with few places left to go except upwards.

The ringgit’s rise against other main global currencies could increase a foreign buyer’s gains even further. At least in terms of their home currency.

Investing in Malaysia real estate is a less obvious choice when compared to other places in the region.

Nonetheless, its robust economy, strong demographics, and rock-bottom prices make the country a solid option for investors.

If you’re serious about buying property in Malaysia, our full guide offers more detailed information about the local real estate market.

 

Skip the Next Western Recession

Learn the best places to invest - and where to avoid - by downloading our free Investment Cheat Sheet.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an international stock trader and property investor based in Southeast Asia. Reid manages the world's first frontier market real estate fund and has been featured in publications such as Forbes, Property Report, South China Morning Post, and Seeking Alpha. You can learn more about him here.

You Might Also Like

Share This