Opening doors to foreigners in real estate
24/06/2007 NST

MALAYSIA has all the ingredients to be an Asian haven for foreigners seeking to buy real estate.

But industry experts say it is failing to seriously do so because of inability on the part of local players and the authorities to package good deals.

They say what is needed is for the government to take the lead with the private-public sector to communicate the international profile of local assets to the right people abroad.

These people can then shepherd more offshore investments into what is seen as relatively cheap value-for-money Malaysian property.

These include promoting local properties to foreign private-equity funds, or global investment bank analysts whose critical views and connections can shape international investor perception

"Malaysia has a strong story which is not told. The effort has to be led by the government," said real estate agency Zerin Properties chief executive Previndran Singhe.

In a move to attract more foreign property buyers, Malaysia has in recent months (December to April) introduced several landmark policies to make it easier for them to own real estate.

These include allowing foreign purchasers to own or invest in as many houses costing more than RM250,000 each as they want here without the Foreign Investment Committee’s consent.

The authorities also scrapped the real property gains tax from April 2007 and changed the rules to allow foreigners to take more than three loans to buy property.

Developers, however, claim that efforts to liberalise foreign ownership of properties was being hampered by slow processing at government department level, at the state-level and at local council level.

According to the Real Estate and Housing Developers’ Association Malaysia, some state authorities take up to 153 days to approve property transfers compared with about 14 days in Singapore and Australia.

"The effort to promote Malaysian property must involve the government and all industry stakeholders, including developers, valuers and architects," said Dr Teoh Poh Huat, a director of property agency Henry Butcher Malaysia.

Meanwhile, analysts expect the liberalisation of the property market to put the sector on a level playing field with regional countries.

This would mean Malaysia, where real estate is relatively cheaper, stands to gain as it offers a lower entry point into the regional market.

"We believe the government’s latest move to abolish real property gains tax is the turning point of opening up one of the heavily-guarded sectors in the country.

"We expect property prices to accelerate at a faster pace in selected areas like Kuala Lumpur, Penang and Johor," TA Securities Holdings Bhd analyst Kamarulzaman Hassan said in a property sector report.

High-end property prices in Kuala Lumpur, Penang and Johor rose quicker at eight per cent annually, surpassing the national housing price index’s average gain of 3.7 per cent.

Moreover, the gradual strengthening of the ringgit against the US dollar is also good news for for- eign buyers due to the potential foreign exchange gains, and capital upside.

Meanwhile, the House Buyers Association said Malaysia needed to benchmark itself against international standards to be a world-class property destination, said association honorary secretary general Chang Kim Loong.

These include adopting the "build-then-sell" method (or its variant 10:90 approach) for new property transactions, and honing a more efficient public-delivery system.