Now Malaysian speculators snap up properties in London

An informed source has revealed to me that at one upmarket seafront apartment suites complex in northern Penang Island, the actual occupancy rate is just 10 per cent, even though the apartments have been sold out.

Contrary to popular belief that much of the property speculation/investment in high-end properties in Penang is by foreigners, the rough breakdown by nationality of owners of these particular apartments is as follows:

• Malaysians based in the country (60 per cent),
• Malaysians residing/working abroad (20 per cent), and
• foreigners/others (20 per cent).

Some of the foreigners renting these apartments have moved out to find newer, more modern apartments in Penang, said the source.

Perhaps many locals have snapped up properties in Penang because of low bank interest rates and the fear that property prices are surging beyond reach. There is also the desire to buy property as a hedge against inflation.

But this ‘articificial’ surge in demand is in turn fuelling the bubble.

This is a phenomenon that is not peculiar to Malaysia. London too has experienced a sharp rise in property prices, a lot of it fuelled by panic buying in the belief that property prices are surging beyond the reach of its residents. This is happening amidst concern that there is not enough affordable housing. The vast majority of the buyers are UK nationals, contrary to the perception that the people driving up prices are super-rich foreigners (though some of them are foreigners resident in the UK).

Read this article in The Guardian and you will see the similarities with Penang, KL and JB are uncanny:

Londoners themselves are probably part of the reason prices continue to soar. One housing market expert suspects that what he calls “this crazy boom” is being further fuelled by a kind of panic-buying among people with savings, wealthy relatives or equity in existing homes who fear that the market is spiraling beyond their means forever. He predicts that this now-or-never part of the “feeding frenzy” will continue until everyone who can get their hands on the necessary cash has sunk it into their pile of bricks and mortar.

In the midst of this are the foreigners who are also buying property in London. Who are they? Surprise, surprise, two third of new London homes sold before completion have been bought by South-East Asians. One third of these are from Singapore, another third from other South-East Asian countries countries including Malaysia and Thailand, and the remaining third from Hong Kong – probably due to recent curbs on property speculation in these countries. So now they are venturing to London!

Yes, it seems that the property market in Malaysia is cooling down a little, with Bank Negara curbs on the length of housing loans, a hike in Real Property Gains Tax and an end to the Developer Interest Bearing Scheme, which allows developers to bear part of the interest costs.

In the Iskandar Region in Johor, a new measure barring foreigners from buying property below RM1m plus a 2 per cent levy might curb demand for homes costing between RM0.5m to RM1m. But will this merely result in developers now building properties above the RM1m threshold – and dragging up all other property prices as well? This was our experience in Penang, wasn’t it?

Thanks to blog regular Sharyn for the Bloomberg link.