What foreign investors look for in Malaysian properties

THE biggest difference between a local property investor and a foreign one is that the former is often present in the country while the latter is often absent.

“Even if the foreign investor bought the property as a holiday home or as a ‘second home’, they’re [usually] not based in the country where the properties are located most of the time,” noted Singapore Association of Property and Facility Managers president Dr Lim Lan Yuan.

Such absentee ownerships therefore mean that they would be inclined to choose an investment asset that offers good property management.

In his session entitled “In the eyes of a foreign investor” at the TheEdgeProperty.com Symposium on Property Management 2017 on April 8, Lim shared that one major aspect that Singaporean investors weigh heavily before they invest in a property in Malaysia, apart from the property’s design features, is property management, especially in terms of security.

“Safety and security is one of the specific considerations among foreign home investors due to absentee home ownership where the property owner is not there to look after the property himself or herself,” he said.

“There were instances where property owners found their units either renovated or modified without their consent or even broken into with all the furniture and fittings gone. So it is crucial to have a good property management team to guarantee the safety of the property on behalf of the property owner,” he said.

Factors to consider when buying foreign property

Generally, among the things to ponder when you’re looking to invest in a foreign property are its exit strategy, location, financing and, of course, the property management, said Lim.

“Sure, you can buy a property, but at the end of the day if you would like to resell it, would people buy it? Would there be any restrictions to selling the property off?

The economic and political situation of a country must also be considered as that will affect the property investment risk in the country.

“Another thing would be the control the country has on foreign ownership such as on financing or transaction costs including foreign exchange, mortgage interest amount, legal fees, etc, as well as the management and reselling cost,” he said.

On property management, especially for strata residential developments, Lim said one would have to look at the management cost and who manages the property.

What Singapore investors like

According to Lim, Singaporean real estate investors tend to look for something they cannot find in their own residential property market. Hence, some prefer to purchase properties in neighbouring Malaysia because of the tenure and larger sizes compared to those on the island republic.

“In terms of tenure, in Singapore, it is very difficult to get freehold property as the government owns most of the land. So when we get a freehold property, we will love it.

“Another thing we pay a lot of attention to is the property size. Generally, Malaysian properties have bigger built-ups and they are still considered relatively cheap.

“And this translates to higher growth potential for property investors because there is still room to grow (capital appreciation). In Singapore, the property prices are very high, so there will not be much growth there,” he noted.

Lim advised aspiring foreign property investors to understand the country they are looking to invest in and its laws, do some research or consult an expert, work out the total costs, visit and inspect the property, and consider the management issues, before making the final decision of purchasing a property in a foreign country.

Themed “Is your investment a time bomb?” the symposium was presented by TheEdgeProperty.com, with partners Nippon Paint Malaysia and Panasonic Malaysia. It was supported by The Edge Malaysia while the supporting sponsor was Gamuda Land.

This story first appeared in TheEdgeProperty.com pullout on April 14, 2017. Download TheEdgeProperty.com pullout here for free.