EVEN as the Asean Economic Community (AEC) heads towards the goal of regional economic integration by 2015, the regional property markets continue to see restrictions among member countries.
Here is a quick roundup of Asean 5 comprising Singapore, the Philippines, Indonesia, Thailand and Malaysia.
The conclusion is that Malaysia seems to be the most liberal in the case of foreign property ownership although land is a state matter. If a foreign national wishes to purchase a residential property in Malaysia, he must therefore make an application to the state authority to obtain the state consent before he completes the transaction. If this is not complied with, the sale or disposal can be rendered null and void.
Even with this additional level to overcome in order to complete a purchase, foreigners can own and purchase freehold land and other types of properties, landed and high-rise projects, industrial and commercial properties, anywhere in the country as long as they are prepared to fork out a minimum of RM2mil. Only Malay reserve land are prohibited.
They can own properties 100% under their names. Therefore, despite the various pricing thresholds in the different states and the need for state consent, these restrictions seem minute compared with the compliances in other countries.
While the current interest among Malaysians and well-heeled Singaporeans are Britain, Australia and the United States, perhaps in the very distant future, the property markets closer home will be more appealing and the buying process more cohesive and integrated among the people who reside in this region.
Knight Frank Asia-Pacific head of research Nicholas Holt considers four of these five markets.
The last couple of years saw the marketing of Thailand’s condominiums in Malaysia. Foreigners are allowed to buy into this market as long as local Thais own 51% of the project. This is by far the most straightforward of purchases among individuals and corporations. Buying land is more complex.
A number of foreigners have bought into this market but the number is not big with Malaysian, Singaporean, British, and Hong Kong investors among the investors. Compared to the Singapore and Hong Kong real estate, Thailand is many times more affordable for investors from these two countries. People buy into the market because they like the culture and shopping opportunities there.
The political uncertainties and the disruptions to law and order have not dampened appetite. Every couple of years, an issue erupts but the city bounces back. Thai developers sell quite well. Bangkok, Phuket are the top destinations, followed by a lesser degree of interest in Pattaya and Chiangmai, and a smaller number in Koh Sah Mui.
The key markets are Iskandar Malaysia in Johor, Penang in the north and the Klang Valley. There is price pressure here and land is a state matter with different pricing limits for foreign ownership. However, they are allowed to buy freehold, landed properties and high-rise condominums in these three most popular areas. Foreign buyers in Penang are subject to a minimum threshold of RM1mil for condos and RM2mil for landed properties on the island, and RM1mil for all types of properties in Seberang Prai on the mainland.
In Johor, the minimum price cap is RM1mil but they are allowed to buy most types of properties, while in Selangor it is RM2mil in most of the districts. In the Federal Territory, the minimum threshold is RM1mil.
These restrictions aside, the last couple of years have seen a greater interest in locations such as Kota Kinabalu in Sabah among Asian buyers. Malaysia also has a Malaysia My Second Home programme under the Tourism and Culture Ministry which is open to all countries. The programme has numerous requirements which include a minimum monthly income, minimum liquid assets, a fixed deposit, plus various other rules. It was launched in 2002.
This market has always been attractive to Malaysians, Indoneisans and Chinese nationals. Prices have kept going up from 2009 to 2013, prompting multiple rounds of cooling measures. The market has been going down for over a year and will continue to cool in 2015. The commercial and office market is quite strong.
In October the government said there was some distance to go in achieving “a meaningful correction”, signalling “an engineered slowdown”.
About 80% of housing stocks is with Housing Developers Board units while 20% in private housing market but this 20% plays a significant in the overall market. When a project comes up, the prices move up, and fingers point towards the foreign buyers but the reality is that, it is the Singaporeans who are pushing up house prices. Therefore, it all depends on what the government want, and how far they want to drive prices down.
Interest rates could likely inch up midway through 2015 in tandem with the rates in the US; challenges are expected as the US dollar has an indirect effect on the Singapore dollar. It is packaged to a basket and US dollar makes up a large part of it. The government may possibly taper stamp duty but this is still uncertain. Singapore is a good market for the long term and investors like the safety and liquidity aspect of their investments.
It is a bit more complicated here and the market is cooling. Foreigners are restricted as the market is regulated. People buy leaseholds through proxies and corporations. Legality of some of these transactions may be questionable. President Joko Widodo was thinking of opening up the property market but the understanding is that it is not going to happen. Jakarta properties is predominantly a domestic market and a foreigner is not going to get freehold title like in Malaysia. The Indonesian market is regulated.
Knight Frank declined to comment on this market. According to various blogs and websites, investing here seems trickier than in the other Asean 4. Purchasers have to be 100% in the name of a Filipino spouse. In the case of a corporation, it must be 60% Filipino-owned.