Property Investments Outperform Other Assets

Diane Foo Eu LynnJanuary 19, 2017

 

Real estate offers higher return on investment (ROI) of around 5.2 percent versus 2.0 percent to 3.0 percent for stocks, bonds, and mutual funds, according to CH Williams Talhar & Wong’s (WTW) Managing Director Foo Gee Jen.

Hence, property investments in Malaysia are expected become more popular this year. However, the consultancy expects the sector to be under pressure by political uncertainties, low commodity prices and the sluggish economy in some major countries.

Nevertheless, prices of residential properties will likely become more affordable as the market cools, and demand for low-cost homes priced below RM400,000 are anticipated to increase.

Additionally, real estate with good transport linkages and strategically located in areas with growing population are forecasted to perform well in 2017.

“Among the transportation connectivity are High-Speed Rail (HSR) KL-Singapore, Mass Rapid Transit (MRT) Line I and II, Light Rail Transit 3 and West Coast Expressway,” said Foo after presenting WTW’s latest property outlook.

Other major transport projects that are envisioned to create more property hotspots include the Pan Borneo Highway, Seremban-Port Dickson, Gemas-Johor Bahru rail, Singapore MTR extension to Johor’s capital, and East Coast Rail.

Meanwhile, WTW said there is mounting expectations that home prices are likely to decline further this year, while vacancy could go up as well.

“The inability of the emerging young working population to buy homes due to the rate of house price increase and tighter lending rules are probably the most pressing matters facing the country,” said Foo.

Furthermore, 2017 is expected to be a strenuous year for home builders, in light of rising construction costs due to the strong dollar. Other problems facing developers include a shortage of skilled manpower, as well as higher electricity tariff and crude oil prices.

“In the short term, investors and developers should focus on taking calculated risks where the market is strong, pursuing development in strong, supply-constrained markets and bidding on strategic long-hold assets that are most likely to be able to withstand a downturn,” Foo added.

 

Image sourced from FT Advisor

 

Diane Foo Eu Lynn, Senior Content Specialist at PropertyGuru, edited this story. To contact her about this or other stories email diane@propertyguru.com.my

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