The participation of Chinese developers, especially in Iskandar Malaysia is encouraging. In fact, their plans for Iskandar is nothing like what we have seen before. What about Chinese (China) investors? Are they also warming up to Malaysia’s property market? What do they like, where do they like and why do they buy? Let’s learn from someone who is managing a property portal dedicated to showcasing Malaysian properties beyond just Malaysia, with China as its current main focus. We speak to Ms.Olivia Lim, Chief Executive Officer for 88home.co
Is is true that property markets in China, especially the Tier 2 and Tier 3 cities are facing an oversupply of homes?
Based on various research reports in the market, the demand for the housing in Tier 2 and Tier 3 city in China is still strong and the pricing is holding well. What China is facing today is more of quality issues of old properties which was built more than 10 years ago is not picking up good pricing and infrastructure issues at certain locations. Other than that, China is a rosy market with unlimited domestic demands. All new launches are still experiencing long queue for registration or bidding which you will not see in other part of the world today.
Chinese (China) buyers are the biggest group buying Australian properties, for example those in Melbourne. Why are their main reasons for buying Australia?
The modern Chinese families of today are sending their children for further education abroad as they believe that there are much more to learn outside the world than just within China. They strongly believe that the younger generations require more exposure and knowledge in order for them to be competitive when they finish their education abroad. Education is close to the heart of Chinese families.
Looking in general context, an ordinary apartment in Tier 3 City in China will cost them an average of RMB 5 million, hence buying a house in Australia is not costing them a lot of money comparative to their income level. Moreover, the Asian culture meant preference to own the property for family members instead of renting since they need to use it for medium to long term.
I would say that the Chinese purchasing power is higher today and their currency is strong enough to allow them to invest in Australia. Australia is a preferred destination because it is an education hub, it has a stable currency, affordability, clean and well managed streets and safe place to have a holiday home. Another primary reason is the availability of significant Asian population living in Australia today for the past 4 decades. This has convinced the Mainland Chinese that living in Australia is easy.
Are these Chinese investors starting to focus their attention at the Malaysian property market? Why are they interested?
Yes, China is a very huge country with 1.38 billion population now. When we take just a fraction of the population, it is huge. Many of these wealthy Chinese may have interest to live in Malaysia due to the existence of Chinese culture for generations, geographical proximity and even the pleasant climate.
In the Northern area of China such as Beijing, Shenyang, Harbin, Shanxi and Hernan, the investors are always looking forward to have a nice holiday home in Malaysia for their elderly during winter time. In China, the weather is very extreme during the winter season, hence owning a house in a vibrant city such as Kuala Lumpur and Penang with lots of food and interesting activities will entice them to enjoy their holiday here. Hence the need for a holiday home.
Besides this, the fast growing education hub in Petaling Jaya, Cyberjaya and Damansara is also another pull factor for the Mainland Chinese to own properties at the said location.
On the other side of Southern China such as Guangzhou, Fuzhou, Xiamen, Shantao investors are looking forward to own properties in Malaysia because they view it as an investment and business opportunity. The pricing and freehold / leasehold title of 99 year is something very attractive to them living in Malaysia is considered extremely similar to them as most Malaysian Chinese are decedents from Southern China making it easier for them to do start up businesses too.
Another advantage is that the distance between Southern China and Malaysia is less than 5 hours by flight. This is considered short distance for the mainland Chinese especially when compared to them flying from the southern part to the northern part just within China itself. Hence, Malaysia is a close destination to them.
Are there any specific cities in Malaysia which they love? If it’s for investment purpose, which are the 3 cities in Malaysia that they would start first?
I would say Johor ranks no. 1 for the Mainland Chinese to invest in view of its location right next to Singapore and the Johor Government which is taking many steps to encourage new investments.
Kuala Lumpur is ranked no 2 in view of the robust business activities and availability of resources for them to carry out new start-ups. Selangor would complete the top 3 ranking due to the availability of education HUB strategically located in this state.
Chinese from mainland China aside, I would say Penang is top ranked for Hong Kong people due to similarities of the sea front properties and density lifestyle. Of course, I must also add that Penang properties are also by far more attractive where pricing is concerned compared to Hong Kong today.
Do you think Malaysian developers are doing enough to attract these Chinese buyers?
Malaysian developers from all the other states except for Johor has not been able to do much because of the lacking of government support in various approval processes and restriction on ownership of properties by foreigners especially in Selangor state and restriction of quota in Negeri Sembilan. The Real Estate Housing Developers Association (REHDA) has already voiced out on numerous occasions on the lack of support but the government is not aligned to the need of property developers.
Hence, property developers are restricted by what they are able to do due to the policies of the state or federal government. I personally believe that for more investments to come in, the state government and federal government may have to pay more attention to the requests from Rehda so that the building industry is able to progress. As we are aware the building industry constitutes approximately 20% of the GDP growth of Malaysia. By restricting the ability of the property developers to sell to foreigners for specific projects or locations this will in turn start a vicious cycle to the entire supply chain and industry.
The other reason that I say Malaysian developers are not doing enough to attract China investors is that they are not moving in the right direction to market their assets to China investors. Besides, they do not have experience in terms of human capital and resources. One major casein point is their inability to handle the language and inquires from the investors in a convincing manner. If they need to start today, they need time to restructure their workforce. The typical planning to implementation stage will take nothing less than half a year to have everything to work out in an orderly manner.
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