In the recently concluded 10th Swhengtee Annual Property Forecast Talk, Dato’ Sri Gavin Tee
gave his take on what’s going to rock the Malaysian property market in 2017.
“There are many changes that will rock the Malaysian market this year. We have a situation where there is a slowdown in the property market, yet at the same time, inflation is rising. We also have continued weakening of the ringgit,” he told the audience during the talk in Kuala Lumpur. Nevertheless, he sees bright spots in the market.
Tee is confident that Greater Kuala Lumpur will retain its position as the preferred investment hotspot in the country as many large-scale market-changing projects are still going full steam ahead. Look no further than the buzz surrounding Bandar Malaysia, Tun Razak Exchange, KL118 Tower, Pavilion@Damansara Heights, KL Metropolis and Bukit Bintang City Center for the optimism. He predicts that population growth in the urban areas will continue to spearhead growth in the country’s capital.
Tee also predicts that this year will see China moving into Greater KL with a massive influx of funds following its investments in infrastructure projects located both north and south of KL. The investment will not only lead to strong infrastructure growth in the city centre, but will also increase the number of tourists to Malaysia as well as improve bilateral trade between the two nations.
The High Speed Rail connecting KL with Singapore and the MRT project in the Klang Valley have dominated the headlines over the past year and for good reason. Tee is confident that the rail projects will not only open up new areas like many predicted, but will also revitalize old districts such as Pudu or Maluri as connectivity to these areas improves.
Despite current economic woes, Malaysia remains one of the most sought-after travel destinations in the region as well as a favoured retirement destination. According to Tee, the tourism market is expected to grow by 10 times over the next decade and the country will receive a huge influx of funds in the tourism sector in the next 2 to 3 years. Medical tourism also falls under this category and Malaysia remains one of the best medical tourism destinations in the world.
Technology will continue to change the way we interact with the world and Prime Minister Datuk Seri Najib’s announcement about setting up the world’s first Digital Free Trade Zone with Alibaba founder Jack Ma on board as a consultant is indication of exciting times ahead. Tee believes that technology will rapidly shape how we carry out real estate searches and transactions by making the process simpler and faster. He expects traditional areas such as agencies, financial services, retail space, media and service providers to be the most negatively impacted by the technology revolution.
Tee also predicts the demise of 20% of Klang Valley’s shopping malls within the next five years as the retail market continues to grapple with an oversupply of retail spaces and pressure from online retailers. As much as 50% of shopping malls in Greater Kuala Lumpur would be fighting for survival in the same five-year period but Tee expects those malls that survive to gain a greater foothold going forward and should come out stronger than before.
The subsale market is expected to take a hit in the near future and owners with less holding power will be most negatively impacted. Although rising cost of construction means developers are unable to significantly slash prices on their new properties, many have adjusted their strategies for new launches by lowering the bar for ownership through numerous incentive schemes. Properties on the subsale market lack such incentive schemes to compete and banks typically value the property lower than market price. As a result, Tee expects the subsale market to perform even worse this year.
Tee expects Singapore to face a decline in growth rate over the next three decades and risks being surpassed by other more dynamic cities within ASEAN such as Manila, Ho Chi Minh City and Kuala Lumpur. Kuala Lumpur meanwhile, as an important fulcrum in China’s Silk Road initiative (One Belt, One Road), can expect massive investments into its ports and railways from China which will propel Malaysia ahead. However, Tee believes that the Singaporean government will take countermeasures to halt the decline but it remains to be seen how effective the measures are.
Durian is a high value agriculture export for Malaysia and Tee sees huge potential in agriculture land suited to durian cultivation. This comes on the back of increasing demand from markets such as China which has been increasing its appetite for this delicacy. In addition, durian farms can unlock additional source of income by expanding into eco or culinary tourism, making the investment in such farms highly attractive which should drive up demand for such land.
Last but not least, Tee believes that education hubs will continue to be a significant area of growth in the country as the demand for quality education from Malaysians and foreigners continues to be strong. He added that education cities or university towns have a much more stable population which makes it an area of growth in the future.