Malaysia Real Estate Outlook: To BUY or not to BUY?

Last week I was invited to attend a property conference organized by one of Malaysia's leading universal broker, RHB Investment Bank. The conference aimed to provide the latest outlook analysis of the regional property market with emphasis of course on Malaysia's property market, mainly residential, commercial and retail in the mainstream Klang Valley arena. Key speakers include reputable senior personnel from Jones Lang Wootton, REHDA, Regroup Associates and Axis REIT.

"To BUY or not to BUY! Where are we in the Malaysian Property Cycle"? This was the exact catchy tag line presented by RHB before the event. It has certainly caught my attention! However, as some of my past experience tells me, this could be yet another one of those event that was somehow "engineered" to inform people of all the rosy outlook and the exciting stories such as record land or property prices transacted around the area! Worst still, they may even come with some marketing flavour!

Well, i was rather pleased to see that first and foremost, the event was very professionally organized, with nice food being served too! Secondly, i reckon i did get quite a fair bid of value from the speakers whom have (to a great extent) shared a rather unbiased view and offered some real intricacies within the local property scenes!

In a nutshell, NOT ALL IS ROSY! The following key phrase probably reflected the current environment pretty rightfully: "cautious but optimistic outlook" Well, what it means really is left to anyone's interpretation! On a personal note, i do agree with the consensus view that real estate property may soften for the foreseeable future, particularly going into 2009. According to one speaker, certain degree of "adjustment" is possible depending on location and choice of property, but it SHOULD NOT be a case of gate crashing! For 2008, it should still be a relatively good year (for the high-end condominiums and Klang Valley commercial sector, particularly quality or "grade A" office sector).

Other key takeaways include:
- Malaysia property prices are still relatively "cheap" among the other regional countries such as Thailand, Singapore, Indonesia, Vietnam, Hong Kong and major cities in China. However, the bad news is there is still an impression that Malaysia is relatively under-marketed! (i.e., no good if it continues to be a hidden jewel!)

- quality or "grade A" office sector in Kuala Lumpur is expected to offer a better prospect than other sectors for at least the next two to three years, due to current shortage in good quality supply.

- High-end condos, while promising (from price perspective), may not be everyone's cup of tea, due to high holding cost and likely unsustainable yield factor. This is better suited for investors (particularly foreigners) with deep pockets and people who just care more about the brand and prestige, and long term capital growth potential. Yield is not something these group of people are too concern about. (Bad for conventional wisdom, i.e., positive cash flow, good ROI)

- There are still signs of abundance of interests coming from foreign investors, particularly from Singapore, Hong Kong, South Korea and the Middle East.

- One speaker advocated that we are only in the beginning of the boom cycle, assuming it started from 2005.

- For the retail sector, market has generally soften, particularly for some mid to high-end shopping malls, due to lower consumer spending. In some cases, vendors have to give substantial rental rebates to merchants at some high end mega shopping malls including The Gardens and Pavilion!

To sum it up, it's fair to say that there is no best time or worst time to buy a property. However, it is likely that more better buys will emerge during challenging moments like this or if market soften further. At the end of the day, having a fair understanding of the potential demand and supply always helps.

Overall, i believe the economic slowdown has already happened since Q2 of 2008, ironically further accelerated by the recent "astonishing" 40% fuel price hike! I happen to call this a "political suicide" at the worst possible moment....A classic case of pouring "fuel" to fire!