This article first appeared in Forum, The Edge Malaysia Weekly on October 7, 2024 - October 13, 2024

Malaysia’s property transaction values hit RM105 billion in the first half of this year from almost 199,000 transactions, making these the highest transaction values and volume in the last five years.

Based on a back-of-the-envelope calculation hinged on unchanged market sentiment in the second half of this year, Malaysia is on its way to registering RM200 billion or so in real estate transaction values from 400,000 transactions before the year is out.

The robust real estate market, notably the industrial subsegment, has been boosted by foreign direct investment (FDI) inflows amid an improving economy held steady by a stable interest rate regime.

According to a recent report, more than 50 data centres in Johor are now either at the application, construction or operation stage. Expect more to join the pack, thanks to the realisation of the Forest City Special Financial Zone (SFZ) alongside the Johor-Singapore Special Economic Zone (JSSEZ). Sentiments are now supercharged with positivity, something that has been absent until recently.

Any chance that this is yet another false start as was sadly experienced in the past? It had better not be, as too much is at stake for Johor and Malaysia as a whole.

It is heartening that technology giants such as Microsoft, Nvidia, Alphabet unit Google and China-based ByteDance have announced billions of dollars’ worth of digital investments in Malaysia over the past year. Oracle has just joined the list, with a reported planned investment of more than US$6.5 billion (RM27 billion) to set up its first public cloud region in Malaysia.

Indeed, the country is now in a race to emerge as a global tech hub of reckoning, the spillover of which is expected to be tangible in the property sector, among others.

The bulk of Malaysia’s property transactions continues to come from the residential subsector. Yes, people continue to actively invest in a roof over their heads despite the moans and groans about prices. Like it or not, ready or not, the demand is alive and kicking.

Residential property transactions contributed 61.3% to volume and 46.8% to values in the first half of this year. More than a fifth of the residential property transactions took place in Selangor. Overall, during the six months in review, there were a total of 121,964 residential property transactions (up 6.1% from 1H2023) worth RM49.43 billion (up 10.4% from 1H2023), according to the National Property Information Centre’s (Napic) Property Market 1H2024 Report.

Meanwhile, landed homes, both traditionally built ones as well as the newer and formally guarded-and-gated types, continue to be the flavour of the day.

In response, the ever-agile developers are building smaller and smaller landed homes so as to attract buyers with limited budgets. Consequently, intermediate link homes that used to measure at least 22ft by 75ft have now shrunk to as tiny as 18ft by 60ft.

The value of landed homes has soared. In Desa Sri Hartamas, two-storey link homes were launched at above RM400,000 and aptly dubbed the “Beverly Hills” of Kuala Lumpur in the 1990s. With the benefit of hindsight of course, those “crazy” buyers would have had the last laugh as prices have since soared with the residential area’s ability to pull in the expatriate crowd. Listings on EdgeProp.my show that owners are now asking for around RM2 million to part with their homes.

Desa ParkCity is another often quoted example of “crazy” prices that have successfully outdone the market trend. The award-winning township debuted its freehold landed homes — Safa — in 2002, pegging them at RM450,000 and above for the two-storey link homes (3- and 4-bedroom) and RM550,000 onwards for the three-storey units (4- and 5-bedroom).

Owners are now asking on EdgeProp.my for between RM2.6 million and RM2.9 million for the two-storey units. Meanwhile, a three-storey corner unit is on the market for RM4.88 million, while another is listed at RM4.3 million.

So you find homes expensive these days. How much did it cost to buy a house exactly 30 years ago? Why 30 years, you might ask? Well, that is how old The Edge Malaysia is!

Many things tend to change with time but harbouring the regret of not having invested in real estate of value remains a constant source of regret for many.

Let us examine how much (or how little) landed homes in Kuala Lumpur used to cost three decades ago and their rental yields. For context, 1994 saw only RM29.73 billion in transaction values (1993: RM23.61 billion) from 217,546 (1993:199,817) transactions.

Did you know that one-storey intermediate terraced houses in Bangsar’s Lucky Garden area were sold for just RM191,000 in 1994? In fact, these very same homes used to cost only RM158,000 in 1991, according to the Valuation and Property Services Department’s Property Market Report 1995.

Prices continued to climb steadily and in 1995, they breached the RM200,000 mark to touch RM233,000. Rents of RM900 and RM1,000 a month were giving owners a gross yield of 5.6% in 1994, before dipping to 4.9% in 1995 on the back of rising prices.

Listings on EdgeProp.my show that the one-storey intermediate terraced houses in Lucky Gardens are now on the market at RM1.26 million to RM1.5 million.

Interestingly, prices of one-storey terraced houses in Kuala Lumpur’s Taman Tun Dr Ismail (TTDI) have been rising lately, giving the Bangsar address a run for its money. Listed on EdgeProp.my are owners asking for RM1.3 million to RM1.45 million, depending on the condition of the units.

Notably, more and more owners of one-storey terraced houses in TTDI are razing them to the ground to build new homes that are two or even three storeys high. As for the rental market, listings on EdgeProp.my show owners asking for anything between RM2,200 and RM2,900 a month.

Back to 1994, let us look at the rental yields of other one-storey terraced houses in KL as detailed in the government’s Property Market Report 1995. Tenants of one-storey terraced homes in Taman Kepong were paying anything from RM360 to RM480 a month, giving a gross yield of 4.8%. In Taman Setapak, rents of RM450 to RM550 returned a gross yield of 4.8% while in Taman OUG (Overseas Union Garden), owners were getting rents of RM500 to RM550, or a yield of 5.3%.

One only needed to fork out RM230,000 to own an intermediate two-storey link house in TTDI in 1991. By 1994, however, prices had shot up to RM270,000 before escalating to RM340,000 in 1995. Consequently, yields of 6.7% (with rents of RM1,300 to RM1,800) in 1994 dipped to 5.5% in 1995.

Interestingly, the prices of two-storey intermediate link homes in TTDI tend to swing significantly based on factors such as location, built-up and extent of the renovations.

The current asking prices could go as low as just under RM1.7 million to above RM2 million for a basic unit. Earlier this year, a beautifully renovated unit in the Aminuddin area was known to have changed hands for more than RM2.5 million. Typically, yields do not commensurate with the investment. A typical unit is being rented out at less than RM4,000. Clearly, buyers are seeking capital appreciation.

For market comparison, back in 1994, the two-storey homes in Taman Wahyu, fetched rents of RM500 to RM600, or a 4.3% yield. In Wangsa Maju, two-storey homes seemed to be more popular, with rents of RM1,000 to RM1,200, or a yield of 4.6%.

Then, tenants in Taman OUG were paying RM600 to RM700 a month, giving owners a yield of 5.2% in 1994.

There is surely no recipe in property investment. While real estate is a key component of an investment portfolio, it is foolhardy to make any decision based on emotion, a sense of euphoria or FOMO (fear of missing out).

A good friend’s parents bought two units of medium-cost apartments in Bukit Beruntung, Rawang, more than a decade ago. Unfortunately, it was a decision that has haunted them since. It was only recently, after some heart-wrenching reflection that they decided to part ways with the two rundown units that had never been lived in at all. After settling all the unpaid bills and lawyer and agent fees, they only managed to recoup less than half of what they paid for the property.

My friend’s parents are not alone in it — the other apartment owners must be suffering in silence too. Yes, property investment can be risky. It can make or break you.

The reminder here: knowledge is key. Make only informed investment decisions. That’s the Real Deal.

Au Foong Yee (afyee@bizedge.com) is an editor emeritus at The Edge

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