What’s on the line for real estate in Malaysia’s general election?
A change in governance can bring about changes to real estate if the right measures are implemented in a timely manner.
Malaysia is now back on the voting block, with the 15th General Election (GE15) declared and scheduled for 19 November 2022. For the property market, some opine the impact of a general election on property buyers to be minimal as housing and commercial spaces will always be in demand. Still, the implementation of relevant policies or initiatives hold some weight in the mind of investors, as well as provides an added boost to the real estate market currently undergoing its post-pandemic recovery. While incentives and policies intended for the property market primarily aim to improve housing affordability, the commercial market stands to benefit indirectly from policies and development strategies via the trickle-down effect.
Figure 1: National Housing Policy (2018 – 2025)
Source: Ministry of Housing & Local Government (KPKT)
Looking back to GE14, the incoming government then adopted a prudent approach based on the country’s challenging fiscal position at that time. The changes included the replacement of the Goods & Services Tax (GST) with the Sales & Services Tax (SST), the temporary suspension of mega projects and infrastructure developments, and the launching of the National Housing Policy 2.0 (2018 – 2025). The national capital saw the Kuala Lumpur City Plan (KLCP) 2020 finally being gazetted since it was finalised in 2012. This led to a new plot ratio limit, causing new property projects already having granted in-principle approval to seek fresh consent from Kuala Lumpur City Hall.
On the commercial front, effects were felt primarily by the construction sector as mega-developments were shelved – either temporarily or permanently – for cost-cutting and cost-revision purposes. The projects that were permitted to resume included LRT3, MRT3 and the East Coast Rail Line (ECRL). The revival of these projects was expected to have a multiplier effect on the country’s economy.
Figure 2: National Trade Blueprint (2021 – 2025)
Source: Malaysia External Trade Development Corporation (MATRADE)
Figure 3: Twelfth Malaysia Plan (2021 – 2025)
Source: Economic Planning Unit (EPU) Malaysia
Coming to GE15, market anticipation is now focused more on achieving stability after having experienced several changes in country leaders in 2020 and 2021. With the launch of several impactful development strategies in 2021 and 2022, such as the National Trade Blueprint (NTBp), Malaysia Digital, The Second National e-Commerce Strategic Roadmap (2021 – 2025) (NESR 2.0) and the 12th Malaysia Plan (2021 – 2025), further economic growth and consequently a more thriving commercial market are on the line depending on who will take the lead by way of vote.
Once a niche concept, Environmental, Social and Governance (ESG) has gained traction in the mainstream and is slowly shaping the future way of doing business. This brings a new set of demands that developers face as occupiers seek green and sustainably designed spaces. Currently on the line is the Energy Efficiency and Conservation Act (EECA) draft that is yet to be tabled and passed in Parliament. The act is likely to encourage businesses to adopt more sustainable measures in their energy consumption through renewable energy technologies. For building owners, it creates a new hurdle to keep their assets relevant, particularly for older buildings requiring refurbishment.
Alongside efforts to revive local demand, effective measures must also be introduced to attract foreign demand to re-establish Malaysia as the next best second home and investment destination. The programmes currently in place are the post-reviewed Malaysia My Second Home (MM2H) and the newly introduced Premium Visa Programme (PVIP). This will also help to keep Malaysia as a competitive destination amongst its regional peers.
Looking beyond GE15, Malaysia’s property market continues to look to the next government to provide a stable government and economic environment so as to promote and encourage a more positive market sentiment. Importance to achieve such is ever more higher now for both property buyers and property developers who now face heavier financial burdens resulting from rising inflation and higher cost of construction.