November 2024 Market Outlook
Malaysia property market landscape remains robust with a positive foreign direct investment (FDI) outlook in the short to medium term, According to the Malaysian Investment Development Authority (Mida)’s announcement, the country secured RM85.4 billion in foreign investments during the first half of 2024 (1H2024), with Austria leading the contributions at RM30.1 billion, followed by Singapore (RM16.5 billion), China (RM9.8 billion), the Netherlands (RM4 billion) and Taiwan (RM2.4 billion).
Singapore is home to many Malaysians, with 300-350k daily commuters crossing the Johor – Singapore causeway, making it one of the busiest border crossings in the world. Hence the Foreign direct investment (FDI) flowing from Singapore to Malaysia continued to increase.
Notably, foreign investments represented 53.4% of the total approved investments of RM160 billion, while domestic investments made up the remaining 46.6% or RM74.6 billion.
The RM160 billion in total approved investments marked an 18% increase year on year (y-o-y), from RM135.6 billion in 1H2023. These investments span the services (RM97.2 billion), manufacturing (RM60.1 billion) and primary (RM2.7 billion) sectors, and involve 2,948 projects expected to create 79,187 new jobs.
Source: Mida
Data Centre Boom to Benefit Developer
The data centre boom in Malaysia, particularly in Johor, is expected to offer significant opportunities for real estate developers and investors. Especially for Johor, due to its strategic location, favourable business environment, and improving digital infrastructure, it is becoming an increasingly important hub for data centres. Several factors are contributing to this trend, making it a key growth sector for the region.
According to CNA’s report, Johor is expected to attract another USD 3.6 billion in new data centre investments this year alone. All these efforts are lauded by the Malaysian government with support in building out industrial parks with over 500 acres in size.
Related Data Centres Announcement For Developers
Company | Operator | Structure | Selling Price psf (RM) | Estimated Land Cost psf (RM) | Estimated Net Margin | Total Value (RMm) | Size MW |
Klang Valley | |||||||
Sime Darby Property | Build to lease (49 acres) | n.a | n.a | n.a | 2,000 | 80 (can scale up to 100mw) | |
Mah Sing | Bridge Data Centre | JV Partners (18 acres) | 160 | 18.57 | 60% | TBD | 100 (can scale up to 500MW) |
Johor | |||||||
JLand | Princeton | Land Sale Sedernak (31 acres) | n.a | n.a | n.a | n.a | 150 |
Ame Elite | Digital hyperspace Malaysia | Land Sale Iskandar Puteri (35 acres) | 138 | 58.53 | 41.0% | 210 | n.a |
Axis Reit | Not disclose | Land Sale SILC (27 acres) | 138 | 130.5 | 0.3% | 162 | n.a |
Paragon | Bridge data center | Land Sale (48 acres) | 114 | 28.9 | 29% | 238 | n.a |
Crescendo | STT | Land Sale | 120 | 10-15 | 58% | 117 | n.a |
Crescendo | Yu Ao | Land Sale Nusa Cemerlang | 125 | 15 | 57% | 111 | n.a |
Crescendo | Microsoft | Land Sale | 120 | 15 | 55% | 315 | n.a |
Crescendo | Microsoft | Land Sale | 120 | 15 | 61% | 132 | n.a |
UEMS | Logos | Collaboration – Iskandar Puteri | TBD | n.a | n.a | TBD | 360 |
ECW | Microsoft | Land Sale -Kulai | 75 | 12 | 40-50% | 403 | n.a |
UEMS | Not Disclose | Land Sale – Iskandar Puteri (29 acres) | 115 | 70 | 27% | 145 | n.a |
Crescendo | Halo Digital | Land Sale- Nusa Cemerlang | 130 | 18 | 61% | 116 | n.a |
River Retreat (80% Khazanah, 20% IWH) | Telekom-Singtel | Land Sale- Iskandar Puteri | 98.03 | n.a | n.a | 178.23 for land cost only (RM9 b investment) | 64 (but can scale up to 200MW) |
Sunway | Equalbase | Land Sale- Iskandar Puteri (64 acres) | 136 | 60-70 | 40-50 | 380 | n.a |
All the Stimulus – Iskandar 1.0 /FCSFZ/JS-SEZ /Labuan Financial zone/ SG incentives for foreigner
New incentives for the Forest City Special Financial Zone (FCSFZ) were unveiled, aimed at attracting financial services to establish operations and revitalise the area. What caught our eyes include a 0% tax rate for up to 20 years for family offices with a minimum AUM of RM30m, and exemptions on property transfer stamp duty, making it an appealing option for wealthy individuals, particularly from China. Compared with Singapore, where family offices must have a minimum AUM of S$10m (approximately RM34m) under Section 13O, and SGD 50m under Section 13U, Forest City provides a more accessible entry point.
15% personal income tax rate for a wider audience including Malaysians working in FCSFZ, which previously only applied to select industries in Iskandar Malaysia, to attract skilled professionals. To compare with Singapore, non-residents face a flat 15% tax on employment income, while other incomes, like director’s fees, are taxed at 22-24%. Additionally, a 5% tax rate for up to 20 years for fintech and financial services companies fosters a tech-driven ecosystem in Forest City, shifting the focus from Iskandar 1.0’s traditional sectors like manufacturing to high-value industries.
Aspect | Iskandar 1.0 (2006) | FCSFZ (2024) | JS-SEZ (2024) | Labuan Financial Zone (IBFC) | Singapore Incentives for Foreigners |
Main Focus | Broad regional development (Industrial, residential, tourism) | Financial services, technology, family offices, fintech | Cross-border trade, financial services, technology, healthcare | Offshore financial services, Islamic finance, wealth management | Family offices, tax incentives for non-residents, digital economy |
Geopolitical Focus | Malaysia’s southern development | Attracting foreign investment into Malaysia financial sector | Malaysia-Singapore economic cooperation | Offshore jurisdiction for international business and investors | Global financial hub, focus on wealth management |
Key Sectors | Manufacturing, education, healthcare, tourism | Fintech, insurance, capital markets, family officers | Electronics, financial services, digital economy, healthcare | Banking, insurance, Islamic finance, trust management, insurance | Private health management. hedge funds, corporate structure |
Incentives | -Corporate Tax Exemptions Up to 10 years for key sectors like manufacturing, logistics, education and healthcare. -Expatriate Employment Easier work Visa and multiple entry visa for foreign professionals | -0% tax rate for family office -Special tax rates for corporate between 0%-5% – Individual income tax rate of 15% -special tax rate of 5% for financial global business services -Allowing foreign banks to expand more branches within the SFZ with foreign exchange flexibilities | -Passport Free Travel: exploring a QR code-based passport free system for travel between SG and Johor -Enhanced infrastructure: strong focus on importing infrastructure, including Johor SG link to ease travel and attract more talent. -New Tax Incentives: The SEZ will introduce special tax incentive for sector like finance and tech, with a 15% flat tax rate for skilled worker -5-6 High Value Priority Sectors including electronics, logistics, pharma, education, healthcare, digital economy and finance | -3% tax on net audited profits or flat tax of RM20,000 | -15% flat tax rate for single family offices -Family Office AUM requirement -S13O: SGD 10m AUM initially, increase to SGD20m within 2 years -S13U: SGD 50m AUM, requires 10% or SGD 10m invested in SG based assets |
Government support | Malaysia’s federal and state initiatives | Malaysia’s federal involvement with special fiscal and non-fiscal incentives | High-level collaboration between Malaysia and SG governments | Malaysian federal government, governed under Labuan Financial Services Authority (LFSA) | Strong support from Monetary Authority of SG (MAS) |
Connectivity Projects | -Nusa Jaya city development -Iskandar waterfront | Forest city | RTS linking JB to SG, potential revival of KL-SG HSR by 2026 | Relies on digital and air connections | Well-establish infrastructure, close links to global markets |
Targeted investment | Domestic and international investors | Family office, financial institutions, fintech, insurance company | SG business, international firms, financial institutions | International company, wealth management firms, Islamic finance | Ultra-high net worth individuals (UHNWs), private health management, hedge funds |
Key infrastructure | Flagship zones (e.g. Nusa Jaya, western gate development, eastern gate development) | Forest city project | Focus on better infrastructure connectivity (RTS, possible HSR revival) | Offshore banking, trust companies, reinsurance hubs, Islamic finance | Well-developed financial ecosystem, efficient regulatory framework |
Special features | Strong manufacturing and logistics components | Duty free island, exclusive digital status for business, MM2H special category | Enhanced cross border cooperation, attracting SG business and talent | Specialized tax regime, regulatory flexibility, gateway to ASEAN markets | No estate and inheritance tax, no capital gains tax, corporate tax incentives for venture capitals. |
Demand front led to the improvement for both residential and non-residential loan application approval rate.
Demand led to the improvement for both residential and non-residential loan application approval rate for the first 3 quarters of 2024, residential property loan applications grew 3% cumulatively to RM347b, while residential property loans approved over the same period rose 3%to RM146b. Non-residential loan applications for the first 3 quarters of 2024 grew 7% to RM129b, while non-residential property loans approved over the same period expanded 19% to RM67b.
Overall, earnings growth in the first three quarter of 2024 for property companies was positive, driven by higher recognition from property projects as the labour shortage issue was resolved while improving new property sales has also supported earnings growth.
Source: BNM, CEIC
Malaysia property index vs SG Real Estate Index vs KLCI vs STI
The chart below indicates that performance of Malaysia properties index, is leading for the past 3 years with 76% total gain and follow by Straits Time Index (STI) 45% gain, FTSE KLCI index ranked no 3 with 9.5% gain and Singapore Real Estate Index delivered a negative return with 14% loss for past 3 years.
The performance of property stocks in Malaysia outperforming those in Singapore can be attributed to several macroeconomic, market, and sector-specific factors.
The yields on Malaysian real estate can often be more attractive, especially in comparison to the low yields in Singapore’s high-priced property market. With lower property prices, investors in Malaysia can secure properties that generate higher rental returns relative to their capital investment. For example, in cities like Kuala Lumpur, Penang, and Johor Bahru, investors can often secure properties at a lower cost per square foot compared to Singapore, and rental yields can range anywhere from 4% to 6% annually, or even higher in certain areas. In some parts of Malaysia, the rental yield could go beyond 7% or 8%, especially with strategic property selection, such as in areas with high demand for long-term rentals or near new infrastructure projects. Whereas, In Singapore, the average rental yield for residential properties typically ranges from 3% to 5% per year. This is considered relatively low compared to many other countries, including Malaysia, due to the high cost of property in Singapore.
Greater Regional Growth Potential for Malaysia’s properties market, FDI inflows in high-value sectors such as green technology, data centres, and renewable energy have bolstered economic activity which led to more potential for development, particularly in emerging growth regions such as Johor Iskandar Malaysia. These areas have seen significant infrastructural investments, making them attractive to developers and investors.
Lastly, the Malaysian government has introduced various initiatives to stimulate the property market, such as stamp duty exemptions, affordable housing programs, and incentives for first-time homebuyers. These measures have helped to support demand for housing and bolster property developer earnings.
Source: trading view, Oct 24
Malaysia GDP growth rate vs SG GDP growth rate
Source: trading view, Oct 2024
As of June 2024, Malaysia’s GDP growth rate has indeed surpassed Singapore’s. This trend reflects Malaysia’s recovery and expansion in various sectors, including manufacturing and services. In contrast, Singapore has been experiencing slower growth due to its reliance on global economic conditions.
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