Malaysia vs Singapore: Which has a Better Property Market?
By Farah WahidaJan 24, 2014
The Malaysian property sector remains sizzling hot despite the new cooling measures, while that in Singapore is slowing down. But can we really say that the former has outshined the latter?
In this article, we will examine the pros and cons in each markets so that you can decide for yourself. Specifically, we will discuss Mortgage Rates, Resale Prospects, Land Supply and Rental Yields.
Generally, the real estate market of Malaysia and Singapore can be likened to Charles Dickens’ famous novel “A Tale of Two Cities.” In other words, one is going south and the other is going north even though both have introduced cooling measures.
Malaysian real estate, especially those in Iskandar and Klang Valley, are still attracting many foreign buyers in spite of the higher real property gains tax (RPGT) and heftier minimum purchase price of RM1 million from RM500,000 previously.
On the other hand, Singapore’s real estate sector is cooling down due to the new property curbs like the total debt servicing ratio (TDSR) framework, which has slashed the loan-to-value (LTV) ratio and imposed a ceiling on monthly debt repayments.
In terms of mortgages, Singapore has enjoyed lower rates of one to three percent in the past decade, while that in Malaysia was between four and six percent. In this aspect, Singapore has the upper hand, as lower rates lead to higher capital gains upon resale.
However, many borrowers in Malaysia are only required to shell out a 10 percent down-payment, while those in Singapore have to pay heftier amounts of 40 to 60 percent based on the number of their outstanding property loans.
In addition, Malaysia has implemented the Deferred Payment Scheme (DPS), meaning borrowers can wait until the Temporary Occupancy Permit (TOP) has been granted before paying any instalments. As such, some investors prefer Malaysian properties due to lighter payment terms.
Looking at resale prospects, Singapore’s property market is more predictable, considering it has been a real estate hub for a long time. Historical trends are well established and most property agents can easily quote resale prices in various districts, without the need to glance at their notes.
It’s the opposite for Malaysia, especially in Iskandar. Although there are plenty of new property projects there, their prices when resold in 10 or 15 years’ time remain a mystery.
On the positive side, this means the country’s property market can be compared to a rough gemstone that has yet to fully shine. In simpler terms, Malaysian properties have the potential to multiply your investments. This is different from Singapore, where it’s getting harder to get resale prices higher than district norms. But an untested resale market is also a downside due to the presence of many speculators.
Comparing land supply, this asset is scarce in Singapore, but plenty in Malaysia’s Iskandar region, given that it’s twice the size of the city-state. As such it comes as no surprise that property prices are more expensive in the republic. As we say in economics, scarce resources command premium prices.
But the downside to this is that few people can afford to invest in Singapore properties, or even buy a home. Interestingly, even Singaporeans themselves are shunning local real estate in favour of Malaysian properties. For example, Singaporean purchased a six-room mansion in Johor Bahru for just RM550,000 (S$211,602) in 2010, while in Singpore, that price can only get you a two-room flat.
However, Iskandar’s abundant land supply could also backfire due to the possibility of a glut, given the growing number of development projects. Nevertheless, it’s still too early to say even in places like Iskandar; the high speed rail link isn’t even built. And if we recall the golden rule of property buying, it’s location that matters, not numbers.
In terms of rental yields, Malaysian properties usually offer higher rates compared to Singaporean real estate due to their lower prices. Moreover, many developers have introduced schemes that help homeowners find suitable tenants, guaranteeing rental yields of between six and nine percent. Even though it comes with a service fee, this programme is a big hit among Singaporean landlords, who encounter difficulties in finding and managing tenants abroad.
Other factors that work in Malaysia’s favour include: property prices are more affordable compared to other Asian countries. The nation is politically stable and generally free from natural disaster like floods, tsunamis and earthquakes.
Apart from a flourishing economy with a forecasted GDP growth of 5.5 percent for 2013, doing business in the nation is also easier. In fact, the World Bank ranks Malaysia as the sixth friendliest country in the world to do business. In addition, Middle Easterners and Chinese are investing huge amounts of monies in Malaysia property market and other business sectors.
As such, it’s safe to say that that now is a good time to invest in Malaysian properties in spite of the latest cooling measures. With more affordable prices, you are sure to get better deals. However, please stick to well established Malaysian developers and projects that are generating lots of buzz like The Mews by E&O properties, and Layar Intant Sdn Bhd’s The Binjai on the Park.
As for Singapore, it’s resale property market is simply more consistent and predictable, when it comes to resale values.
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