Investing Properties In Malaysia

Recently I was chatting with my cousin from Mukah regarding the house/apartment prices in Malaysia, West particularly. To my amazement, the prices she told me was not as expensive as I thought. Perhaps due to the the slowing economy that reduces demand or the oversupplied properties left hanging there.

Prices for a condo starts around RM170,000+ for about 110sqm. Now that's not bad when compared to Aus. It's only about AUD $70,000 for a decent condo. She also told me it's for one of the nice premium locations.

In those premium locations, it's easily to get over RM1,200 in rents per month. So that comes to about 8.5% gross return. In Australia, you'd be lucky to get about 5% gross return for similar property.

Seems tempting and looks like a good investment? If so, why hasn't investors flocked in to buy them instead a lot of Malaysian investors are buying properties elsewhere?

Let's examine some of the reasons why I wouldn't invest there:

1. Lack of legislation protecting landlords
   - Court system is slow, expensive and pro-tenant. There're no real laws governing this issue. Renting only makes up of 9% in Malaysia, so not strangely enough, is being ignored.
   
   - In 1997, an act has been passed called "Control of Rent"mainly to help landlord to gain possession of the property back and prevent abuses from tenant, however, according to sources, it sucks and not doing much different.


2. Poor urban plannings
   - Lack of urban planning is not something new in Malaysia, basically they see a vacant land, they build whatever they like! Only recently Governments and councils have stepped in to minimise some of these random structures popping out of nowhere.
   
   - Public transport is pathetic and always overcrowded. Traffic is nightmare. Cycling is standing on cliffs edge. Walking is not an option.
   
3. No proper insurance cover
   - Well, nobody is going to insure you if they have nothing to insure themselves to begin with!
   
4. Agents
   - Never dealt with any agents in Malaysia before. However, impressions are they're dodgy. So how to trust them? Unless someone intro me a good agent? :)
   
5. Tenants
   - As we can see from the wonderful infranstructures we have, our citizens in Malaysia are not very good in caring things that do not belong to them. Would you trust someone like that to look after your house?


6. Renting market
   - The market is just a mere 9%, though expected to increase, is just not big enough. With oversupplied of properties, the rent prices can only go down.

An important aspect of investment is about risk management. If the risks can't be managed, it's just not worth it. You might be better off dealing with banks or like other investors have done: move your funds overseas.

Lately, we have seen some changes by the Najib's administration. Let's see if they can tackle this issue as well. Billions of RM have went out of Malaysia into properties in other countries, how much more can Malaysia afford to lose? How much longer can Malaysia keeps foreigners away from Malaysia?

Source