Chinese buyers’ demand for Malaysian properties has changed

Education may be the key for the nation to make a big win

Real-estate agent showing house plans for client at office.

By Joseph Wong

The Chinese buyers’ demand for Malaysian homes has fallen sharply, especially over the Covid-19 pandemic period in the last two years. It currently stands at about one-third of the level it was before the pandemic, but there is a silver lining.

The demand is expected to climb back up in 2022, according to Juwai IQI Group co-founder and chief executive officer Kashif Ansari.

“The drop has been due to the reduction in travel between the two countries. After Malaysia reopens its borders sometime in the second quarter of the year, travel will remain limited by China’s zero-Covid policy. 

“Chinese who want to travel to Malaysia have to undergo an extended quarantine upon returning home. As a result, most Chinese have avoided overseas travel,” he said.

All this is poised to change but it hinges on Malaysia’s ability to attract students from China, who had initially intended to seek out English-speaking countries like the United States of America or Australia.

“We believe that in 2022 to 2025, Malaysia has the opportunity to attract international students in K-12, university, post-graduate, and English-language programs which might otherwise have gone to the US or Australia. 

“The number of Chinese students in the US is down by 20%, due to political tensions, fears for safety, and difficulties obtaining visas. The number of Chinese students in Australia is down even further,” said Ansari. 

Ansari pointed out that if Malaysia could attract a small percentage of those students to its own educational institutions, it would be a big win for the Malaysian economy.

“In 2019, there were more than 32,000 international students enrolled in Malaysian educational institutions, accounting for about 6% of total student numbers. We believe that in 2022 the number of international students has been reduced by at least 30% and that the level will begin climbing again this year, before returning to the pre-pandemic level by 2025,” he said.

Even though China’s borders remain closed at this time, Ansari believed that 2022 would see Chinese buying of Malaysian property begin to climb again. 

“Psychologically, people are moving beyond the pandemic. When China’s borders reopen to free travel, the rebound in Chinese property acquisition will gain pace as visits climb,” he said.

The Malaysian home market remains appealing to Chinese buyers due to the high quality of life on offer, its proximity to China, and relatively low prices. Some buyers will be seeking bargains and hoping to buy unsold new units from developers at a discounted price. 

Another factor motivating Chinese investors is the market in China, which is lacklustre at the moment. Restrictions on investing and the development industry have some Chinese buyers looking overseas for alternatives.

Foreign investors

According to the Q3 2021 Juwai IQI Property Survey and Index, in the first half of 2021, foreign buyers account for 13% of new home purchases. Foreign buyers accounted for the largest share of new home buying in Sarawak at 15% and Kuala Lumpur and Selangor at 13%. 

The National Property Information Centre reported that RM18bil of residential property sold in the third quarter. “Foreign buyers accounted for 10% to 15% of new and second-hand transactions in Malaysia’s largest cities. Working on the back of an envelope, you can estimate that foreign buyers purchase in the range of RM1.8 billion of real estate per quarter, or RM7.2 billion per year.

“If they are buying for their own use, Chinese buyers choose to purchase where they intend to live or use the home. If they’re buying for investment, they seek good yields, easy maintenance, and likely capital gains,” said Ansari.

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