Why Kuala Lumpur?

Malaysia is increasingly becoming the preferred investment destination in Asia due to its stable property market and relative affordability. According to Tim Murphy, IP Global's Founder and Managing Director, "Malaysia is a sensible market and tends to perform more steadily than the rest of Asia, the property market is well regulated, such that speculators can't buy and sell quickly so it doesn't tend to create a boom and bust scenario. That's why we've seen 5.3% growth in the past 19 years. The only difficult time came in the financial crisis in the late 90s, we have not see anything like that since and even in the last recession the market performed extremely well". Tim goes on to explain that the reason for this is because Malaysia's property market is "driven by owner occupiers and domestic consumption and not pure rampant speculation like the rest of Asia. However the market is still priced as the second cheapest residential capital city in the region which is superb when you think that the only market which is cheaper is Jakarta which is very difficult for foreigners to purchase in".

The underlying strength of the Malaysian Ringgit has also aided investor's confidence in this secure market. The Ringgit has been Asia's best performing currency in 2010 appreciating by approximately 9% against the US dollar, 23% against the euro and 15% against the British pound. Tim Murphy explains that "Although the Malaysian ringgit has performed exceptionally well this year it is still considered extremely undervalued." This strength has been gained on the back of strong economic fundamentals and higher interest rates which has risen gradually to 2.75% in August 2010.

Within Malaysia, Kuala Lumpur is the key investment location with several global companies relocating to Kuala Lumpur due to its relative low operating and purchase costs. Although Kuala Lumpur continues to attract international investors and property developers there remains a lack of supply especially in the mid to luxury condominium market. In June 2010, of the total supply of residential housing in the Klang Valley, just 25% was located in Kuala Lumpur. Growth in existing supply has declined significantly over the last 2 years. With just 2% growth in 2009 and 6% in 2008; future supply has also declined over the past few years from a high of 17% of existing supply at the end of 2004 to 10% of existing supply at the end of 2009.

According to Tim Murphy, "due to the limited supply we have experienced strong take up rates in Malaysia with 85-90% of units sold in KLCC and Mont Kiara and 96% of our units currently tenanted". This lack of supply has caused price increases as illustrated in July when Kuala Lumpur recorded on of the highest selling prices of an apartment when it sold for RM38 million (USD $11.8 million). According to the National Property Information Centre, the Malaysian property sector has recorded a 52% year on year jump in the number of property sales in Q1 2010. This increase is equal to RM25.3 billion (US $8.18 billion).

As a result of a low housing there are currently 6.5 people living in every property. This is relatively high in comparison to Hong Kong which has a ratio of 2.8 and Singapore which has a ratio of 3.2. Given the trend in developed countries for smaller ratio of population per housing unit one can expect that over time Malaysia will see this ratio decline as demand for housing increases. According to Tim Murphy, "half of Malaysia's population is under the age of 35; this group is typically very aspirational and actively seeks out properties to rent or buy. This is good news for property investors as it translates into strong rental demand and a high number of potential buyers."

Growth remains robust in the mid to luxury tier property with a number of projects recently launched selling extremely well. CBRE research indicates that in Q2 2010 capital values were highest in KLCC at approximately RM 890 psf with luxury property prices in Kuala Lumpur increasing by 1% in Q1 2010. However, even with this increase, the property affordability gap in Malaysia is still almost the lowest in the Asia Pacific, with places such as Hong Kong recorded to be 5 times higher, making investment in this market enticing for those wishing to diversify their property portfolios.

According to Tim Murphy, "Unlike the property markets of Singapore and Hong Kong, Kuala Lumpur remained relatively stable during the Global Financial Crisis. Over the last 12 months prices in Hong Kong have increased by approximately 25% Singapore by 38% and in comparison Kuala Lumpur has lagged with prices increasing by only 3%, this makes Kuala Lumpur an even cheaper option."

The property market is expected to remain stable with prices on an upward trend. The International Monetary Fund (IMF) confirms the country's Gross Domestic Product (GDP) forecast for 2010 has now been revised to 6.7% from an earlier estimate of 4.7%. The IMF also expects the Malaysian economy to grow 5.3% in 2011.

Tim Murphy is optimistic about the outlook for Malaysia, "The data coming out of Malaysia is extremely positive and we expect the property market to improve substantially over the next 12 months due to the positive economic sentiment and growing optimism within the property market."

Kuala Lumpur remains one of Tim Murphy's preferred investment destinations; IP Global has invested USD800 million alongside its clients since 2005 with over USD250million of that invested in Malaysia. According to Tim, "Malaysia makes for a nice steady, safe but equally exciting property market where you can own a property as a foreigner with low taxes and strong economic fundamentals."