By Ryan Khoo / Alpha Marketing, The Edge Property | September 25, 2015 10:00 AM MYT
Malaysia as a country has had a difficult time in 2014 and 2015. First, there was the unexpected, tragic loss of Malaysia Airlines flights MH370 and MH17, AirAsia’s flight QZ 8501 and a series of major natural disasters — devastating floods in Kelantan that displaced thousands and an earthquake in Sabah that cost even Singaporean lives.

Malaysia also faces economic headwinds, with oil prices falling since late 2014 to below US$40 a barrel from their high of more than US$100 a barrel. Palm oil, the other major commodity produced by Malaysia, saw prices fall to less than US$600 a tonne from its three-year average of US$750 a tonne. This dented the earnings of national oil corporation Petronas, oil and gas companies and palm oil producers, which are among the biggest companies in Malaysia.

And then, there was the implementation of the Goods and Services Tax in April 2015, the timing of which was fortunate or unfortunate, depending on whose view you take. For consumers, the 6% GST is an unwelcome distraction and an added cost in times when the global economic outlook is uncertain. There is a negative impact on retail spending that has been more visible in the recent months. From the government’s perspective, however, GST is the bright spot to cover the shortfall in oil revenues and will help keep government finances balanced.

The political situation in Malaysia is also precarious. Prime Minister Najib Razak is in a delicate situation, owing to the recent 1MDB debt concerns and his links to a purported RM2.6 billion ($855,000) political donation. This has created huge concerns over the political stability of his government and his ability to govern effectively.

The combination of these factors has resulted in the plunging value of the ringgit. The currency has fallen almost 17% against the Singapore dollar in the past one year and is the worst-performing currency in Southeast Asia.

What does this mean for real estate investors? Is Malaysia now an attractive opportunity or an investor’s trap? We put forward the case why now might be a good time to invest in Malaysian real estate.