Malaysians investing in UK Property
Investing UK Property in Malaysia
As in many other countries across the world, Malaysia is facing a serious property bubble. With little sign of any imminent upturn in housing prices and stagnant wage growth, Malaysians are increasingly looking overseas for more affordable homes. The UK is currently the number one destination for Malaysians buying property abroad and this trend shows no sign of abating with Malaysian investment in UK property increasing by 68% year-on-year to £1 billion.
UK property is very popular with Malaysians as it offers properties that are typically of a high standard and have good returns. There is also a perception that they are a safe bet as the UK is one of the only countries in Europe that has seen house prices consistently rise since 2006. Demand in excess of supply, coupled with appetite from international investors and extremely low interest rates, has made the UK property market an attractive proposition for Malaysians looking to invest in property.
The investment of Malaysians in UK property has grown substantially over the past few years. 6% of the total foreign direct investment (FDI) in Malaysia is allocated to UK property and it is one of the top 10 countries for Malaysian investment out of more than 150 countries.
One important aspect missing from UK property activity has been inclusion of real estate transactions conducted by individual Malaysians, which represent a significant proportion (50%) of all Malaysian investments abroad. In addition, most Malaysian real estate transactions conducted by individuals are located on the north-east coast (35%), namely the Scottish Borders, Northumberland, Tyne & Wear and Durham. The volume at this location has grown 2.7% annually since 2012, which is the highest growth rate among all locations in the UK. The second most popular area is the south-east (23%), which includes London and the surrounding counties.
High property prices in the UK has led to a surge in demand for rental properties from Malaysians looking for an alternative investment, who are now willing to pay higher rents and purchasing costs. The strong rental market of Malaysia has also led to an increased interest from this demographic for investment in rental property overseas as well as higher yields compared to Hong Kong, Australia and New Zealand (HKANZ) property.
One way that Malaysians are investing more extensively abroad is through direct investments by Malaysian companies into foreign real estate projects. Real estate is a primary sector of the Malaysian economy and this trend is only set to increase as Malaysian companies are increasingly looking to diversify into overseas markets.
A large proportion (50%) of the total investment in UK property from Malaysia in 2017 was from companies, compared to 35% from individuals. This trend has been consistent over the past few years. This reflects a change in mentality for Malaysians on how they invest abroad with individuals now investing much more through companies, which offer more extensive support and legal protection than personal investments.
It’s also worth noting that 51% of all Malaysians who buy UK property by companies are those registered in Europe, showing the growing importance of Europe as an important market for Malaysian investors.
Property purchases are done on a private loan basis typically by individuals. Three quarters of these loans are undertaken by Chinese, Indian and British citizens (77%), though the remaining 25% is split between other nationalities. The average value of a mortgage for Malaysians purchasing UK property is £300,000.
There are several factors that have led to the growing popularity of UK property among Malaysians. The strong economy and a rising value of properties have been cited as reasons why Malaysians are choosing to invest abroad. However, it is important to note that high property prices will only continue to push investors elsewhere within the region and Europe will begin to see more interest from this demographic from 2018 onwards.
In addition, a high number of real estate developers in Malaysia have started offering international property services for buyers looking for homes in other countries, which has helped prospective investors gain access into foreign markets through the easy transferability of their existing properties.
Almost all Malaysians who invest in the UK are highly-educated (87%) and 25-34 years of age (28%). They are also typically married with children. Almost half of all Malaysian investors in the UK have an annual salary of £50,000 to £60,000 and one third earn more than £60,000 a year. Around 36% are directors, executives, or senior officials of their company and 17% are managers.