How Will Malaysian Investors Respond To New Property Taxes?

Commercial sales agents from Knight Frank Australia held a roadshow in Malaysia last week.

Despite massive interest in the Australian market, the one thing on everyone’s mind was the potential impact of changes to Australian property taxes on Malaysian investment.

Knight Frank Australia’s Paul Henley, Matt Whitby, Tim Holtsbaum, John Bowie Wilson, Tim Grant, Stephen Kelly, Eugene Evgenikos and Nic Purdue conducted the formal seminars in Kuala Lumpur and Penang.

They collaborated with Asia Pacific colleagues Knight Frank Managing Director for Malaysia Sarkunan Subramaniam and Executive Director for Capital Markets Malaysia James Buckley to present a range of properties to potential investors.

The team held scores of one-on-one client briefings as part of an Australian Property Forum Malaysia Roadshow, presenting an exclusive selection of Australian investment and residential development opportunities.

According to Knight Frank Head of Commercial Sales Paul Henley, Australia is of much interest to Malaysian investors due to its strong underlying economic fundamentals, including a record-low interest-rate environment.

"With interest rates having dropped to their lowest ever, and a stable political scene with the Federal election result, combined with an ever-growing population, Australia is well-positioned for offshore investors.

“Recently, Malaysia’s SP Setia purchased 288 Exhibition Street, Melbourne for AUD $101 million.

"This is just one example of the growing interest from Malaysia into Australia’s commercial property sector,” he said.

Knight Frank Head of Research & Consulting, Australia Matt Whitby said Brexit is expected to accentuate the capital flows into Australia.

“I expect Australia will benefit from Brexit and other global uncertainty, as it remains a safe-haven for investors. With volumes slowing over the past quarter, mainly on the back of limited supply of assets, I expect Brexit will accentuate the capital flows into Australia and volumes will pick up in the second half of 2016," he said.

“Australia’s economy is the envy of the developed world, growing at 3.1 per cent as at the March 2016 quarter. Sydney and Melbourne are driving performance, while our population is strong, with a growth average of 1.5 per cent across the country.

“Sydney alone accounted for $19 billion over the past two years, predominantly from Asia. Total Malaysian overseas investment into real estate globally was steadily increasing; however fell back in relative terms over the last financial year.

"Malaysian investment into Australian real estate has averaged $750 million over the past six years – however deal flow has not been as prevalent over the past year," he said.

(left to right): Bernadette Mak (Pitcher Partners), William Zhang (Pitcher Partners), Paul Henley (Head of Commercial Sales, Australia, Knight Frank), Matt Whitby (Head of Research & Consulting, Australia, Knight Frank) and Andrew Clugston (Pitcher Partners).

Mr Henley said it remains to be seen over the coming weeks how much the latest Australian taxation laws for foreign investment will impact Malaysian buyers into this market.

“Despite the recent stamp duty changes imposed on foreigners purchasing residential property, interest from Malaysian privates and institutional investors is remarkably strong.

"We expect many commercial, hotel and retail assets transactions from Malaysian investors over the next year.

"These types of assets are not impacted by the tax changes, and some residential specialists will still show interest at the right pricing metrics to build scale,” said Mr Henley.

According to Mr Sarkunan Subramaniam, Australia is a key destination for Malaysians.

“I myself was educated in Australia, and many Malaysians do travel there for education. 77 per cent of Malaysia’s ultra-high net worth individuals expect to send their children abroad for university over the next year.

“This has created a significant connection between Australia and Malaysia over time. Tourists from Malaysia are at record levels, having jumped over 40 per cent in the past three years,” said Mr Subramaniam.