Strengthening of Ringgit, Rebound in Economy to Boost Property Market
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The recent rebound in Malaysia's economy and the strengthening of the Malaysian ringgit offer a ray of hope for recovery in the local property market, according to Knight Frank Malaysia executive director of research and consultancy Judy Ong.
"Malaysia remains as an attractive investment destination in the region due to its political stability, well-developed infrastructure and stable property market with relatively lower entry prices that continue to offer reasonable returns" she added.
The findings were part of Knight Frank's Global Currency Report which assesses the impact of currency movements for international investors purchasing luxury residential properties in key cities around the world.
Whilst currency shifts can be significant, it is important to keep in mind the fundamentals which underpin property markets, said Knight Frank Malaysia senior manager for international project marketing Dominic Heaton-Watson,
"These factors are often much less volatile and play a pivotal role in selecting a safe-haven investment destination" he added.
The independent global property consultancy's report high lighted that currency market movements can have a significant impact not only on the return provided by an overseas asset but also on the flow of international capital into property markets.
The US dollar acts a good case study, it noted.
"The dollar appreciated by 21% between June 2014 and January 2016 making it more expensive for international buyers to purchase in the US which contributed to the 25% fall in non-resident property purchases in the US over the same time period; whilst purchases by US residents increased by 10% over the same time period (according to National Association of Realtors).
"Despite the significant impact currency can have on an overseas investment, fundamental market indicators such as price performance and yield should not be overlooked, it added.
Meanwhile, commenting on the currency movement, Knight Frank Asia Pacific head of research Nicholas Holt said currency has, and will continue to be a driving factor for both property purchaser patterns and property asset performance.
Given the monetary tightening cycle now taking place in the US, those with US dollar or linked currencies will find their spending power enhanced compared to many other markets and could influence the direction of capital flows,'' he noted.
"Currency can influence returns at the purchase, hold and disposal stages and investors need to be aware of how fluctuations can impact total returns over the lifetime of an investment" Holt said.
The report also stated that despite the significant impact currency can have on an overseas investment, fundamental market indicators such as price performance and yield should not be overlooked.