Malaysia’s opposition party has won a historic election last week, beating the long-ruling Barisan Nasional party that had been in power since the country’s independence from Britain in 1957.
A win for Pakatan Harapan (PH), led by former Prime Minister Tun Dr Mahathir Mohammad, is expected to usher in changes across the country, although the impact on real estate will take longer to play out. Mahathir Mohammad has now been sworn in as Malaysia’s seventh Prime Minister following the win.
While campaigning, the PH party promised several reforms, most pertinently limiting the tenures of the Prime Minister and first ministers of states to just two terms. There were also pledges to abolish the goods and services tax, introduce more affordable housing, and investigate scandal-plagued state investment firm 1Malaysia Development Berhad.
PH, which won 122 seats out of 222, has shown “that they are equally business-friendly to foreign investors as the former ruling party,” points out YY Lau, Managing Director, JLL Malaysia. “We believe this will provide continuity to past policies aimed at attracting foreign investment into Malaysia.”
Chinese investment to be reviewed
While campaigning, the PH party raised alarm over the influx of Chinese investment to Malaysia. Mahathir previously stated he would review some of the mega- Chinese projects if re-elected.
“Not all Chinese investments are seen in negative light,” says Lau. For instance, Chinese tourism is booming, and PH is well aware of the current economic benefits that Malaysia has with China in terms of trade, investments and its tourism industry.
The Chinese government has introduced further policies that favour industrial development in Malaysia, over residential.
PH’s manifesto has also pledged to encourage continued investment from “China and other Asian countries, although it is expected that there would be more scrutiny and transparency for the award of high-impact real estate projects, going forward.”
The issue of affordable housing will remain on the government’s agenda. The Valuation and Property Services Department of Malaysia reported in April this year that a total of 24,738 completed residential units remain unsold, a 67.2 percent increase from last year.
Part of PH’s election promises were to introduce a million affordable houses in 10 years should it emerge victorious and the removal of GST, which is currently imposed on the transactions of commercial buildings while residential is tax-exempt.
“It will take some time for the new government to settle in and implement measures that have been promised during the election to show a clear direction for the economy,” says Lau. “Malaysia is experiencing its fastest growth in three years, with GDP at 5.9 percent in 2017 and the new government will want to ensure it retains its momentum.”
As a veteran, Prime Minister Mahathir will likely prove reassuring for investors, says Lau.
“Under his stewardship, Malaysia emerged relatively unscathed from one of the most trying situations during the Asian Financial Crisis in 1997.”
With an experienced hand on the helm, the negative publicity that has plagued the nation over 1MDB should be put to rest, while ensuring better transparency in future government projects.
“Malaysians have voted with the hope of a cleaner, stronger and credible future.,” says Lau.
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