Malaysia’s Budget 2024 has set its sights on optimizing subsidies, a move that is poised to have significant implications for the country’s real estate sector. According to JLL’s Malaysian 2024: Real Estate Key Highlights report, this budget aims to redirect resources towards development expenditure, ultimately supporting the nation’s journey to becoming a developed nation.
- Infrastructure Investment: With substantial funds allocated to infrastructure projects, developers have an opportunity to participate in large-scale projects with a lower risk profile. This investment is expected to have a strong positive impact on the medium-term prospects of the office, industrial, and logistics markets.
- Supply Chain Shift: Ongoing supply chain disruptions and uncertainties surrounding China could accelerate decision-making processes. Many multinational companies in the manufacturing segment are considering Southeast Asia for implementing the “China + One” hub concept. Malaysia is highly regarded by these companies, which could further boost the industrial and logistics real estate market.
- High Growth High Value Industries: The focus on High Growth High Value (HGHV) industries is likely to drive growth in the industrial and logistics market. These industries, often involving high-tech manufacturing, are concentrated in the Northern region of Malaysia. Government support for startups entering HGHV fields like digital economy, space technology, and electronics and electrical (E&E) is expected to transform the industrial and logistics real estate market.
- Impact on Luxury Retail: New legislation to implement the High Value Goods Tax on items like jewelry and watches might affect shopping centers with a significant share of luxury goods retail tenants, potentially resulting in lower turnover rent from this segment.
- Electricity Subsidy: The targeted electricity subsidy, based on consumption levels, will reduce subsidies for the top 10% of electricity consumers while keeping them unchanged for the remaining 90%. This may affect investors and operators of real estate, leading to increased operating costs.
- LRT Station Resumption: The government’s plan to resume the construction of five previously canceled LRT3 stations could spark new township developments around these stations, offering real estate investment opportunities.
- East Malaysia Development: Fresh development targets for East Malaysia, particularly Sabah and Sarawak, may entice investors to explore expansion opportunities in these regions.
In conclusion, Malaysia’s Budget 2024 presents several opportunities and challenges for the real estate market. The redirection of resources towards infrastructure development, support for high-growth industries, and the resumption of transportation projects can drive growth. However, the impact of high-value goods tax on luxury retail and changes in electricity subsidies should be monitored closely by real estate investors and operators. Additionally, East Malaysia’s development targets may open up new investment prospects in these regions.