This week we take our fictional million to Asia where we speak to Stephen Hodgson, Managing Director of Malaysian portal and property centre, Propertrack.com. Since 1988, Stephen has worked all over southeast Asia and finally settled in Kuala Lumpur in 2004 when he set up one of the country’s most successful international real estate and property marketing businesses.

To help our readers come up with ideas for future projects, we gave Stephen a hypothetical investment pot of £25k, £100k and £1 million to invest with the objective of maximising return over a five-year period.

Ashley Rigg:  Hi Stephen, welcome to the world of hypothetical property investment. I’m not sure how many Ringgit (MYR) this is, but here’s twenty five thousand pounds sterling. How would you invest my money?

Stephen Hodgson:  It’s close to MYR 160,000. Thanks very much! For that sum, you couldn’t get anything in the centre of Kuala Lumpur but a great up-and-coming area is Petaling Jaya. It’s a suburb about a 15-minute train journey from the centre. It’s where all the clever people live! There’s a big Chinese community there.

AR:  So there’s potential demand from expats as well as locals?

SH: Absolutely. What many people forget is that the expat market is not just Brits and Europeans. There is a huge expat market from China, Japan, Korea and the Middle East. All the major banks are here in Kuala Lumpur as are many regional offices of big blue-chip international companies and Islamic financial houses. It’s a major employment hub.

AR:  So why invest the money in Kuala Lumpur? Why not Hong Kong, Singapore or Tokyo for example?

SH:  They are very different markets. Kuala Lumpur is maturing and prices are a fraction of what you’d pay in the cities you mention. Prices in central Kuala Lumpur are around MYR 1,500 (£235) per square foot, which is a fraction of the cost of real estate in Hong Kong or Singapore. It’s got a long way to go to catch-up and the government is doing lots to bolster demand. For example, the Malaysia My Second Home (MM2H) programme, which grants a ten-year renewable visa to participants and the removal of Real Property Gains Tax (RGPT).

What also makes Malaysia a great investment is its educated workforce. By observation, these affluent groups in Malaysia, in particular the Malaysian Chinese who represent around 25% of the population, account for 70% of the wealth, not dissimilar to other countries within Asia.

AR:  Ok, let’s add another £75k into the pot. Where would you invest £100k of Globaledge money?

SH:  For that amount of money you could buy what locals call landed property. This is property that has only one or two floors, usually with plenty of space and a garden. Newly built property like this is highly aspirational. There is strong demand and construction volumes can’t keep up.

AR: Where in particular would you invest?

SH:  It would either have to be Kota Kemuning or the Malaysian Administrative Capital “Putrajaya”. Kota Kemuning is a newly built township. It’s a master development with everything on site, mosques, churches, schools and sports facilities. It’s about 40 minutes drive from Kuala Lumpur. Our accountant has just bought there.

AR:  I’m not sure whether that’s a good thing or not! Sounds a bit like Milton Keynes. Do they have a crap football team as well?

SH:  Not yet. I’m a Scot and a rugby man, but it’s an idea. Seriously though, Asian buyers think differently. Newly built towns like this are highly sought after. I suppose some British people would call the taste “nouveau riche” but there is huge demand, not just from families but from retirees too.  Also, space is often at a huge premium because children tend to live with their parents until they get married and it’s not uncommon for grandparents to live in the family home too.

AR: What could you get for your money in Kota Kemuning?

SH: For close to MYR 650,000 (£100k) you could get what we call a 4+1. Four bedrooms and a room for a maid with a front and back garden, all set within a landscaped development. You get a lot for your money in Malaysia.

AR: Thanks Stephen.  Let’s take the investment up to a million. I’m guessing you’re opting for Malaysia again?

SH:  Not entirely. I’d use £400,000 of the money to buy a property in Edinburgh. I love the place. I grew up and went to school there. It would also be good for my daughter if she decides to go to university. Buying a city centre property in a European capital city is also great long-term investment. I have my eye on a Cala development in Fettes, right in the centre. It makes sense to invest in new-build when you live so far away.
 
AR:  Where would you invest the rest of the money?

SH:  I’d split the pot in two. For £300,000 (MYR 1,800,000) you could buy something very special in the Golden Triangle, right in the centre of Kuala Lumpur with a view of the twin towers. Everyone wants this view and there’s obviously limited real estate, so it’s a good long term investment.

AR: And the other £300k?

SH: I’d look to buy land on the East Coast of Peninsular Malaysia and develop a boutique resort. It has a spectacular coastline and is totally unspoilt. It’s also cheap, you can get around five acres for that money. There is a market for exclusivity and luxury and a boutique resort, one hour's flight from Kuala Lumpur, would be very popular.

AR: You could do it all for £300k?

SH: No. I’d have to leverage the money but for £1 million (MYR 6.5 million) you could fund everything from land purchase to completion of a resort with maybe 25 units on the coast, with sports facilities and a small golf course. There’s a gap in the market for something like this. It would pay for itself many times over.

AR: Thanks Stephen. Malaysia is a really interesting market. We’ll have to do an exhibition there sometime.

SH:  My pleasure. Come and see us any time you’re in the area.

Source: Globaledge.co.uk

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