Why Malaysia is a better choice than Thailand for property investment: A Comparative Analysis

Why Malaysia is a better choice than Thailand for property investment: A Comparative Analysis

Malaysia and Thailand are popular choices for investors interested in Southeast Asia’s property markets. Both countries offer attractive opportunities, but Malaysia stands out for its flexibility in property management, high occupancy rates, and return on investment (ROI). With favourable foreign ownership policies, increasing demand in urban centers, and promising long-term prospects, Malaysia’s property market has proven more reliable and rewarding for investors than Thailand. This article will delve into the reasons why Malaysia excels over Thailand for property investment, supported by facts and figures.

Malaysia offers more flexibility in property management compared to Thailand

Investing in Malaysia offers several advantages, particularly in property management for foreign investors. Malaysia’s flexible policies, such as the Malaysia My Second Home (MM2H) program, allow foreigners to own freehold properties with minimal restrictions. In comparison, Thailand’s Condominium Act of 1979 imposes strict limits on foreign ownership, with only 49% of a condominium’s total floor area allowed for foreign ownership. Additionally, foreigners in Thailand cannot own land outright and must rely on long-term leaseholds or joint ventures with local Thai entities.

Foreigners can buy property in most states in Malaysia with few limitations. For instance, in Kuala Lumpur, the minimum price for foreign property purchases is set at RM 1 million (about $215,000 USD), which is considerably lower than similar thresholds in prime areas of Thailand. Furthermore, Malaysia offers various property management options for investors, including widely permitted short-term rentals like Airbnb in many urban areas. In contrast, in Thailand, short-term rentals of less than 30 days are illegal unless the property is licensed as a hotel, making property management more complicated for foreign investors.

Malaysia has more liberal property laws and less stringent leasehold requirements compared to Thailand. This makes it easier for foreign investors to manage and profit from their properties without facing excessive red tape. The flexibility in Malaysia provides a more secure investment environment, especially for those looking for long-term returns.

Occupancy rates in Malaysia show stronger growth than Thailand’s saturated market

Occupancy rates play a crucial role in determining the success of a property investment. Malaysia is experiencing stronger growth in this area than Thailand. Economic centers like Kuala Lumpur and Penang are witnessing steady increases in demand due to urbanization, infrastructure development, and a growing middle class. The latest report from the National Property Information Centre (NAPIC) indicates that the occupancy rate for residential properties in Kuala Lumpur was 78.5% in 2024. Further growth is projected as the capital city continues to attract both domestic and international residents.

Thailand is currently facing an oversupply issue in its major markets, particularly in popular tourist destinations such as Phuket and Pattaya. The Real Estate Information Center (REIC) in Thailand reports that condominium occupancy rates in Bangkok have been around 70% in recent years, making it challenging to find tenants after buying a house or condo in Bangkok. The COVID-19 pandemic has worsened the situation, leading to higher vacancy rates in previously popular areas like Chiang Mai and Phuket, as a result of the decrease in international tourism.

On the other hand, Malaysia has concentrated on diversifying its economy and infrastructure, resulting in a more sustainable property market. Ongoing projects such as the Mass Rapid Transit (MRT) lines in Kuala Lumpur and the expansion of the Penang International Airport are expected to increase occupancy rates, making Malaysia a more appealing market for property investors looking for stable, long-term returns.

Malaysia’s property market provides higher returns on investment than Thailand

When comparing return on investment (ROI) between Malaysia and Thailand, Malaysia once again emerges as the more favourable option. In Malaysia, average rental yields in prime areas like Kuala Lumpur range between 4% and 6%, according to Knight Frank’s 2023 report. In some high-demand districts, yields can even reach up to 7%, particularly for properties located near transportation hubs or within mixed-use developments. Additionally, Malaysia’s relatively low property prices compared to other Southeast Asian countries make it an affordable market for investors to enter, while still offering competitive returns.

Thailand still offers decent rental yields, but it generally lags behind Malaysia in terms of return on investment (ROI). In Bangkok, the average rental yields range from 3% to 5%, with higher yields in less saturated areas outside the capital. However, the long-term capital appreciation in Thailand has been slower due to market saturation and restrictions on foreign ownership. Specifically, areas like Phuket and Pattaya, once considered property hotspots, have experienced diminishing returns as new developments flood the market.

Furthermore, Malaysia offers a stable political environment and a solid legal framework for property ownership, providing additional security for investors. On the other hand, Thailand’s political landscape is periodically unstable, which can pose risks for property investors, especially in areas where foreign ownership laws are subject to change. Given Malaysia’s combination of favourable yields, affordable entry points, and political stability, it is the preferred choice for investors seeking consistent and high returns on investment.

The future outlook for Malaysia’s property market is more promising than Thailand’s

Looking forward, the property market in Malaysia is expected to grow more than in Thailand. Malaysia has established itself as a regional business center, drawing in multinational companies and expatriates. The government’s ongoing investments in infrastructure, such as the East Coast Rail Link (ECRL) and the Johor Bahru-Singapore Rapid Transit System (RTS), are anticipated to further drive property demand, particularly in major urban areas. These projects are projected to improve connectivity, making previously neglected areas more accessible and appealing to both local and international investors.

Thailand’s property market is at risk of stagnation due to overdevelopment in tourist-heavy areas and the country’s heavy reliance on the tourism industry. While Bangkok continues to be a thriving market, other regions like Phuket and Pattaya are dealing with oversupply and slow demand recovery. Additionally, Thailand’s aging population presents a long-term challenge, which could potentially reduce domestic demand for property in the future.

Malaysia has a younger population and proactive government policies that encourage foreign investment, creating a dynamic and resilient property market. The country’s economic diversity, focus on technology and business sectors, and commitment to sustainable development projects all indicate a bright future for its property market. For investors seeking long-term growth and stability, Malaysia holds far more promise than Thailand.