By Joseph Wong
As Donald Trump prepares to assume the US presidency once more on Inauguration Day, historically held on Jan 20, experts are closely analysing the potential global economic ripple effects, including those on Malaysia.
With policies likely to intensify trade tensions with China, Malaysia’s economy stands to gain significantly. According to global property firm IQI, the upcoming Trump administration could contribute up to RM19.7bil to Malaysia’s GDP over the next four years. This economic boost could have a profound impact on the Malaysian property sector, influencing investments, demand and overall market dynamics.
Trump’s expected extension of tariffs on Chinese goods is anticipated to accelerate the China Plus One strategy, whereby manufacturers diversify production away from China to other Southeast Asian countries. Malaysia, already a beneficiary of this trend during Trump’s first term, could attract even more foreign direct investment (FDI).
Between 2017 and 2021, FDI from China and Hong Kong to Malaysia grew from 9% to 15.2% of total FDI. This trajectory continued under President Biden, with Malaysia receiving RM15.98bil annually from China and Hong Kong by 2023.
“It’s still too soon to know exactly what policies President Trump and the Republicans in the United States Congress will implement,” said Juwai IQI co-founder and group chief executive officer Kashif Ansari.
“However, his direction and goals are clear. We also have the record of the first Trump presidency as precedent and we can make deductions from the team he has selected for his cabinet. One key policy Trump is expected to enact is the extension and intensification of tariffs on Chinese goods.
“That would result in Chinese and international firms going even further than they have over the last eight years to shift manufacturing out of mainland China and into Southeast Asia. This policy alone could contribute an additional 1 percentage point to Malaysia's GDP over four years,” said Ansari.
This influx of capital into manufacturing and infrastructure could bolster Malaysia’s economic foundation, creating more jobs and increasing disposable income—a positive indicator for the real estate market. With greater financial stability, Malaysians may be more inclined to invest in property, particularly in high-growth areas.
Trade and export growth
During Trump’s first presidency, Malaysia’s trade with the US flourished. In 2021, Malaysian exports to the US reached US$56.2bil (RM250.22bil), a 27.3% year-on-year increase. Should similar trade policies persist, Malaysia’s export-driven economy could benefit once again. Growth in manufacturing and trade often translates to increased demand for industrial and commercial real estate, as businesses require facilities for production and distribution.
Additionally, heightened trade activity might drive development in logistics hubs and ports, further fueling the industrial property sector. Developers focusing on warehouses, distribution centres and mixed-use developments are likely to see new opportunities in response to the increasing trade volume.
Risks of volatility
While the outlook appears promising, certain risks loom. A key concern is the potential for rising US interest rates to combat inflation, which could draw capital away from Malaysia in favour of higher returns in the US. A stronger US dollar could also raise costs for Malaysian exporters dependent on imported machinery and materials, potentially dampening their competitiveness.
For the property market, these risks could lead to fluctuating investment sentiment. Developers and buyers might adopt a wait-and-see approach, particularly for high-end properties until global economic conditions stabilise.
Impact on residential property market
Malaysia’s residential property market experienced slower price growth during Trump’s first term, with house price increases dropping from 6.5% in 2017 to just 1.2% in 2020 amid the pandemic, according to Ansari. However, the economic uplift anticipated from new FDI and trade opportunities could renew momentum in the housing market. A more robust economy often translates to increased consumer confidence, driving demand for residential properties, especially in urban centres poised for economic growth.
Foreign investments spurred by Malaysia’s strategic location and relatively affordable property prices could also bolster the luxury real estate segment. Affluent buyers from China and other countries may seek Malaysian properties as safe, stable investments, further enhancing market activity.
The commercial property sector stands to gain significantly from increased manufacturing activity and business expansions. Office spaces, retail outlets and mixed-use developments could experience heightened demand, especially in regions benefiting from FDI. Industrial real estate, particularly in logistics, warehousing and factories, will likely see substantial growth as Malaysia continues to position itself as a manufacturing hub in Southeast Asia.
Notably, the first Trump administration had no direct impact on the Malaysian housing market, except by lending an extra hand to the economy and thus giving consumers more money to spend on housing, pointed out Ansari.
On the other hand, Trump’s policies could indirectly stimulate infrastructure development in Malaysia, as increased trade and investment necessitate better transportation and logistics systems. Areas like the East Coast Rail Link (ECRL) corridor and other key industrial zones could witness a surge in property development. Developers targeting these regions may benefit from rising land values and demand for residential and commercial spaces.
Primed for growth
As it stands, Malaysia’s property sector appears poised to capitalise on the anticipated economic gains from Trump’s presidency. However, developers and investors must remain vigilant of global financial shifts that could impact liquidity and buyer sentiment. Policymakers should also focus on enhancing Malaysia’s attractiveness as an investment destination through streamlined regulations and incentives.
In the coming years, the Malaysian property market is likely to witness a mix of opportunities and challenges. By leveraging its strategic location, competitive advantages and adaptability, Malaysia can cement its position as a key player in the global economic landscape. For real estate stakeholders, this is the moment to prepare for a future shaped by both geopolitical trends and local resilience.
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