KUALA LUMPUR, Oct 30 — Foreign investors will likely switch to buying commercial properties soon as Malaysia enforces a set of cooling measures to moderate spiralling house prices, a real estate consultancy firm said today.

In what is seen as a boon for Malaysia which currently suffers a glut of office space, Knight Frank Malaysia also predicted that investors will line up to snap good deals before the goods and services tax (GST) is implemented in April 2015.

“There will be shift. There is already a shift. Investors who are already familiar with residential properties will look into commercial properties for better returns,” said Sarkunan Subramaniam, managing director of the firm’s Malaysian branch.

Sarkunan told reporters that the returns from commercial properties could reach up to 6 per cent, while residential properties only between 3 to 4 per cent.

In Budget 2014 tabled last Friday, Putrajaya doubled the tax to 30 per cent for properties disposed within three years of acquisition, 20 per cent within the fourth year, and 15 per cent on the fifth year.

Putrajaya also forbade the Developers Interest Bearing Scheme (DIBS) in which the developer pays the interest payments for the buyers’ loans during the construction of a property, which was seen as an incentive for speculation.

The minimum price of property that may be purchased by foreigners was also doubled by Putrajaya from RM500,000 to RM1 million.

In addition, Malaysia will finally implement the long-delayed Goods and Services Tax (GST) at 6 per cent beginning April 2015, which will also apply to commercial properties transactions but not houses.

“Until April 2015 we will see those who want to invest in commercial sector, they will look into it... I do believe there will be a trend to avoid GST,” Sarkunan added.

Sarkunan was speaking to reporters after the launch of Knight Frank’s annual Global Investment report here, which pointed to a growing demand for prime office space around the world in 2014.

According to the report, Asia Pacific saw a year-on-year increase of 6 per cent in commercial properties transaction volumes in the first half of 2013, amounting to US$56.9 billion.

Latest data from real estate agents showed that office space in the Klang Valley has jumped from 69.56 million sq ft in 2003 to 104.66 million sq ft this year, while occupancy rate has remained stable for the past decade. It increased by 2.67 per cent as of the first half of this year to 77 per cent.

Incoming future supply of office space for the Klang Valley is expected to be at 21.96 million sq ft, out of which 2.24 million is planned supply. This, however, excludes nine million sq ft of planned supply for the Tun Razak Exchange.

A CIMB Bank report last month warned that Kuala Lumpur could be heading towards a Dubai-style crash as both major cities have a penchant for building iconic “tallest” towers and Grade-A office space.

The report, published on CNBC’s website, noted that the current construction boom, particularly for commercial office space and big-ticket projects like the Warisan Merdeka tower, would likely create an eventual oversupply and overhang of properties.

It pointed out that after years of “frenetic” development, the city-state suffered a real estate crash in the wake of the 2008 financial crisis, with properties losing more than 50 per cent of its value by 2011.