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Buyers' Guide To Malaysia Properties

Before going ahead with a property purchase in Malaysia, it is important to be familiar with the buying process and what fees and agreements will need to be met. Below is a general overview of what procedures to expect.

Unlike some of its Asian neighbors, Malaysia makes it fairly easy for foreigners to purchase real estate. The Malaysian government is constantly looking to improve conditions for people wishing to purchase property in the country and this is of course good news to foreign investors.

What You Can Buy

Foreigners are allowed to purchase any kind of property with a minimum value of MYR 250,000 (US $67,977) and can buy up to two residential properties – two condominiums (max. 50% foreign ownership within a block) OR one condominium and one of the following:

  • Terraced or linked houses above two storeys
  • Land/bungalows and semi-detached houses

Should you wish to purchase a third property, you will need to apply to the Foreign Investment Committee of the Economic Planning Unit at the Prime Minister’s Department and provide a valid reason for the third purchase for permission to be granted. Property on Malay reserved land cannot be owned by overseas foreign investors. Other than these restrictions foreign owners of property are treated in the same way as Malaysian owners and both are protected by the same real estate laws.

Using an Agent

A good agent can prove invaluable when you buy a property in Malaysia. Propertyshowrooms.com working with the International Investment Property Network (IPIN) always carefully examines your particular requirements and provides you with a selection of appropriate options in your chosen country. In addition, we can recommend all related professional services you will require in Malaysia to make a safe purchase. Most of our properties for sale in Malaysia are within off-plan developments located near Port Dickson and in Kuala Lumpur, as they offer the best value for money and represent general demand from international property investors in Malaysia.

Appointing a Lawyer

As mentioned above, foreign investors interested in the Malaysian property market are subject to certain restrictions on the type of real estate they can purchase while great care and attention to detail have to be given to the entire buying process in Malaysia. It is therefore imperative that a good IPIN recommended local lawyer is used to assist with your transaction.

Legal fees and disbursements for the preparation of applications to the Foreign Investment Committee and the sale and purchase agreement are calculated at a percentage of the value of the property. Should you plan to take up financing from a bank, remember that you will also have to pay legal fees and disbursements for the preparation of the loan documents. A full breakdown of fees is described below.

Surveyors

When looking for property for sale in Malaysia it is wise to have a structural survey carried out on any property that meets the investor’s objectives because many homes are known to have structural problems and they may not be apparent at first glance. Once you are satisfied your chosen real estate is sound, you can then sign an offer letter that will be submitted to the vendor for acceptance. Should you wish, we will gladly help you find a reputable surveyor through IPIN.

The Buying Process

Once you have selected your property, a Letter of Offer and Acceptance is signed and a 3% deposit payment is normally expected from the purchaser.

Within 14 days, the buyer must pay a further 7%. Deposits paid are non-refundable if the buyer withdraws from the sale but are subject to obtaining finance and checking of title deeds. Make sure that there is a clause added to the standard agreement, stating that if the vendor pulls out, they must pay back the deposit plus an amount equal to that to the investor for the inconvenience. From the date of the signing, the buyer normally has a maximum of three months to complete the sale and make full payment.

Upon signature, the Sale and Purchase Agreement must be stamped at the Stamp Office. After examination of the property by the valuation department, Stamp Duty must be paid to the Stamp Office. The Sale and Purchase Agreement is then sent to the land registry along with the Memorandum of Transfer form 14A to transfer the title deeds into your name.

Transaction Costs and Fees

     

Who Pays?

Stamp Duty

1% - 3%

 

buyer

Lawyer/Solicitor's Fees

     

First 150,000

1%

   

Next 850,000

0.7%

   

Next 2,000,000

0.6%

0.4% - 1%

buyer

Next 2,000,000

0.5%

   

Next 2,000,000

0.4%

   

where the consideration or adjudicated value is in excess of MYR7,500,000

negotiable on the excess (but shall not exceed 0.4% of such excess)

   

Other Fees

MYR180 (US$49)

 

Buyer

Real Estate Agent's Fees

 

2% - 2.75%

Seller

Costs paid by buyer

1.4% - 4%

   

Costs paid by seller

2% - 2.75%

   

ROUNDTRIP TRANSACTION COSTS

3.4% - 6.75%

   

* Malaysian currency is the Ringgit. Exchange rate is US$1=MYR3.6777 as of 26th October 2006.

Finance

As a foreigner, you are allowed to borrow up to 80% LTV from banks in Malaysia and they are eager to lend to overseas borrowers. With interest rates currently amongst the lowest in Asia, at 3.5%, property purchase in Malaysia is now an attractive option for many investors.

The mortgage application process takes longer than in many other countries and you would be well advised to extend the three month period from your initial deposit payment to final signature of the Sale and Purchase Agreement, to allow for normal delays in obtaining your Malaysian loan.

Malaysia has long been a haven for property purchasers and tourists alike, seeking an exotic Asian holiday destination where high standards, a rich culture and stunning natural beauty all combine to make that perfect holiday location. Today however, Malaysia’s property market is taking on new dimensions due to a major government initiative, the Ninth Plan, which calls for impressive new provisions for the country’s infrastructure. This, along with a strong rate of economic development, including increased foreign investment, reinforces our analysts’ firm belief in the future success of Malaysia’s property market.

An already robust tourism sector is now spawning a secondary holiday home market which further boosts the strength of the property market and opens up many new investment opportunities to property purchasers in Malaysia. The Malaysian property market offers a good mid range investment opportunity to international property purchasers seeking reasonably priced real estate with sustainable growth potential in both the residential and tourism sectors. Malaysia boasts two primary property markets that are attractive to overseas buyers: the area around the capital's central business district and the resort properties on the beautiful south western coast such as Port Dickson.

To find out more about this exciting new opportunity to invest within Malaysia’s growing property market, please take a look at our Malaysia Property Guide section where you will obtain all kinds of information on the practicalities of buying property in Malaysia and just what the country is like as a residential and holiday location. The Investment Property in Malaysia section will guide you through the economics and strategies involved in maximizing your investment returns by using carefully selected Malaysian property as your investment vehicle. Simply click on the boxes below and access a bank of information which will help you to fully understand Malaysia and its property market.

Malaysian Property Market Overview

Current trends in purchasing Malaysia property are characterized by investment either in the capital city of Kuala Lumpur or within the new coastal resorts. City investment is growing in line with increased direct foreign investment from China, the US and Japan. A surge in economic activity (predicted increase in worker numbers of 27.9% by 2013 over 10 years) has brought with it a high demand for quality commercial and residential real estate lettings to serve an ever growing expatriate community employed in and around the city. Off-plan properties are being sold to international property developers with impressive guaranteed rental yields of between six and ten percent.

Meanwhile, growth in the tourism sector has prompted the birth of new resorts, particularly in coastal areas just south of Kuala Lumpur around Port Dickson. Boosted by a strong tourist industry, property purchasers are experiencing impressive returns on their buy-to-let and off-plan investments. These holiday resorts also offer great potential for second home buyers seeking an exotic overseas home in the sun.

The Malaysian government has recently relaxed home ownership rules for foreigners and introduced tax incentives which contribute to make this property market an easier and more beneficial option for foreign ownership. Further details are available on www.imi.gov.my.

Malaysia Property Investment

Property investors in Malaysia are profiting from some lucrative off-plan investments in and around the capital city as well as within the coastal tourist resorts and both markets are experiencing high growth rates. Residential property prices have generally risen by between 15 and 30% over the past five years and rental yields in Kuala Lumpur stand at a respectable 7.4 to 8.7%, while corresponding figures remain just a little lower within the tourist resorts. Holiday rentals are big business, particularly in areas in and around Port Dickson, as is the holiday home market which continues to attract visitors to this interesting and exotic holiday destination.

While property investment in Malaysia remains a firm favourite amongst Asian and US investors, we are witnessing a current European trend for worldwide property investment and Malaysia is now catching the eye of all discerning property investors with worldwide vision for a shrewd investment.

Malaysian property prices remain low by international standards and the local currency, the Malaysian ringgit (RM) is very cheap versus the sterling, making investment in carefully selected Malaysian property a highly lucrative option.

Reasons why property in Malaysia is a good investment

  • Government legislation is actively encouraging foreign property investment through a number of tax incentives and the relaxation of laws governing real estate purchase by foreigners.
  • Through its Ninth Plan, the government of Malaysia aims to improve the infrastructure and general economic development of the country. Analysts believe this will have a positive impact on the Malaysian real estate market.
  • Malaysia boasts a stable economy and government. It already has a world-class infrastructure, industry and support, along with a modern and cosmopolitan lifestyle.
  • English is widely spoken by a multi-lingual, experienced and qualified workforce.
  • The value of the local currency, the ringgit, is far below the euro, dollar and pound sterling, allowing foreign investors to buy a lot more for their money in Malaysia.
  • Property prices per square metre in all major Malaysian towns and cities are a fraction of the cost of similar investments in London and New York.
  • There is high demand for quality new real estate is high from an affluent expatriate market.
  • Malaysia is also among the top three countries for the greatest number of tourist arrivals among the 53 Commonwealth countries, according to the World Tourism Organisation.
  • Tourist arrivals in Malaysia rose by more than 160% between 2000 and 2005 - an astonishing achievement for tourism.
  • Malaysia is located near the Equator, hence its year-round tropical climate, ideal for tourism.
  • Malaysia does not suffer from any natural disasters such as earthquakes, volcanoes or tornados.
  • Extensive white sandy beaches continue to draw holidaymakers. Port Dickson resorts which have long been a favourite amongst visitors from Kuala Lumpur and other neighbouring towns who seek an escape from hectic life.
  • Buying costs are very low in Malaysia at between 3.4 to 6.75% of the property value, including 2.75% agent’s commission (for first MYR 500,000).

International Property Investment Network (IPIN) assists investors of all levels to find the best and most current investment opportunities. The network carefully vets all recommended investment locations, therefore maximising members´ chances of achieving the best return on investment from their property purchases in Malaysia.

Homebuyers in Malaysia

Traditionally overseas homebuyers in Malaysia have originated from the US, China and Japan. Today, however, as competition amongst other emerging property markets gathers steam, Malaysia is making sure it does not miss the boat and today actively encourages all forms of foreign investment to its shores.

As a result of a successful growth in economy and a competitive foreign exchange status, Malaysia attracts an exciting new influx of foreign investment in industry and real estate. Residential and holiday home purchasers are confidently buying into the very beginnings of a property boom in Malaysia, safe in the knowledge that prices are relatively low and growth figures remain high.

Malaysia is an attractive destination for high net worth foreigners looking to set up home. Now that the government has introduced changes in the Foreign Investment Committee (FIC) guidelines for foreign property purchase and restrictions have been lifted regarding the usage and number of units that can be purchased by foreigners, real estate in Malaysia has become far more accessible.

Malaysia Property Hotspots

As is often the case in emerging markets, city centre property investment can yield some high returns and Kuala Lumpur is no exception. With an ever increasing expatriate worker presence, a requirement has emerged for commercial premises, top-end accommodation, off-plan properties and buy-to-let options which are particularly attractive to investors. Alternatively, due to a sharp increase in tourist figures in Malaysia, property purchasers are finding some excellent opportunities in coastal areas such as Port Dickson, namely the sea-front Legend Water Chalets and the Banyun Curve Water Chalets, which are proving highly popular amongst many discerning property buyers.

Property Tax In Malaysia

Malaysia remains relatively free of taxes from a foreign property purchaser’s point of view. Below you will find basic tax guidelines which will help you plan your investment wisely.

 

Capital Gains Tax

In April 2007, capital gains tax was abolished in Malaysia.

Stamp Duty

Since the 2008 budget, Stamp Duty for the Land Title Transfer for properties costing less than RM250,000 was halved. This benefit is applicable for the purchase of one house for the entire financial year of 2008.

Price Stamp

Stamp Duty in 2007

Stamp Duty in 2008

RM250,000

RM4,500

RM2,250 (-50%)

RM150,000

RM2,000

RM1,000 (-50%)

RM350,000

RM6,000

RM6,000 (unchanged)










(Based on the current rate of 1% for first RM100,000 and 2% for RM100,001 to RM1,000,000)
This situation is prompting property developers to provide more properties at below the price of RM250,000 in order to entice buyers. However, new home buyers face two main Stamp Duties: for title transfer and the bank loan facility agreement.

Inheritance Tax

There is no inheritance tax charged in Malaysia.

Other Taxes

There is no VAT in Malaysia, but a Government Sales Tax (GST) of 5% is charged on hotel and restaurant bills and on professional bills such as lawyers’ bills.

Non-residents are liable to pay tax, without reliefs, on money earned in Malaysia. Rates are 22.4% on monthly income of USD 1,500 and 25.1% on USD 6,00 per month.

Property tax, a local tax based on the annual rental value of your property, is payable in two installments annually. It is usually levied at approximately 6% for residential lettings.

Quit rent is a local tax levied on all landed properties and payable annually at a rate of 1 sen (US$0.003) to 2 sen (US$0.006) per square foot - RM1 = 100 sen (cents). The Quit Rent liability generally totals less than RM100 (USD31) per year.

Once a retiree has been out of the UK for the prescribed period, offshore investments become free of UK tax and are not taxed by the Malaysian tax authority. In fact, several people have calculated that their living expenses within Malaysia are far less then their tax savings, making it, in effect, almost cost free to live there.

Info extract from http://www.propertyshowrooms.com/

For Federal Government loan

Please visit http://bpp.treasury.gov.my/web/index.php?option=com_content&view=article&id=221&Itemid=234&lang=ms

For State Government loan

Please visit http://www.sfs.sarawak.gov.my/serv_home.html