Thinking of buying or indeed selling your property in Malaysia? Prices in the Malaysian real estate market have been rising for some time. People here will ask you questions like “Why would you rent?” which you will hear all around Asia. The value of real estate constantly seems to rise. What a strange thought, I’ve heard that somewhere before. Real estate prices in San Diego “always go up,” as some mortgage broker who purchased infomercial time from me in 2006 put it. The government of Malaysia, however, is taking many steps to reduce the heat in the real estate market and discourage foreign investment. When it comes to the Malaysian real estate market or any other market, I am not a supporter of government interference. However, it appears that the efforts taken to calm the market have been successful, since real estate prices in Malaysia have levelled down since 2014. Although Kuala Lumpur’s prices aren’t too far off their levels following the late 1990s Asian financial crisis, I anticipate a drop of up to 10%. What kind of real estate cooling procedures are in place in my area? As a first step, the government of Malaysia increased what amounts to a ban on foreign ownership of property in Malaysia by a factor of two. Starting January 2014, non-Malaysian citizens will need to purchase a home costing at least 1 million ringgit (about US$317,000).
That means you can’t buy a home in Kuala Lumpur or the rest of Malaysia on the cheap and expect to get by. Any given property is subject to that cap. It is not possible to buy more than one property in Malaysia for less than 1 million ringgit, just as you cannot bring twenty 50 mL bottles of wine into the Land of the Free without paying a hefty tax. That will make it more challenging to profitably invest in real estate in Malaysia, where prices for homes are (despite recent increases) remain relatively low. Be mindful of the word “slightly.” My landlord is a wealthy Malaysian-Chinese businessman, and while he originally asked for one million ringgit for the spacious expat-friendly apartment I rent as a home base before construction began, he is now asking for two million to bring it in line with prices in the prestigious KLCC neighbourhood. Still, I can pay less than $2,000 monthly for the rental.
That’s an awful yield for her right now and just an average one before. If you’re looking to buy, the more desirable neighbourhoods may potentially cost you over a million dollars. Many “landed” houses with yards may be found in the suburbs for much less money, a trait somewhat peculiar to Malaysia’s close-in suburbs. Petaling Jaya, whose living costs are lower than in other parts of Malaysia, is where the country’s rich elite call home. For my part, I have no interest in renting out high-end properties. At the same time, larger units in the same areas of town would certainly reduce return in the event of rents and tie up more cash in the case of a flip. That very much puts an end to my hopes of ever being a landlord in Kuala Lumpur, Malaysia. A new capital gains tax on foreigners would apply if you decided to fix and flip a large unit or even have a short hold time on a rental property. The initial five years will incur interest at a rate of 30%, decreasing to 5% thereafter. Company tax rates in Malaysia will be uniform. Agent commissions, improvements, and taxes on the sale of a home can all be deducted. However, these tariffs are exclusive to residents of Malaysia. Having a Malaysian spouse or business partner might be helpful if you need quick access to affordable homes.
As a result of citizen complaints about rising housing costs, the government of Malaysia has decided to implement these reforms. Property price increases in Malaysia have prompted a political backlash from the populace. And the dominant political party can’t afford to let those folks down after this year’s election was the closest in decades. Part of the housing bubble that Singapore is trying to quell in its own country is beginning to spread into neighbouring Malaysia. But I think that is happening more in Johor Bahru, the rapidly expanding New Jersey to Singapore’s New York. While this is going on, Penang is considering adding a 3% tax to the sale price of any home sold to a foreign national. However, analysts argue that it is effectively simply a stamp duty, and that a rate that low will have little effect on speculation by overseas investors. Do you recall when the United States levied a luxury tax on vehicles costing more than $40,000?
Did it prevent any potential BMW buyers? When you consider that Singapore levies a hefty stamp duty of 15% on investments in real estate from outside the country, you can see why that reasoning holds water. Despite my deep admiration for Singapore’s more unrestricted approach to economic policy, I must say that their recent spate of cooling measures has driven me absolutely bonkers. Despite this, purchasing property in Malaysia is still very inexpensive, especially in comparison to other Asian countries. Fees for a full cycle of transactions might range from 3.5 percent to 7 percent (not including taxes).
Limits on who can own property in Malaysia prevent foreigners from buying up all the homes.
Foreign ownership is also less restricted in Malaysia than in nations like the Philippines, Vietnam, and Cambodia. Landed property is only one example of the variety of real estate available to international buyers. The sort of title you will obtain is an additional factor to think about when buying property in Malaysia. Many Westerners are accustomed to holding property indefinitely, but in some regions of Malaysia, as in other parts of Asia, this may not be possible. Always be sure you’re purchasing a “freehold” property, as opposed to a “leasehold” property, where you’re really just buying a long-term lease. The good news for would-be property investors is that few additional regulations exist in Malaysia. Apart from the initial limitations, foreigners are free to own as many homes as they choose. In addition to allowing direct foreign ownership, the area also offers easy access to inexpensive finance. Foreign borrowers can get loans from a global bank starting in the mid-5% area, with as little as 10% down and 15-35 year terms. The Malaysia My Second Home (MM2H) Program allows foreigners to become permanent residents of Malaysia by providing evidence of offshore investments and a stable source of monthly income in exchange for the right to purchase a second home in the country. The terms of purchasing expensive property are more favourable for those who are residents. Although there are certain limitations on foreign ownership, such as the fact that you can only buy a condominium, I still think real estate in the Philippines offers a stronger overall value proposition for investors.
One last suggestion
While the rapid appreciation of Malaysian real estate hasn’t quite tickled my fancy, I can’t deny that it’s based on solid evidence. Kuala Lumpur still has room to expand, and I believe that other, more resort-like locations will attract visitors from places like Russia. In Kuala Lumpur, condos close to high-end shopping districts sell for exorbitant sums, yet a short stroll will bring you to far more reasonable options. To me, the best option is to move in personally. Condos in Kuala Lumpur aren’t as little as they are in other Southeast Asian countries. A two-bedroom, one-and-a-half bathroom apartment in a relatively recent building in the heart of Raja Chulan, close to a monorail stop, may be purchased for less than $200,000. There are several apartments available for rent in the building, with prices ranging from $800 to $1,200 per month. To sum up, I don’t think real estate in Malaysia is a terrible investment, especially because the country has a sizable population of people who are interested in the market. But the yield is low and the prospects for growth in value are lukewarm. When compared to other Asian cities like Bangkok, Malaysia is a much more developed and spacious option, making it an excellent place to call home. Furthermore, the basics are less crucial to you if you are prepared to take the plunge and purchase a property in this area. Contact us to buy or sell property in Malaysia fast.
