Investing in Malaysian Real Estate
A Strategic Guide for Foreign Buyers and Expats
Malaysia is a haven or sanctuary for a myriad of things, a warm and welcoming place, one of the most favoured property markets in Asia since the last decade. Foreign buyers make up a bulk of new and second-hand properties in the cities. Most of the transactions are residential units purchased as second homes, either for retirement or investment. If you are an expatriate expanding your investment portfolio, there are some essential guidelines that can help you navigate your homeownership venture. Malaysia’s property market is well-regulated, with financial and practical oversight of practically everything, from housing construction to property loans. Here is what you need to know as a foreigner buying a home in Malaysia.
Purchasing Properties in Malaysia
Foreigners can buy and own any type of property in Malaysia, be it residential, commercial, industrial, or even land. Although each state has its own set of rules and regulations governing foreign property acquisition covering property types and application procedures, they are subject to the federal laws under the National Land Code (NLC) 1965. Whilst there is no nationwide definition of properties that restricts foreign homeownership, there are three key property types that foreigners are ineligible to purchase. They are properties residing on Malay reserved land, properties defined as low-cost or medium-cost affordable units, and properties allocated to Bumiputra interest groups. Whether you are an expat looking for a home or an investor looking for an investment opportunity, there is an abundant array of property, ranging from posh condos to luxury townhouses.
Property Purchased Under MM2H
Malaysia currently offers a special avenue for property purchase with Malaysia My Second Home (MM2H) visa programme. The MM2H scheme provides a renewable 10-year maximum, multiple-entry visa.
Eligibility criteria vary between Peninsular Malaysia, Sabah, and Sarawak, but requires an applicant to demonstrate a certain level of financial liquidity, either through offshore income/investment or via disposable cash in one’s bank account. You will need to be sponsored by a Malaysian citizen and in Peninsula Malaysia, a registered MM2H agent can replace a citizen sponsor. As MM2H visa holders, you will enjoy various benefits when it comes to owning houses in Malaysia, including rebates or discounts on certain properties in the market.
Buying A Property without MM2H
Introduction of the Premium Visa Programme (PVIP) in Sept 2022, a long-term residency visa plan has enabled foreign investors and entrepreneurs to live, work or study in Malaysia. This programme provides visa approval for up to 20 years, and foreigners can purchase properties in either residential, commercial, or industrial segments.
Key requirements or prerequisites for eligibility of PVIP include:
- Having an offshore account with a minimum of RM480k per annum
- Fixed deposit account of RM1 mil with a local bank
All applications are to be made or processed by an authorized consultant or agency appointed by the Immigration Department of Malaysia. The initial participation fee is RM200k per applicant with additional dependent(s) being charged RM100k per person.
Some of the documents to be provided to a PVIP consultant/agency via online application are:
- Biodata page of passport
- Certificate of good conduct
- Birth/marriage/divorce certificate(s)
- Medical verification letter
- Security approval/authorization from PDRM.
All documents must be certified for authenticity by the Malaysian embassy or consulate.
Malaysian Property Market Outlook
The Malaysian property market is certainly on an upwards trend despite a slow or sluggish progress towards recovery post-pandemic (Covid-19). The general public perception is that property prices are still pricey, and buyers are adopting a ‘wait-and-see’ approach, or they simply do not have the funds to purchase at the present time. Nonetheless, the residential sector saw a substantial increase in transaction volume and transaction value during the past year, according to the National Property Information Centre (NAPIC).
Four peninsular states, Penang, Kuala Lumpur, Johor, and Selangor were major contributors to total transaction volume with terraced houses dominating new residential launches. The robust median prices as well as solid growth in the rental markets suggest that there is substantially-high demand for higher-priced properties particularly amongst expatriates and entrepreneurs. This positive scenario or outlook in the overall property market truly augurs or bodes well for first-time home buyers and real estate investors. With a plethora of property choices in the marketplace, there is definitely no better time than now to invest for the future in a dream home as well as capitalize on the lucrative potential of Malaysian rental properties.
An Investment Haven/Hotspot
Residential properties strategically situated within close proximity to public transportation hubs such as LRT, MRT, ERL (KLIA Ekspres) and KL Monorail are highly sought after by homebuyers. Such high-value residences comprising mainly of high-rise units potentially yield higher rental returns and greater capital appreciation for investors. Many in-demand or hot properties are typically located within integrated/mix developments, commercial business districts (CBDs), and transit-oriented developments (TODs) such as KL Sentral central interchange station which connect the nation’s capital to other parts of the city centre. This enables better accessibility in commuting, and seamless travel experience for both residents and expatriates alike.
Home Financing Options
Getting a banking loan when buying a house via MM2H is less of a hassle since it is an established government programme offering a five-year visa plan. But if you are not registered under MM2H, your ability to obtain a loan will depend on whether it is from a local or foreign bank. Unless you are a high net-worth individual with RM1 million in assets, you may need to first become a resident in Malaysia for 5 years or more. You might require other forms of assets such as savings or stocks which could be used as collateral to obtain a home loan. Local banks also have different procedures for houses bought from developers and the sub-sale secondary market. Loan eligibility for foreigners is no different from locals, as the fine margin of finance varies between being either a resident or a non-resident foreigner.
Cost/Expenditure for a Home
There are some significant closing costs that needs to be included in planning a property purchase. They include stamp duty for the Sales & Purchase Agreement (SPA) and Memorandum of Transfer (MOT) or Deed of Assignment (DOA) as well as legal fees for the SPA and loan agreement. Stamp duty is essentially tax placed on the property documents during the sale or transfer of the property. Stamp duty rates for properties valued at more than RM1 million were increased from 3% to 4% since January 2019. Real Property Gains Tax (RPGT) continues to be charged on profit gained from property disposal. If a property is sold within five years of ownership, a sum or quantum of 30% in RPGT is imposed on the profit made from the property sale.
Obtaining a Bank Mortgage
According to Malaysia’s central bank, Bank Negara Malaysia (BNM), a non-resident is permitted to borrow money to finance or refinance activities in the real sector in Malaysia, including the purchase of a piece of property. However, access to mortgages in Malaysia greatly depends on an individual’s financial status or standing, the purpose of the purchase, and the property type. The protocol or procedure is somewhat lengthy but rather similar with Malaysian citizens applying for a bank loan or mortgage. Submission of relevant documentation such as Letter of Offer, Sales & Purchase Agreement (SPA), Memo of Transfer (MOT), deposit downpayment and personal documents (i.e. salary slip, income tax & rent assessment) are important conditions.
Is Malaysia a Good Investment?
Malaysia is ushering a new era in government with great vision and bright future for its people. With a politically-stable country, the national economy is fast booming with diverse digital investment options such as cryptocurrency, blockchain NFTs and metaverse real estate. Nevertheless, investing in ‘brick-and-mortar’ property is by far the best hedge/shield against inflation, and it presents a time-proven investment strategy for long-term capital gains. Malaysian residential market has remained resilient and appealing to overseas buyers from across Asia and America. Malaysia has always been a preferred destination of choice for expatriates who have plans to migrate abroad or settle down with their families in a foreign land. There is a steady stream of demand for properties in the Klang Valley especially those within the vicinity of premier academic institutions and reputable international schools. Purchased property can also be easily leased out or sold off in the event the homeowner or investor leaves or departs the country. Bottomline is, investing in Malaysia appears to be a sunny prospect as well as a golden opportunity for foreigners looking for a dream abode to call their second home.