Malaysia is an attractive destination for foreign property investors, offering a blend of vibrant cities, beautiful landscapes, and a relatively straightforward property purchase process. Whether you’re considering a luxury condo in Kuala Lumpur or a beachfront villa in Penang, understanding the facts involved in buying property in Malaysia is crucial. Here are seven essential facts every foreigner that want to buy property in Malaysia should know.

7 Essential Facts for Foreigners Buying Property in Malaysia

1. Understanding Stamp Duty

Stamp duty is a tax that applies to several key documents during the property purchase process in Malaysia. Here’s what you need to know:

• Sale and Purchase Agreement (SPA): A flat stamp duty of RM10 applies when signing the SPA, which is a standard fee across all property transactions.
• Instruments of Transfer: Starting from January 1, 2024, a flat rate of 4% stamp duty is imposed on foreigners (except Malaysian permanent residents) for property transfer documents like the Memorandum of Transfer (MOT) or Deed of Assignment (DOA). This new rate replaces the previous tiered system, so it’s important to factor this into your budget.
• Loan Agreement: If you’re taking out a loan to finance your property purchase, a stamp duty of 0.5% applies to the total loan amount. For example, if you borrow RM500,000, the stamp duty would be RM2,500.

2. Minimum Purchase Price

Malaysia has set minimum property prices for foreign buyers to ensure that locals have access to affordable housing. These thresholds vary by state and type of property:

• Terengganu, Pahang, WP Kuala Lumpur, Putrajaya, Kelantan, Perak, and Labuan: RM1,000,000
• Selangor: RM2,000,000 for Zones 1 and 2, and RM2,000,000 for Zone 3
• Johor: RM2,000,000 for landed property in international zones; RM1,000,000 for strata title and landed properties in non-international zones (except Medini)
• Sabah: RM1,000,000 for landed titles; RM600,000 for high-rise or strata titles
• Kedah: RM600,000 in Kedah; RM1,000,000 in Langkawi
• Perlis: RM500,000
• Sarawak: RM500,000
• Penang Island: RM1,800,000 for landed properties; RM800,000 for strata titles
• Penang Mainland: RM750,000 for landed properties; RM400,000 for strata titles
• Melaka: RM1,000,000 for landed titles; RM500,000 for strata titles

These thresholds are important to consider as they dictate the types of properties you can purchase.

3. Foreign Ownership Restrictions

Malaysia allows foreigners to own property, but with some restrictions:

• Types of Property: Foreigners are generally not allowed to buy low-cost housing, properties on Malay Reserve land, or certain agricultural land. However, luxury apartments, high-rise properties, and specific landed properties are available to foreign buyers.
• Quota Limitations: In some developments, only a certain percentage of units can be sold to foreigners, usually around 30%. This helps maintain a balance between local and foreign ownership.

4. Financing Your Purchase

Foreigners can obtain financing from Malaysian banks, but the terms are different from those offered to locals:

• Down Payment: Typically, foreigners are required to pay a down payment of 30% to 40% of the property’s value.
• Loan Tenure: The loan tenure for foreigners is generally shorter, often between 15 to 25 years.
• Interest Rates: Interest rates for foreigners are usually higher than those for local buyers.

It’s advisable to shop around and consult a financial advisor familiar with the Malaysian market to get the best possible terms.

5. Real Property Gains Tax (RPGT)

Real Property Gains Tax (RPGT) is imposed on the profit made from selling property:

• 30% if sold within the first five years of ownership.
• 10% if sold after five years.

This tax is calculated on the profit after deducting the purchase price and related costs. There are no exemptions for foreigners, so it’s important to consider RPGT when planning your investment.

6. Legal Representation

Hiring a reliable lawyer is crucial when buying property in Malaysia:

• Legal Fees: Typically, legal fees range from 0.5% to 1% of the property’s purchase price.
• Title Searches and Due Diligence: Your lawyer will ensure the property is free from encumbrances and that the seller has the legal right to sell.
• SPA Drafting: The lawyer will also draft or review the Sale and Purchase Agreement (SPA) to ensure it protects your interests.

A knowledgeable lawyer can help prevent legal issues and ensure a smooth transaction.

7. Managing Your Property

If you don’t plan to live in Malaysia full-time, consider hiring a property management company:

• Rental Management: These companies can find tenants, collect rent, and handle maintenance, providing peace of mind while you’re abroad.
• Maintenance and Upkeep: Property management companies ensure the property is well-maintained, preserving its value and condition.

This service is especially useful if you have multiple properties or live in a different time zone.

Is Investing in Property in Malaysia a Good Idea?

In 2024, Malaysia offers a strong opportunity for property investment, especially under the Malaysia My Second Home (MM2H) program, which allows foreigners to live in Malaysia on a long-term visa and invest in local real estate. The country's growing economy is expected to boost property demand and values, making it a promising option for investors.

Malaysian property prices have been steadily increasing, offering stable and reliable returns. As the financial situation of Malaysians improves, the demand for housing is likely to grow, enhancing the potential for capital gains and rental income.

Malaysia remains a stable and trustworthy place for investment, with a balanced market outlook that supports steady real estate demand. While rental yields might be average, the combination of economic growth, stability, and the benefits of the MM2H program make Malaysia an attractive choice for property investment in 2024.

 

Investing in property in Malaysia, particularly under the MM2H program, can be a rewarding experience. By understanding these seven key facts, you’ll be better prepared to navigate the process and make a smart investment. Whether you're looking for a home or an investment opportunity, Malaysia offers a stable and promising real estate market.

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