Can a Foreigner Own Property in Malaysia?
Yes, foreigners can invest in Malaysian real estate. The country has liberal regulation compared to the others in the region as pertains to foreigner residential property investing. Unfortunately, the regulations have been overhauled a couple of times in the last few years, making it confusing especially the rule on the minimum price a foreigner can buy property at.
Malaysia property is under the control of a number of Malaysian State Governments and the rules can vary wildly depending on the part of Malaysia you are buying in. While the Federal Government passes national regulations, States are not obligated to implement them. For example, the minimum price setting for foreigners can buy property at was not implemented in some states.
Malaysia has two types of titles for foreigners purchasing property:
• Freehold: Gives the property owner permanent, full ownership of the property
• Leasehold: Allows the property owner to remain in possession for a set period with 99-year leasehold titles extendable upon payment of a further sum.
Houses get a title when complete, while a condominium or apartment gets strata title. In the case of a condo, the strata title may be withheld for some time even after the building is complete.
The Sale and Purchase Agreement
The Sale & Purchase Agreement (S&P or SPA) is standard, but it is advisable that you engage the services of a lawyer to represent your interests before you sign any agreements. Before completion of the transfer of property from the seller to the buyer, a memorandum of transfer has to be signed. If a developer has not yet attained the full title, the seller states in the SPA that this will be handed over soon.
Property Purchase Approval
In the event of purchasing property in Malaysia on Property Guru, the Foreign Investment Committee (FIC) approval is not required. However, foreign property buyers still need to get approval from State Authorities (may take up to six months and in some cases even longer) who consider factors like:
• Type of property
• Location of the property of interest
• The percentage of total units sold owned by foreigners in the State
Why Invest in Malaysia?
Malaysia’s sustainable growth potential is continuously attracting property investments from various countries in the world. The country’s economy has remained steady with increased consumer and business spending. Malaysia’s housing index reports a decrease to 5.4 percent in quarter three of 2015. Other reasons why foreigners are investing in Malaysia are:
• The Malaysia My Second Home (MM2H) which has encourage foreign investors to purchase property by pioneering substantial incentives including the removal of capital gains tax on property owned for 5 years and more.
• High rental returns at 10 percent
• Capital appreciation as high as 35 percent with annual expectations of between 25 to 30 percent
• Several financing options including traditional mortgage solutions from western and local banks, and Islamic mortgage solutions
• More land for less money and foreigners can own freehold and landed properties
• Competitively priced luxury seafront properties that offer access to properties that would be virtually unattainable in other countries
Types of Properties Foreigners Can Buy in Malaysia
• Condominiums/Apartments: With basic facilities like a guard, swimming pool, common areas, but subject to condominium rules and regulations.
• Semi-detached houses: These are two houses connected on one side, with front, rear and one side open space. They have spacious back yards and gardens.
• Bungalows: Are one, two or three-storey standalone buildings and foreigners are allowed to build their own houses if they purchased a ready bungalow long from a development scheme.
• Terrace houses: Connected houses in a single row and each row may have between 10 to 12 units.
• Shop houses
• Orchard houses
Any foreigner may purchase any number of residential Property Guru property in Malaysia, subject to the minimum price established for foreigners by the different states. They start from RM500,000 per unit for most states. Land is a state matter and it is important to check state laws before making any commitment, as the minimum purchase price is not standardized between states. It is also advisable if you purchase property that is already issued with a certificate of fitness, but if you want to buy from developers, ensure you are dealing with a reputable company.