Malaysia Real Estate: How to Rent or Buy Properties as a Foreign Retiree
By Jim Veinot
Before we delve in, a word of caution: this article is NOT an all encompassing directive on property purchase or rental in Malaysia.
The subject matter is far too complex and constantly changing to cover it in one article. However, what I can give you, is an overview and a guideline for further research.
The very first piece of advice I will offer you is to make sure that you engage a Malaysia real estate lawyer, even if your intention is to lease a property. Do this before you go to look at a property.
Fees are reasonable and protection has inestimable value. No one may be trying to pull a fast one on you; but just lack of understanding of the rules can get you in trouble. English is commonly spoken and there are lawyers that specialize in helping expats.
The vast majority of expats rent or buy in Kuala Lumpur or in Penang. Most of the expat inhabitants in KL are there on work permits and live in gated communities outside of the city center, with transportation or infrastructure close at hand for the commute.
Communities in Penang are smaller and the residents are generally retirees or self-employed and working from home.
Malaysia Real Estate: Guidelines to Property Investment
The key points below are summarized from an extremely well written article by two expert authors on Malaysia real estate:
- Properties in Malaysia offer good growth potential in a resilient economy. Malaysia real estate is still relatively inexpensive, with a reasonable rental return and return on investment compared to many neighboring countries.
- Socioeconomic conditions are excellent, driven by an upwardly mobile, young population in a country with 3% unemployment. There a number of reasons why this looks to be an ongoing prosperity.
- There are two kinds of titles in Malaysia; freehold and leasehold. The second title will expire at some time in the future, usually 99 years. There are also strata titles which are given when construction is not complete but you have paid for a unit. These will be replaced by one of the aforementioned titles eventually.
- A Sale and Purchase Agreement must be signed within 14 to 30 days after an offer is made. An earnest or good faith deposit accompanies the offer, generally between 1% and 3%. The balance of the down payment, between 9% and 12% is made with the signing of the agreement. The deal is submitted to the Land Office for permission to proceed. Once given, the balance is payable within 3 months of the original signing.
- The sales document must be submitted to the Stamp Office, the property evaluated for tax purposes, and the Stamp Duty paid. The document is then filed with the Land Registry. Stamp Duty varies between 1% and 3% depending on the value of the property.
- Malaysian banks will provide home loans to expats if you meet their borrowing criteria, at rates of around 5% interest and requiring 30% down payment. Otherwise you can finance from your home bank, which often has international branches.
- The Malaysia My Second Home (MM2H) program offers advantages to home purchasers.
- While there are no restrictions on the number of properties an expat can purchase, there are restrictions on the minimum value of each property. These restrictions are set by the national government, but provincial governments can and have added their own restriction on top of the federal ones. On national level, that threshold has been raised twice since 2010 and is now at RM 1 Million (ca. $250,000 USD).
- As a foreign buyer, you must obtain state authority consent before the property can be transferred to you. This can take between 6 weeks and 6 months, depending on which state your property is in.
- If you’re thinking about investing in Malaysia real estate, be aware that there is a capital gains tax to prevent property flipping (unless you have a Malaysian spouse or partner). Also be aware that rental income is taxable at the rate of 25%.
How Much Can You Expect to Pay for Malaysian Real Estate?
'Bungalow' in Malaysia refers to a detached stand- alone house on its own land, regardless of size or number of stories.
After the inflationary cycle of 2012 - 2013, things are slowing down a bit in Malaysia. The World Bank predicts a growth rate of 4.5% in 2016, which is far better than many parts of the world but still a relief here.
In KL the average property value is $167,000 USD while in Perlis, in the northwest of the country, on the Thai border, the average price was just $36,300 USD.
For a full examination and report of property prices throughout Malaysia, in historical and neighborhood context, check out this article published by GlobalPropertyGuide.com.
How Much Do Rental Properties in Malaysia Cost You?
Bungalow for Rent in Georgetown, Penang. A typical listing from iProperty.com.my.
Once again the cost of renting in Malaysia is all about location, location, location. Size matters too; a condo in KL will be large and well proportioned, not a cookie-cutter box. Often there are well-designed built in cupboards and storage areas, great views and balconies large enough to offer some privacy.
In the outskirts of Kuala Lumpur I found some condo apartments (1 bedroom, 1 bath) as inexpensive as $500/mo while larger units (3 bedrooms, 2.5 baths, study) were in the $1500 range. These units were in large condo communities with shopping centers as part of the overall plan. In downtown KL these units might be double the price.
If you prefer to live off the grid, there are houses and cottages for rent for as little as $200 per month in the rural areas. While you are more isolated here, crime rates are actually lower than in the big cities.
There are countless websites dedicated to Malaysia real estate; just Google “Malaysia rentals” or “house prices in Malaysia” and you can spend the day at it! Here are two of my favorites:
For Rentals: Sublet.com - Easy to navigate by region. Rentals are displayed as a list or on a map. I love that feature, as you can immediately see where the various properties are located.
For Properties to Buy or Rent: iProperty.com.my - Claims to be Malaysia's No. 1 property website. Powerful search function and well laid out details for each listing.
Next report: Visa, Residency and Benefits for Retirees in Malaysia. Hint: Remember that MM2H mentioned earlier? I’ll tell you all about it.