Expatriate Buying Guides
The Malaysian property market represents good long term buy for people who want to buy property. Changes in regulations over the last ten to fifteen years have made it a lot easier for foreigners to acquire property in Malaysia. Currently there is no limit on the number of residential properties a foreigner can buy although they will require State approval for any property purchase and the purchase price must exceed RM250,000.
Malaysia has the advantage of having contracts written in English and unlike some neighbouring countries there is no need for nominees. Foreigners are also allowed to own freehold properties.
Please note that the following rules are given as a general guideline of the terms and conditions but it is wise to seek advice from a lawyer about specific issues relating to the purchase of any property in Malaysia.
There are two categories of title in Malaysia. Freehold which gives the owner full, permanent ownership of the property and leasehold which allows the owner to stay in possession for a limited period. Most leaseholds titles are for 99 years and can be extended on paying a further sum.
A house receives a title and an apartment or condominium is given a strata title. In the case of new apartment buildings the strata title may not be issued for some time after the building is completed.
What Property Can Foreigners Buy?
Foreigners are allowed to buy as many housing units as they wish providing they meet certain conditions:
- The value of the property must be over RM500,000.00 in Peninsular Malaysia and RM350,000.00 in Sabah/Sarawak.
- Foreign interests are not allowed to buy land or properties located on land which has been designated “Malay Reserve Land”. In order to acquire ownership of Malay reserve land it would be necessary for that land to be re-titled. This would require acquiring land elsewhere which is not Malay reserve and getting approval to exchange with the other land and it become Malay reserve land.
- Foreign interests cannot buy land which is deemed agricultural land unless it is over 5 acres and is being used for commercial purposes. It should be noted that Malaysian law allows homes to be built on agricultural land designated “orchard land” providing not more than one building is constructed on each acre of land. These one acre lots can be rented by foreigners but not purchased.
- Many new developments have a Bumiputera (Malays and indigenous tribes) quota which means that the developer has to ensure that only Bumiputeras are allowed to buy a certain percentage of the properties.
Sales & Purchase agreement
The sale agreement is in the form of a Sale & Purchase agreement (SPA). These are fairly standard but it is best to have a lawyer representing your interests before signing any agreements.
A memorandum of transfer also has to be signed to transfer the title from the seller to the purchaser. In the case of a new development where the developer does not yet have full title the seller will state in the SPA that this will be given as soon as they have proper title.
Special Note :
If you are planning to move here under the Malaysia My Second Home programme and are placing a Fixed Deposit to qualify for the MM2H visa then the date you purchase a property is important. You will only be permitted to withdraw part of your fixed deposit (after it has been on deposit for one year) towards the purchase of your property if the S&P is dated after the issuance of your visa.
For most housing properties foreigners are no longer required to obtain Foreign Investment Committee (FIC) approval. Foreign purchasers are still required to obtain approval from the State Authorities who will consider factors such as the location of the property, the type of property and in new developments the percentage of total units sold owned by foreigners. State consent can often take six months and in some cases longer.
Major Types Of Properties
There are two broad categories of property sale - sales by a developer of newly constructed properties and sales by individual owners of existing properties.
New Developments: In Malaysia it is common for developers to sale properties “off the plan” which means you purchase the property before it is built. Under the Housing Developers Act property developers are required to complete the construction of these properties within three years of the sale and purchase agreement. Purchasers are required to make periodic progress payments throughout the three year period as the architects confirm that progress has been made on the overall project construction. Usually 5% of the price is held by solicitors for up to 18 months after completion to cover any defect claims. Recently the Malaysian government has been trying to encourage developers to change to a “build then sell” policy which means that they will complete construction before making the sale. The suggestion is that the purchaser then pays a 10% payment to secure the property and the balance is only payable when the property is completed.
Purchase of existing properties usually involves a down payment of 10% of the purchase price (this may be made in two instalments 3% with letter of offer and 7% within two weeks). The remaining 90% is payable within three months. After that period then interest would become payable on the outstanding balance.
Before buying an existing property you should ensure there will be no problems in obtaining the necessary State approval to acquire it as a foreigner.
Foreigners can acquire both freehold and leasehold land in Malaysia. Most leasehold land is owned by the state and leases are usually for 60 or 99 years. At the end of the lease it is fairly easy to renew the lease for a further 99 years upon payment of a premium which is based on the current market value of the property. It is also possible to arrange for a new lease during the period of the existing lease. This involves canceling the existing lease and applying for a new one.
Malaysians use the following terms to describe the types of residential property available:
Bungalow. This is a detached stand alone house on its own land. Unlike the UK where it means single story smaller dwelling it can be any size in Malaysia. Some are extremely large with built up areas exceeding 10,000 square feet.
Semi D. This is short for semi detached and refers to house which is joined on one side to another property. Two homes make up one building.
Terraced. This refers to houses which are connected on both sides to other homes. The end unit, which is obviously only connected on one side, has the largest land space and is usually premium priced. Terraced house are usually one or two stories high but occasionally they consist of three floors. Many terraced houses in major cities like Kuala Lumpur are being renovated. Some of the end units are reconstructed to substantially increase their built up area with a corresponding reduction in their garden space.
Town Houses. These are essentially the same as terraced houses except they tend to be more up market and expensive. Some may have an internal patio.
Gated Community. This generally refers to developments which have controlled access with a guard house and fencing surrounding the whole development. This usually means security will be better but it is advisable to check exactly what security is offered. Consider how easily you gained access, ask how often they patrol the development and what system they have to let visitors enter. Do they have security cameras and do the properties have an alarm system connected to the guard centre?
Obtaining Local Finance
Foreigners wishing to borrow money to buy property will usually only be able to obtain financing in Malaysia. Financial institutions outside Malaysia do not usually lend money to buy individual residential properties in Malaysia.
Generally Malaysian banks will only give loans to foreigners who are working in Malaysia and have a valid work permit. However, we may have some local and foreign banks who would be willing to lend to non resident foreigners or people who have retired here under the Malaysia My Second Home programme.
For foreigners with valid work permits the maximum loan is usually 60%-80% from purchase price subject to their financial eligibility. It is usually easiest to get financing for new developments as the developers will have arranged with selected banks to offer loans to their purchasers including foreigners.