Malaysia – An Attractive Property Investment Destination

Malaysia’s property market offers many attractions to foreign investors. Many favourable factors such as strong economic fundamentals, freehold land title, a healthy rental market, relatively easy access to market for foreign nationals, no property tax after five years of ownership and a legal system that gives equal treatments to both citizens and non-citizens have seen Malaysia, in particular Kuala Lumpur, develop as one of Asia’s top investment destination.

Based on a comparative survey by Global Property Guide, Malaysian residential properties are amongst the cheapest in the Asia Pacific region and offer amongst the highest yields. Round trip transaction costs are also amongst the lowest.

Steady growth recorded by Malaysian property market.

One of the cheapest priced in the region.

Price US$ per sq m (Source: Global Property Guide)

Offer attractive yields 

Gross rental yields % (Source: Global Property Guide)

Incidental transaction costs are amongst the lowest.

Roundtrip transaction costs US$ (Source; Global Property Guide)

Participants under the MM2H programme are exempted from having to seek government approval for the purchase and sale of all types of properties although they are still required to secure the approval of the relevant state authorities. Malaysia imposes no restrictions on property ownership by foreigners except that they are not allowed to purchase properties priced below MYR500,000 (RM 1 million in the state of Penang) as well as properties set aside for agriculture and Bumiputeras and properties built on Malay reserved land. In that sense, the regulations in Malaysia are actually more liberal and investor friendly than some neighbouring countries where the titles to the property cannot be registered directly under the foreign buyer’s name but has to be held by a local nominee. In Malaysia, the distinct advantage is that the foreign buyer’s ownership rights are legally protected by way of registration of the buyer’s name as the registered proprietor on the document of title of the property. Further, unlike some other countries, most Malaysian banks are prepared to extend housing loans to foreign buyers for purchase of property in Malaysia particularly if the property is for the borrower’s own use.

In terms of legal safeguards, buyers are adequately protected under the Housing Development (Control & Licensing) Act which requires all housing developers to be licensed and to use a standard format of sale & purchase agreement drafted by the Government. Under the regulations, monies collected from house buyers and or their end financiers have to be deposited into a bank account specifically opened with a licensed bank in Malaysia and cannot be used for any purpose other than for marketing and completing the project.

There are provisions in the sale & purchase agreement requiring the developer to complete the project within a stipulated time frame of 24 months for landed property projects and 36 months for strata titled projects and liquidated damages have to be paid by the developer for failure to complete the project within the stipulated time frame. Payment of the purchase price is in accordance to a standard payment schedule and each progress claim by the developer has to be accompanied by a certificate issued by the project architect or engineer. The standard sale & purchase agreement also provides for a defects liability period of 24 months from the date of delivery of vacant possession for rectification of any defects found in the property.

Although the country has its ups and downs, generally, Malaysia has enjoyed political stability and it has by and large escaped the large scale political upheavals experienced by some of its neighbours. The current Federal Government has continuously ruled the country since its independence 56 years ago and although it suffered a setback in the recent general elections in May 2013, it continues to be in power. A stable government is one of the factors that international investors find reassuring when evaluating a potential investment.

Malaysia is generally viewed as a tolerant society where extremist views are not a major issue. English is widely spoken and used in legal documents and the Malaysian judicial system and Malaysian law was founded on English law. Mandarin and other Chinese dialects as well as Tamil and other Indian dialects are also widely used due to the large Chinese and Indian communities in the country. The justice system is generally transparent. International investors can take comfort in these factors.