Buying Property1 Jan 2011
Six in ten expatriates are currently looking at buying property. And given the hugely favourable housing market in Malaysia, combined with incentives from the government, it comes as little surprise that more expatriates are making the country their second home.
Whatever your personal bugbears towards your resident country, you have to admit Malaysia is a pretty fantastic country in which to live. With good food, great weather and warm, friendly people, it has pretty much everything you could want. Cost of living is low, standard of living is high. And with property prices much lower than Europe and the US, why not make this place your second home?
Other regional destinations require a fair amount of bureaucracy to buy but in Malaysia, anyone is able to own property outright in their own name, without having to find local partners or set up their own company. Malaysia’s legal system also allows children to inherit the property and the relatively recent exemption of RPGT (Real Property Gains Tax) makes investing now even more attractive.
The Malaysia My Second Home program (see related section) also offers expatriates the opportunity of staying in the country long-term and those on the scheme do not need FIC approval to buy a home. The program offers a ten year renewable visa, plus other incentives such as dependency passes for immediate family and a tax-free vehicle.
There is a wealth of choice open for high-end living: KL and the Klang Valley in particular are booming. However, holiday destinations such as Langkawi, Kota Kinabalu and Terrengganu have seen massive investment from both private and public sectors.
A range of serviced apartments, luxury bungalows and beach or riverfront properties are currently under construction with matching private hospitals, international schools and top class hotels in the pipeline. And attractively here, development in the leisure and tourism sectors protects property prices in the long term.
Prices at the high end are still at least a quarter of their equivalent in the US, and half of that in Singapore. As an example, condominiums or serviced apartments around KL city centre can range from less than RM 600 to RM 1,300 per square foot.
As a foreigner, you are eligible for Malaysian bank loans on new builds, for 60–70 per cent of the property’s value. Some new apartments offer up to 90 per cent ‘Loan to Value’ or LTV. The main proviso is the minimum price for an expatriate (which varies from RM 150,000 in KL to RM 300,000 in East Malaysia).
If this box is ticked, approval from the Foreign Investment Committee (FIC) is usually a formality, although you will still need a lawyer to take you through it.
Many properties are sold “off-plan” (i.e. before building starts). The range of choice is bewildering, from turnkey packages that offer furniture in with the deal, through buy-to-rent deals, holiday lets, free clubhouse membership and serviced apartments, right on down to plots of land with a list of architects and contractors. It pays to do your homework and living here puts you in the perfect position to research.
However, for those new to the country and looking to purchase, insiders will always give you extra nuggets of advice. Buy-to-rent apartments guarantee a specified return for a limited period of time, with the option to continue with their property management afterwards.
Their attraction is the steady rate of income over a set period. However, having confidence in those responsible for the upkeep and servicing is vital on any project to protect the value of your investment. If you opt for land purchase (relatively low labour and material costs make building your own home more than possible), you need to double check you are not being sold an area reserved for “Bumiputra” (Malays and other indigenous groups).
You should also be aware that some states do not allow foreign ownership for any property, so legal advice is a must before choosing. Where to buy depends on what exactly you want.
In general, the Malaysian market is rising steadily. But if you want a racier return, a couple of hotspots within KL—the Golden Triangle around KLCC, and the Mont Kiara area, for example - have prices that are rising much quicker than in the rest of the country. Malaysia also has a range of expatriate-focused property going up in many areas outside the Klang Valley.
As a whirlwind, but by no means exhaustive tour, we have: Port Dickson, the nearest sailing hub to KL; East Malaysia—Sabah’s scenic Kota Kinabalu and tip of Borneo both have a number of developments; Kuching, Sarawak’s historic capital and Miri, its up and coming resort city, have apartments, houses and plots of land open for foreign ownership; Terengganu has homes slated for film stars and racing drivers; Penang has a whole range of accommodation for the foreign market; and Johor’s property too is thriving.
Malaysia, as ever, is offering a little slice of everything at a reasonable rate. The sale usually goes through in three stages: ten percent of the money is paid within the first two weeks (3 per cent with the Letter of Offer and 7 per cent with the sale and purchase agreement), with the remainder usually due three months later. And if you trust what the analysts are saying, you might want to hurry things along.
Real estate agents registered by the Board of Valuer, Appraisers and Estate Agents Malaysia. The latest fee for service is approximately 3 per cent on the first RM 500,000 transacted and 2 per cent on the residue over RM 500,000. The agent will need written consent from the developer/owner for the sub-sale of the property.
All administrative fees for obtaining the consent, including registration fees and any outstanding / interest charges, shall be borne by the agent. In the event that written consent is refused by the developer/owner to the agent, the agent shall refund the deposit (if any) without interest to your solicitor and the Sale and Purchase Agreement between you and the agent shall for with be null and void.
If you purchase a sub-sale apartment from a vendor, the following will be applicable:
1. Agent fees
2. Loan application processing fee
3. Monthly installment (Loan)
5. Valuer’s fees and cost duties
6. Stamp duties
7. Legal fees and costs
8. Land office
The Board of Valuers, Appraisers and Estate Agents Malaysia
Suite 3B-10-3A, Level 10 Block 3B,
Plaza Sentral, Jalan Stesen Sentral 5,
Kuala Lumpur Sentral
Tel: 03–2273 7839/7862/5584
The Malaysian Institute of Estate Agents (MIEA)
88-B, Jalan SS 21/39, Damansara Utama
Petaling Jaya, Selangor Darul Ehsan
Tel: 03–7727 7477
When buying a property in Malaysia, it is highly recommended that you seek the services of a Malaysian lawyer. Not only will these lawyers know and understand the ins and outs of the local purchasing laws, they will also be able to lend useful advice about the standard practices and what to do in certain situations. Such expertise is absolutely vital for those wishing to purchase sub-sale or freehold property due to the rigid rules and agreements in place for such sales.
If purchasing off-plan property, however, procedures are slightly different as the property is yet to be built. As such, buyers and sellers must follow a number of clearly laid out obligations throughout the development stages. Initially, the buyer pays a 10 per cent “deposit” on the agreed purchase price to the developer.
Following this, the balance is paid incrementally upon completion of a number of pre-determined stages of development. Should the construction be delayed in any way, the developer is obliged to inform all parties. However, though legal action against the developers is possible, it usually involves a long, drawn out and expensive procedure and is rarely an efficient course of action.
It should also be noted that all legal fees are set by law and are based on the purchase price of the relevant property.
Generally instances of serious crime in Malaysia are low. Nevertheless, home security can be a big issue for expatriates. What with the travelling nature of the expatriate businessperson, families are often left on their own in the house or apartment.
Naturally, the security risk varies from location to location and some areas of the city are left much more open to crime than others. The type of residence you live in will also dictate the level of home security that, a) you need and b) is typically supplied with the property. An increasing number of expatriates are now living within gated communities, comforted by the increased security provided by a guard house and perimeter fence.
Many houses and apartments come equipped with grills on every window and door (don’t be alarmed when you go house-hunting, these somewhat over the top prison-esque methods are common across the country). Remember to keep these locked at all times and, of course, also lock your doors when you go out, even if you live in a high-rise condominium.
Though Malaysia has relatively low crime levels, break-ins can happen, and prevention methods do work. There are many home security companies in Malaysia and there are various alarm systems to suit anyone’s budget; from motion detectors to infra-red systems.
Companies like ADT Malaysia and Armour Security also offer a 24-hour monitoring system, which is ideal when you’re away on vacation or a business trip. And don’t forget smoke and fire sensors that make alerting the fire department in an emergency a considerably faster process.
On top of these, you have security monitoring systems, closed circuit TV, and wireless intercom systems. And in addition there are also the common sense things that can be done, such as having a solid wood or metal door with deadlock bolts and windows that can be secured with key locks. Further security measures you may wish to take include placing signs indicating that your home is monitored by security services or devices. Even if it isn’t, potential burglars will be none-the-wiser.
Besides the physical security measures, you may also wish to take out home insurance. Insurance companies such as AXA offer a range of insurance packages that cater to expatriates.
Mortgage rates in Malaysia are affected by the type of property to which they apply. You’ll tend to find better deals when looking to purchase completed or under construction property rather than bungalow land, ready for development. Typically, expatriates will be eligible for a margin of finance up to 60 per cent of a property’s value with tenures running for 20 years, providing the value of the property exceeds RM 250,000.
These rates vary from those found advertised by the major banks as they normally apply to Malaysians only.
However, to expatriates here under the Malaysia My Second Home scheme (see related section), different rules and terms will apply. For such residents, deals are generally more attractive and margins of finance can be found up to 85 per cent whilst tenures usually run for 20 years or up to the age of 70, whichever comes first.