Guidelines for foreigners
buying property in Malaysia
Buying a property in your home country can be pretty daunting, let alone buying it in a foreign country like Malaysia.
But, to be honest, Malaysia’s a pretty great place to buy (and live), and my folks haven’t looked back since.
And whether you’re planning to buy here as an expat or as a foreign investor, there are plenty of reasons to get stuck in.
So, to help you along, I’ve put together this guide to buying property in Malaysia as a foreigner...
Whether you’re reading this from Malaysia, Singapore, Australia, the US, the UK, Hong Kong, or somewhere else - you’ll definitely find it useful.
Why you should buy property in Malaysia
If you’re reading this, you’ll probably have your own reasons for looking to buy property in Malaysia.
But in case you’re just exploring or not sure, here are a few great reasons:
Still super affordable. Despite the high growth over the last two decades, Malaysia remains an affordable place to buy. In the right places, you can get great value for money. The Ringgit is also relatively weak in relation to many currencies at the time of writing this.
Buying costs are low. Compared to Singapore, Thailand, Australia or the UK, the buying costs are still incredibly low at circa 4-5%.
Financing available, and free flow of capital. Firstly, a number of the banks are eager to lend to foreigners. And Malaysia places no restrictions on the transfer of capital (funds) to and from other countries.
Relatively low capital gains tax. The capital gains tax that the Malaysian government imposes on the sale of property, Real Property Gains Tax (RPGT), is relatively low compared to other countries in the region - especially if you hold the property for more than 5 years.
The two main ways to buy property in Malaysia
There are two main ways to buy property in Malaysia you should know about: buying new launch properties or buying sub-sale properties.
New launch properties tend to be very popular with investors (foreign or local), whereas sub-sale properties tend to be most common amongst foreigners looking to live in Malaysia.
1. Buying new launch properties
‘New launch’ properties (or ‘new launches’) are new properties that are sold directly by the developer, often “off-plan”, i.e. before they are complete.
When you buy a new property, you typically pay for the property in ‘instalments’ based on pre-agreed milestones. This is typically standardised and developers usually use the instalment money to fund the construction.
Unbuilt new launch properties can be 'bought' with relatively small down payments – usually a reservation fee or booking fee. That is, until they're built. This is why they’re usually popular with investors, but also subject to speculation!
2. Buying sub-sale properties
If you’re not buying a property directly from a developer, then there’s a good chance you’re buying a ‘sub-sale’ property. Sub-sale properties are basically properties which have been owned previously, being resold in the ‘secondary market’.
Despite all the hype about new launch properties (agents love marketing these “hot sells”…), the sub-sale market in Malaysia is significantly bigger.
The different types of property in Malaysia
Before diving in head first, you should know that buying property in Malaysia comes with a whole new lingo of its own right. So, you might have to shake off some seemingly normal property terms and adapt to their new meanings.
There are really 14 property types you need to be aware of before buying in Malaysia.
But to understand the rules, you only need to understand the different types of property title for now. Property ‘title’ usually refers to your ownership rights, and different countries have different systems as to how this is documented.
Malaysia operates under the Torrens title system of land registration, which is common amongst most commonwealth nations including Australia and Singapore.
In Malaysia, you’ll typically need to be aware of three types of title: master title, strata title and individual title.
A master title usually refers to the ‘top-level’ title held by a property developer, which affords the developer full control and rights over land they own. Typically you’ll find references to master title when new properties are being constructed, before individual or strata titles are granted.
A strata title is usually granted to a property owner who buys a property in a shared building (i.e. non-landed property). So, for example, owners of condominiums usually have strata titles.
An individual title is similar to a strata title, but it typically refers to landed properties like houses, bungalows, semi-detached houses and so forth - where the property owner has a discrete piece of land, usually below the property.
As a rule of thumb, typically landed properties have individual title, and non-landed properties tend to have strata title. Although some landed properties (specifically in gated developments) may have strata titles.
Confusingly, quite often serviced residences are on commercial titles - as they are frequently attached to or on top of commercial property.
The property buying restrictions that you should know about
One of the tricky things about buying property in Malaysia is that the Government imposes a minimum purchase price for foreign property buyers.
This is generally based on three things:
Where the property is located (typically which state it’s in)
The title of the property - strata or individual title
Whether the buyer holds a Malaysia My Second Home (MM2H) visa or not - more on this later
Since 2014, the minimum property purchase price that the Malaysian government has imposed on foreign buyers is RM1,000,000 (or about USD 225,000 at the time of writing)
It was increased from RM 500,000, partially in an effort to curb speculation from foreign investors.
Whilst there is a Federal minimum of RM1,000,000, States have the ability to overrule this by imposing their own buying restrictions - so you’ll find that the limits differ quite a lot!
*Zones in Selangor
Zone 1 - Districts of Petaling, Gombak, Hulu Langat, Sepang and Klang
Zone 2 - Districts of Kuala Selangor & Kuala Langat,
Zone 3 - Districts of Hulu Selangor and Sabak Bernam
As you can see, Penang, Selangor and Melaka are stricter on minimum purchase prices for landedproperties in particular (or at least those on individual titles) whilst offering more leniency for those on strata titles.
You should know that Penang, Melaka and Johor also impose a ‘state levy’. Penang imposes a state levy of 3% whilst Melaka and Johor charge a state levy of 2% - which can significantly bump up your buying costs.
Whilst it doesn’t impose a state levy, Selangor is probably the strictest of all states - they only allow foreigners to buy landed properties if they have strata titles - which usually limits foreigners to buying in gated developments.
For new developments in Selangor, foreigners are not allowed to purchase more than 10% of the total number of properties set aside for non-Bumiputras (each new development has a quota set aside for Bumiputras, or the indigenous Malay people, called “Bumi Lot”).
Lastly, in Selangor foreigners are not able to buy property at auction or buy agricultural land.
What if you’re on a Malaysia My Second Home (MM2H) visa?
If you’re considering relocating to Malaysia, the chances are that you’ve heard of MM2H.
In short, the MM2H programme is a programme that allows foreigners and their family to live in Malaysia on a long-stay visa for up to 10 years.
It has various benefits such as tax-free remittance of foreign income, ability to import a car, ability to bring a domestic helper amongst other things. The list goes on - here’s a pretty good summary.
Anyway, most importantly, in a number of states MM2H visa-holders can buy property below the RM1,000,000 threshold that otherwise applies:
In Kedah, there is no minimum purchase price on properties bought by MM2H visa holders.
In Perak, the minimum price is RM 350,000 as opposed to the RM 1 million for non-MM2H visa holders.
In Penang, the minimum price drops to RM 500,000 although that’s limited to a maximum of 2 units.
In Sarawak it’s RM 300,000 for MM2H visa holders as opposed to RM 400,000.
Below is the table of summary to make it clear.
In some cases, however, MM2H can be more of a setback!
In Perlis, for example, the minimum purchase price for MM2H visa holders is RM 1 million rather than the RM 500,000 threshold for other foreigners.
In Selangor MM2H visa holders must buy a new property direct from a developer (rather than buying ‘sub-sale’ properties), and each family is only allowed to own one property.
Regardless of where you buy, though, MM2H can offer one major benefit - it can help you get a better margin of financing on your properties. In some cases, this can be up to 90% rather than the typical 70% that’s available to foreigners.
The properties that foreigners cannot buy altogether
In addition to the minimum price thresholds mentioned above, there are a few more types properties that foreigners cannot buy, generally.
These are as follows:
Malay Reserve Land - Malay Reserve Land is exclusive land that can’t be sold to any race except for Bumiputeras. More on Malay Reserve Land and the Malay Reserves Enactment here.
Bumi Lots - Often confused with Malay Reserve Land, each property development has a specific quote for Bumiputras called “Bumi Lots”. Whilst occasionally cases can be made for non-Bumis to buy them, they are off-bounds for foreign buyers.
Low to Medium Cost Properties - Foreigners are not allowed to purchase low to medium cost housing. This is determined by State authorities but these are usually flats.
Agricultural Land - Most agricultural land in Malaysia is off limits for foreigners.
Bumi Lots and Low to Medium Cost Properties aren't always easy to identify, so be sure to learn the differences between these property types.