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A Guide to Malaysian Property And Real Estate Investment Deals By IQI

Historically Malaysia has always been a major source of business in terms trade, commerce, and real estate. Thanks to the straits of Malacca, Malaysia’s economy has continued to grow based solely on its location. Combined with the present unstable economy of the Middle East, Malaysia’s own oil reserves, business-friendly policies, and a strong Islamic Banking industry, Malaysia is most definitely one of the best places to invest in, in all of Asia.

In this article we will be giving you a brief overview of Malaysian property and real estate investment deals.

Foreign Investment Policy for Malaysian Real Estate

The property laws in Malaysia are much more accommodating towards foreign investors than most other Asian countries. Property investors should note that Malaysia is essentially the only country in Asia which allows foreign investors to own land in any town or city. This means that Malaysia offers more options than other Asian countries, in terms of real estate.

However it should be noted that there are a few restrictions.

For example, foreign investors are required to invest in property whose value must be equal to or exceed a certain value. This minimum purchase requirement is RM 1 million in most of Malaysia and RM 2 million in the state of Selangor. Also, foreigners may only purchase landed property if they wish to buy it in a gated community.

The reason for this is to allow foreign investors in fall into mid to high end segment of society and at the same time prevent them from driving up the value of properties for Malaysian citizens.

Also foreign investors may not buy land that has been designated as “Bumiputera only” – which means for ethnic, Muslim Malays. They also may not own most agricultural land or properties that have been designated as low or medium cost housing by the respective state authority.

Types of Properties to invest in

In Malaysia, the three major property types are:

  • Land
  • Commercial
  • Residential

As such the housing sector or the residential sector is the main driver in Malaysian real estate.

In Malaysia, the price of the average house has more than doubled since the year 2000. Major urban centers show a quadrupling in prices in the past 1.5 decades and according to the Malaysian House Price Index, growth has been consistently positive, averaging at 5.85%.

Some of the best properties to invest in for this sector include:

  • Apartments
  • Flats
  • Condominiums
  • Serviced Apartments/Residences
  • Bungalows
  • Terraced Houses
  • Semi-Detached properties
  • Townhouses

Property Taxes in Malaysia

Rental Income Tax: Rental income tax in Malaysia for residents is a flat rate of 20%. For non residents, the numbers bump up to 25%.

Real Property Gains Tax: Real Property Gains Tax or RPGT for short is the Malaysian equivalent of Capital Gains Tax. RPGT is paid on any profit that is made when a property is being sold. In Malaysia the RPGT rate may be up to 30% if the property to be sold has been held for less than 5 years. However it reduces to 5% if it is held for up to 5 years and goes down to 0% for residents when held for more than 5 years (the rate remains at 5% even after 5 years for non residents). This is to prevent speculation by short term buyers and thus keep property prices stable.

Assessment Tax on Residential Property: Assessment tax on residential property is a local tax that is based on the annual rental value of the property, as assessed by the local authorities. It is generally levied at a flat rate of 6% and is payable in two installments.

Quit Rent: Quit rent is a local tax that is levied on all landed properties and is payable annually at a rate of 1 to 2 Sen per square foot. Quit rent liability is generally estimated to be less than RM100 per year.

Places to invest in property in Malaysia

Kuala Lumpur

The financial heart and capital of Malaysia, Kuala Lumpur offers luxury high-rise condominiums, serviced apartments, thriving commercial hubs, world class restaurants, and its exuberant shopping centers and malls.

Selangor

Considered Malaysia’s richest state in terms of gross domestic product, Selangor is filled with prosperous urban centers which include Petaling Jaya, Shah Alam, Puchong, and Klang. Selangor is well connected with public transport and has all the modern conveniences as well as more green living spaces.

Johor (Iskandar Malaysia)

The state of Johor is the third largest state in Peninsular Malaysia and is a mix of modern culture, urban settings, coastal life and ancient biodiversity. It is impossible to talk about Johor’s investment potential without mentioning the special economic region of Iskandar Malaysia, which is the new main southern development corridor in Johor. It is a major government initiative to attract foreign investment. The area has residential, commercial, educational and entertainment zones.

Penang

Also known as the “Pearl of the Orient,” Penang is especially loved by expatriates who consider it their home away from home. There are plans to develop the Northern Corridor Economic Region (NCER), an economic and social development initiative that aims at increasing the income levels of Penang, northern Perak, Kedah and Perlis as well as attract more foreign investment in this area.

Melaka

Tourism and manufacturing are the two main sectors in Melaka’s economy. Its true wealth lies in its cultural heritage and it has several locations that are of historical interest that brings tourists to the city over and over again. Melaka has seen a massive increase in real estate development, to especially attract foreign investors.

Is Malaysian property a Good Investment?

Malaysia has one of Southeast Asia’s most secure property ownership systems. Be sure to deal with a reputable company. New homes and condo units always come with a warranty. It is best to make your deal through an established property agency to avoid being fooled by glib talkers.

There is a clear trend for Malaysian real estate to offer lucrative returns when one invests wisely. Rapid urbanization and an increasing population ensure rising property value, making it worth looking at the suburbs for a long-term, appreciation-based investment.

The facts stated above make it clear that Malaysia’s real estate sector is filled with potential and is also one of Asia’s better real estate investment options.

Want to know more about real estate investment in Malaysia? We want to hear from you, send a message to hello@iqiglobal.com or call us at 012-299-6155 or 037-450-6655.

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Click here for more articles like this one: 5 ways to invest in real estate

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