Can Foreigners buy Property in Malaysia? A Quick How-To Guide

Can Foreigners buy Property in Malaysia? A Quick How-To Guide

The short answer is yes, foreigners can buy property in Malaysia. However, there are some restrictions and guidelines that you need to follow. Below are the different types of properties that foreigners can purchase in Malaysia:

1. Residential Properties

Foreigners can purchase any residential property in Malaysia that is valued above RM 1 million (approximately USD 240,000). You can buy the property under your name or through a local company. If you’re buying your property under a company, the company needs to be at least 51% Malaysian-owned.

2. Commercial Properties

Foreigners can also buy commercial properties in Malaysia that are valued above RM 1 million. However, the property must be used for business purposes only. Foreigners are not allowed to purchase commercial properties that are intended for residential use.

3. Land

Foreigners are not allowed to purchase land in Malaysia unless they have special approval from the government. The approval is usually granted to foreigners who are planning to develop the land for commercial purposes.

Purchasing a property in a foreign country can be daunting and scary undertaking, especially when it comes to the legal processes involved.

However, I also know that with the right guidance and knowledge, it can be a seamless experience. In this guide, we will walk you through everything you need to know about buying a house in Malaysia as a foreigner.

Foreign Ownership of Property in Malaysia

Foreign ownership of property is permitted in Malaysia, subject to certain restrictions. The government has put in place regulations to ensure that the property market is not flooded by foreign investors, and that the interests of local citizens are protected. Below are the key regulations you should be aware of:

1. Minimum purchase price: Foreigners are only allowed to purchase properties above a certain price threshold. In most major states, the minimum purchase price for foreigners is RM1 million (approximately USD250,000).
2. Property type: Foreigners are only allowed to purchase certain types of properties, such as serviced apartments, condominiums, and landed residential properties. It is important to note that not all properties are eligible for purchase by foreigners.
3. Land area: Foreigners are restricted to purchasing properties with a land area of less than 1 acre (approximately 4,000 square metres).
4. State approval: In some states, such as Penang and Melaka, foreigners are required to obtain state approval before purchasing any property.

The Buying Process

Now that you are aware of the regulations, let’s take a closer look at the buying process.

1. Find a Property: The first step is to find a property that meets your needs and budget. You can either work with a real estate agent or search online for listings. It is important to note that some developers have restrictions on selling properties to foreigners, so be sure to check before making any commitments.
2. Submit Offer: Once you have found a property you are interested in, you can submit an offer to the seller. If your offer is accepted, you will need to pay a booking fee, which is typically 2-3% of the purchase price.
3. Hire a Lawyer: It is important to hire a lawyer to assist you with the legal processes involved in purchasing a property in Malaysia. Your lawyer will conduct a title search to ensure that the property is free of any encumbrances, and will prepare the necessary documents for the transaction.
4. Sign the Sales and Purchase Agreement (SPA): The SPA is a legally binding document that outlines the terms and conditions of the sale. It is important to read and understand the SPA before signing it.
5. Pay the Deposit: Once the SPA is signed, you will need to pay the deposit, which is typically 10% of the purchase price.
6. Obtain Financing through Property Loans (if necessary): If you require financing, you will need to apply for a loan from a Malaysian bank. The bank will conduct a credit check and assess your ability to repay the loan.
7. Finalize the Sale: Once all the necessary documents have been prepared and the financing (if necessary) has been obtained, the final step is to complete the sale. This involves paying the balance of the purchase price, as well as any legal fees and stamp duty.

Stamp Duty and Legal Fees

Stamp duty and legal fees are an unavoidable part of the property purchasing process in Malaysia. Below are the fees you can expect to pay:

1. Stamp duty: The stamp duty is calculated based on the purchase price of the property. For properties above RM1 million, the stamp duty is 4% of the purchase price.
2. Legal fees: The legal fees are also calculated based on the purchase price of the property. The fees can range from 1- 2% of the purchase price, depending on the complexity of the transaction and the lawyer you hire.

Tax Implications

As a foreigner, you will be subject to certain property taxes when purchasing a property in Malaysia. These taxes include:

1. Real Property Gains Tax (RPGT): RPGT is a tax imposed on the capital gains from the sale of a property. As a foreigner, you will be subject to RPGT at a rate of 30% for properties sold within 5 years of purchase, and at a rate of 5-10% for properties sold after 5 years.
2. Withholding Tax: Withholding tax is a tax that is withheld by the government on behalf of the seller. As a foreigner, you will be subject to withholding tax at a rate of 7% of the purchase price.

Benefits of Buying Property in Malaysia

Malaysia is a popular destination for foreigners looking to purchase property for various reasons. Below are some of the benefits of buying property in Malaysia:

1. Affordable Prices: Compared to other countries in the region, property prices in Malaysia are relatively affordable.
2. High Rental Yields: The rental yields in Malaysia are among the highest in the region, making it a lucrative investment opportunity.
3. Quality of Life: Malaysia is known for its high quality of life, with a low cost of living and excellent healthcare facilities.
4. Stable Economy: Malaysia has a stable and growing economy, making it a safe investment option.

Conclusion

Buying a house in Malaysia as a foreigner can be a complex process, but with the right guidance and knowledge, it can be a seamless experience. As outlined in this guide, there are certain regulations and procedures that you need to be aware of before embarking on this journey. At Propeasy Asia, we are committed to providing you with the support and guidance you need to make your property purchase in Malaysia a success. So, if you’re looking to invest in property in Malaysia, we’re here to help.

FAQs

Q1. Can foreigners purchase low- and medium-cost properties in Malaysia?

No, foreigners are not allowed to purchase low- and medium-cost properties in Malaysia.

Q2. Is approval from the Foreign Investment Committee required before purchasing any property in Malaysia?

Yes, approval from the Foreign Investment Committee is required before purchasing any property in Malaysia.

Q3. How long does it take to obtain approval from the Foreign Investment Committee?

Approval from the Foreign Investment Committee is usually granted within 30 days.

Q4. What is the minimum price of the property that foreigners are allowed to purchase in Malaysia?

Foreigners are only allowed to purchase properties that are priced at RM1 million and above but it depends on the state of purchase.

Q5. Can foreigners purchase commercial properties in Malaysia?

Yes, foreigners can purchase commercial properties in Malaysia.