Tips on Buying Property in Malaysia

Experts say there are great property deals in Malaysia, where there’s a better value than neighboring countries because of the weak ringgit and a general economic slowdown.

"Property in Malaysia is actually reasonably affordable still, compared to other countries," said Derek Uittenbroek, who runs the website PropertyLife and is an investor in the Malaysian real estate market himself. "The final icing on the cake is the fact that the Singapore dollar, U.S. dollar, Australian dollar, Japanese yen and to some extent even the British pound and euro are either at, or close to, all-time highs against the ringgit."

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According to Haresh Khoobchandani, CEO of iProperty.com Malaysia & Singapore, a property listings site, foreigners are able to get much better value as compared to neighboring countries. (iProperty is owned by News Corp.’s’ REA Group. News Corp also owns Dow Jones, which runs Mansion Global.)

"Based on data obtained from Brickz.my and iPropertyIQ, for MYR1million (around US$230,000), property buyers and investors are able to get a 1,190-square-foot property in prime residential areas, whereas in Singapore they are only able to get a 140-square-foot property and in Hong Kong a 150-square-foot property" for the equivalent amount, Mr. Khoobchandani said.

Malaysia is also known as an excellent retirement destination, and according to Mr. Khoobchandani, was ranked sixth in the world and first in Asia by International Living as a retirement destination in 2017, because of its islands, beaches, and rainforests, as well as low costs of living, good health care and diverse population.

Government initiative helps spur foreign-buyer interest

The Malaysian real estate market completely changed for foreigners with the advent of the Malaysian My Second Home (MM2H) government initiative in 2003, which was launched to generate more foreign buyers and investment. According to Mr. Khoobchandani, now foreigners can purchase any type of property, with the exception of properties on reserved land and properties that have been allocated for Bumiputera (indigenous people’s) interest.

As a bonus, Mr. Khoobchandani said, "There is no minimum price threshold for foreign property buyers, and foreign property purchases are exempted from real property gains tax until Dec. 31, 2025."

How to do it

Luckily for foreigners, buying in Malaysia doesn’t differ much from other countries in the region. According to Mr. Uittenbroek, "Malaysia operates under the Torrens Title system of land registration, which is common amongst most commonwealth nations, including Australia and Singapore." This means that land is transferred through a registration of title instead of deeds, in order to simplify transactions and ensure clear ownership.

The largest difference for foreigner buyers as opposed to Malaysians is that foreigners must obtain state approval for their purchase. Mr. Uittenbroek outlined the steps: First, a buyer makes an offer to purchase and prepares a 10% deposit. The deposit is refundable and conditional upon the approval being granted by the state. Then, the buyer’s lawyers construct the Sale & Purchase Agreement (SPA), which is also conditional on the buyer getting state approval for their purchase by the relevant state authority (there are 13 states and three federal territories in Malaysia). A standard SPA is used when the seller is a developer, but it tends to be more open to negotiation and crafted from scratch when it’s a secondary sale.

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"Each state has its own rules (and timelines) but typically there will be some additional fees payable— this can range from several hundred up to 10,000 ringgit (around US$2,300)," Mr. Uittenbroek said. "Typically, a buyer's lawyer will help the buyer complete their application form and get all their documents together." If the approval is denied, he said, the transaction is voided and the deposit returned, though "I don't know of specific instances where this has happened," he said.

After that, the transaction proceeds as normal. Loans are available to foreigners, though the loan-to-value ratio is capped at 70%, and it is easy to transfer funds from abroad. Once the approval is received from the State Authority, the seller receives the balance and the property is transferred.

On the hunt

"As in most places, I imagine, the best way to get a taste for the market is using the big online property portals," Mr. Uittenbroek said. "The biggest ones are iproperty.com.my and propertyguru.com.my, though I personally prefer propsocial.my, as it's a lot more transparent and has loads of good content. They have lots of useful information about the area the property is in, the property itself (if it's a condo), and it's all really easy to navigate."

Mr. Uittenbroek also mentioned that for-sale-by-owner properties are listed on mudah.my, a craigslist equivalent.

People come to Malaysia from Asia and around the world. "In 2016, iProperty.com Malaysia revealed that the top 10 foreign visitors to the site were from Singapore, United States, Australia, United Kingdom, Hong Kong, Indonesia, India, Japan, China and United Arab Emirates," Mr. Khoobchandani said.

And in terms of the hunt, Mr. Uittenbroek cautioned buyers to be careful about finding the right agents in the country. "I find that the role of agents is also a bit confusing, as they can represent both sides of a transaction (but not at the same time)," he said. "For a long time, estate agents were also unregulated, which led to quite a few issues in the market. This is improving as regulations are now enforced, but there are still issues with transparency about who they work for sometimes."

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He advised that buyers and sellers to make sure they know who is paying the agent’s bill. "If the answer is not clear... it's probably the buyer." Also, he added "the regulations in Malaysia allow agents to charge either the seller, or buyer, as long as it's not both in the same transaction."

In addition to this, he advises buyers to know "asking prices are not selling prices, and to take listings with a pinch of salt, as sometimes you'll find duplicated or false listings."

When considering purchasing as an investment, according to Mr. Uittenbroek, buyers should also be aware that political changes can have serious impacts, and that the rental market is very poor, in large part because of an oversupplied market. Mr. Uittenbroek said that the oversupply is "potentially a result of investor demand combined with more relaxed financing and foreign buying rules in the past." While oversupply means there are great deals to be had, buyers should proceed with caution, too.

But those who stick out the hunt—which Mr. Khoobchandani said can take one to two years—are handsomely rewarded with a good deal in a wonderful location

"Malaysia is slap bang in the middle of South East Asia," he said. "You can get to 60% of the world’s population within a five-hour radius."