Buying Process
- If a buyer uses an estate agent to help them find property for sale in Malaysia they may be liable to pay agency fees of up to 3% of the property’s underlying purchase price. Some agents will require this fee be paid when an offer to purchase has been accepted but it is not actually wise to pay the agent until the whole property purchase transaction has been completed
- In terms of restrictions placed on non-resident purchasers, firstly permission to buy has to be granted by the Foreign Investment Committee of the Economic Planning Unit of the Prime Minister’s Department. Secondly overseas foreign investors cannot own property on Malay reserved land. Other than these restrictions foreign owners of property are treated in the same way as Malaysian owners and both are protected by the same real estate laws
- Purchaser pays an earnest deposit of 2% purchase price upon signing of the letter of offer or acceptance
- The Sale and Purchase Agreement (SPA) to be drawn up by the solicitor and executed by both parties within 14 days from the date of the letter of offer. Upon signing of SPA, pays 8% purchase price being the balance of 10% of the sale price. (The purchaser then proceeds to apply for the bank financing, if required).
- Pay 90% of the remaining purchase price within the next 3 months from the signing date of the sale and purchase agreement. An extension of 30 days is allowed, subject to an interest of 6% per annum on the balance sum.
- Take possession of property upon full payment
- It is advisable to have a structural survey carried out on any property that meets the investor’s objectives because many homes are known to have structural problems and they may not be apparent at first glance.
Sale & Purchase Agreement (SPA) Guideline
Legal Fees
Preparation of Sale & Purchase Agreement, the transfer of the property and attending to stamping and registration. The first schedule of the Solicitors Remuneration Order 1991 sets out the fees based on the purchase price of the property as follows:-
- 1.5% on the first RM150,000
- 0.75% on the next RM4,900,000
- 0.25% on the remainder
Stamp Duty
All transfer of property is subject to Government Stamp Duty. Rate of Stamp Duty is based on the value of property.
- 1% on the first RM100,000
- 2% on the next RM400,000
- 3% on the next RM1,500,000
- 4% on the remainder
Loan Agreement
Preparation of the Loan Agreement of the property and attending to stamping and registration.
- 1% of the purchase price on the first RM100,000
- 0.5% on the next RM4,900,000
- 0.25% on the next RM4,901,000
Other Disbursement
Stamping of loan documents (based on loan amount). Eg..
| Loan Amount (RM) |
50,000 |
100,000 |
150,000 |
200,000 |
250,000 |
| Govt Stamp Duty (RM) |
250 |
500 |
750 |
1000 |
1250 |
Other Miscellaneous disbursement approximately RM400
Taxation Issues
If the investor sells their property in Malaysia within five years of purchase and realize a gain from it they will have to pay a flat tax of 30% of the gain to the government. Gains made on the disposal of property after the fifth year will be taxed at a flat rate of 5%
Investment Potential
The Malaysian property market offers a good mid range investment opportunity to international investors seeking reasonably priced real estate with sustainable growth potential in both the residential and tourism sectors. The stability of the property market in Malaysia is based upon the stability of the country’s economy which is currently expanding at a sustainable rate and benefiting from closer export ties with China as well as strong levels of foreign direct investment from the US, China and Japan. Furthermore the attraction and appeal of the country means that it has a robust tourism sector that has spawned a secondary holiday home market which further boosts the long term strength of the property market and broadens the investment opportunities available to an investor.
If looking to rent out property, two main options are available to investors
- Executive rental market, particularly in Kuala Lumpur, along with lettings of serviced apartments for the expanding expatriate population
- Tourism market, either through residential short term lets, commercial accommodation units or through the development of properties for sale to second home and holiday home hunters
The benefits of Malaysia as a destination for a property investor are manifold and stem primarily from the strength of the country’s economy. GDP was in excess of 7% in 2004 and 2005, inflation in Malaysia is low, unemployment is low, exports and reserves are strengthening and Malaysia has very supportive governmental policies for the attraction of foreign investment which include tax incentives and pro business policies.
Therefore an international real estate investor looking for a well priced, strong economy to target for substantial growth and yields over the medium to long term should consider Malaysia.
Interested?
