Foreign investors are investing in Malaysia today. According to Prime Minister Datuk Seri Anwar Ibrahim, Malaysia has received RM76.1 billion in potential investments this year. Real estate is one of the biggest sectors, but why are foreign investors coming to Malaysia? Why is it interesting to buy property in Malaysia?
Malaysia is a dynamic country with much to offer foreign real estate investors. But before you jump in, it's important to understand the landscape.
Malaysia's political scene has undergone a recent makeover. The long-reigning Barisan Nasional coalition stepped down in 2018, leading to a period of uncertainty with short-lived governments.
While a new coalition emerged in 2022, its long-term stability remains to be seen. Recent efforts at dialogue offer a glimmer of hope, but investors who prefer a predictable environment might find this lack of established leadership a cause for concern. ((BTI) 2024)
The Malaysian economy presents a good economy. According to PNB Paribas economic research (2024), the GDP growth slowed from 8.7% in 2022 to 3.8% in 2023, but 3.8 is still a very good GPD growth.
After that, the good news is that domestic spending remains strong. Unemployment is low, wages are creeping upwards, and inflation is under control. However, potential subsidy reductions could nudge it up a bit.
But there are some challenges to watch. The export-reliant economy could face headwinds from a potential global slowdown and a decline in electronics production. Household and corporate debt levels are also high, requiring careful government management.
According to Trading Economics, after a dip in the first three quarters of 2023. Consumer confidence saw a significant 13.3% jump in the fourth quarter in Malaysia. Projections suggest this growth is expected to continue in the first half of 2024.
Rising consumer confidence points towards a strong domestic market for real estate investments. Which is great news for investors looking to tap into a vibrant local market.
Malaysia's property market has been torn for the past 20 years! People are buying and selling more properties than ever before. In 2000, there were only around 133,000 property transactions, but by 2023, that number skyrocketed to over 399,000!
The total value of these deals has also grown massively, reaching over RM200 billion in 2023, more than four times higher than in 2000.
Prices are rising too, with an average increase of 3.2% nationwide in 2023. Some areas, like Johor, are seeing even bigger jumps, with house prices climbing over 6%. This strong history suggests a bright future for Malaysian real estate (Birruntha, 2024)
The Malaysian housing market in 2024 is shaping to be a tale of two halves. While overall growth is predicted to be a moderate 0.64%, dig a little deeper, and you'll see a market with clear favourites, according to Palansamy (2024).
Terrace homes are poised for a strong year, with a projected value increase of a healthy 2.77%. This could be due to their affordability and appeal to families. They offer more space than apartments but often at a lower price point than detached houses.
Semi-detached homes and high-rise apartments are also on track for some growth, around 0.5%. These options suit young professionals or those seeking a lock-up-and-go lifestyle in urban areas.
Detached houses, however, are the potential underperformers, facing a predicted price dip of 1.62%. This could be due to higher maintenance costs or buyer preferences shifting towards more manageable properties.
This targeted growth suggests the market is catering to specific needs and lifestyles. So, whether you're a young couple or a growing family, there's a good chance you'll find a property type that aligns with your budget and aspirations.
Malaysia welcomes foreign investment in its real estate market, offering ownership opportunities for various property types.
Foreigners can generally own various properties in Malaysia, including landed houses, high-rise condominiums, commercial buildings, and even industrial land. This openness makes Malaysia an attractive option for foreign investors seeking diversification.
There are some limitations to keep in mind. Foreigners cannot purchase properties on Malay Reserved Land, low or medium-cost residential units designated explicitly for Malaysian citizens, or Bumiputera lots (special land designated for indigenous Malays).
Additionally, agricultural land is off-limits to foreign ownership. In Selangor, foreigners face further restrictions, generally requiring a landed strata title (ownership of a unit within a larger development) or permission to buy auction properties.
Most states in Malaysia have a minimum purchase value of RM1 million (approximately USD 238,000) for foreigners looking to buy property. However, a few exceptions exist, so it's important to research specific state regulations.
Malaysia offers programs designed to attract foreign property investors:
Foreigners with residency status and a solid financial profile can obtain mortgages from Malaysian banks. Property ownership also comes with some tax considerations.
Investing in Malaysian real estate presents a compelling opportunity for foreign investors seeking attractive returns. According to Global Property Guide (2024), the national average gross rental yield is a healthy 5.16%.
In simpler terms, for every RM100,000 you invest, you could earn a pre-tax annual rental income of RM5,160. However, this is just a starting point.
Location is king when it comes to maximising your rental yield. While the national average offers a good baseline, some areas significantly outperform others. The southern city of Johor Bahru boasts a crown-worthy 6.25% gross rental yield, making it a potential goldmine for investors.
Iskander Puteri and Petaling Jaya follow closely behind, with yields exceeding 5.4%. Even the capital city, Kuala Lumpur, offers a respectable 4.35% yield. Investors seeking a more relaxed pace might look to George Town, but be aware that its yield sits at 3.52%.
High-rise condominiums in popular tourist destinations might offer high rental income due to short-term rentals, while landed properties in established neighbourhoods could attract long-term tenants.
Malaysia's real estate market is booming, attracting foreign investors with its strong potential returns and diverse property options. Here are some key benefits to take note on:
Fueled by a growing population and a history of steady price increases, the Malaysian property market offers a chance to capitalise on a thriving sector.
Investors can choose from various property types, from spacious terrace homes ideal for families to sleek high-rise condominiums perfect for urban professionals.
The rental yield is high in the country. Formally specific areas, like Johor Bahru, boast high gross rental yields, making them attractive for investors seeking passive income.
Beyond the potential for solid returns, Malaysia offers a welcoming environment for foreign investors. The government has established programs like MM2H (Malaysia My Second Home) to streamline the process of property ownership for foreigners.
This, coupled with a relatively low minimum purchase value in most states, makes Malaysian real estate an accessible investment opportunity.
Malaysia offers advantages beyond real estate, including strong market fundamentals and diverse property options.
Its strategic location in Southeast Asia makes it a regional powerhouse. Situated along major trade routes with excellent infrastructure, Malaysia provides easy access to other booming economies in the area.
This strategic positioning can be a huge benefit for investors seeking to capitalise on the region's economic strength.
Financially savvy investors will also appreciate the favourable currency exchange rates. For some, the current exchange rate between their home currency and the Malaysian Ringgit (MYR) can be quite advantageous.
This translates to a more affordable entry point into the market, allowing you to invest in a higher-value property or diversify your portfolio by purchasing multiple properties.
Malaysia is a really big country and has a lot of places where you can invest. But what is now the best place to invest in Malaysia? As written in the article of IQI about the 7 best places to invest in property, here are the best places.
Kuala Lumpur, the beating heart of Malaysia, entices investors with its modern infrastructure and rich cultural tapestry. Excellent connectivity via KLIA and KLIA2 airports makes it a global hub. Sound infrastructure ensures easy navigation within the city and beyond.
If urban life isn't your style, Selangor offers a serene haven at budget-friendly prices. Its proximity to Kuala Lumpur makes it ideal for residents and businesses seeking a cost-effective alternative.
With excellent infrastructure and amenities, Selangor is a haven for those seeking a balance between city life and affordability.
For nature enthusiasts, Sabah beckons with its pristine beaches, lush rainforests, and majestic Mount Kinabalu.
This haven for outdoor adventurers presents an opportunity for investment in holiday rentals fueled by the influx of tourists and expats.
Penang's vibrant blend of culture, delectable cuisine, and captivating beauty isn't just a tourist draw - it's an investor's dream.
The state's role in the Northern Corridor Economic Region development plan promises further growth. With numerous ongoing projects and stunning sea views, Penang offers properties with excellent potential returns.
Johor's strategic location bordering Singapore makes it a prime destination for those working in the Lion City. Residents enjoy a high standard of living at a more affordable cost.
This unique combination of affordability and proximity to a global hub makes Johor a hotspot for investors seeking a balanced lifestyle.
Perak's captivating limestone hills and serene Taiping Lake Gardens present an exciting opportunity for investors. The state's natural beauty offers immense potential for eco-friendly tourism developments, catering to the rising demand for sustainable experiences.
Excellent accessibility from Kuala Lumpur makes Perak even more attractive. Investors in Ipoh can find modern developments catering to high-end buyers, while Perak boasts one of the lowest minimum property purchase requirements for foreigners under the MM2H program.
Melaka, a UNESCO World Heritage Site, is steeped in history and culture, attracting tourists and investors alike. Offering a relaxed pace of life compared to Kuala Lumpur, it's just a short trip from the capital.
Melaka presents a unique opportunity to participate in the restoration and revitalization of its historical structures, adding immense value to your investment.
So, you've decided to invest in Malaysia's thriving real estate market? Congratulations! To ensure a smooth and successful journey, here's a breakdown of the first seven steps that Nathesan (2024) outlined.
This initial step depending on whether you're buying a new launch property directly from the developer or a sub-sale property from an existing owner.
While not mandatory, many investors choose to finance their Malaysian property purchases. If you plan to do so, research and apply for a loan from a reputable Malaysian bank. Keep in mind that loan approval times can vary depending on the type of property you're interested in.
A trusted solicitor is crucial to navigating the legal aspects of your property purchase. To facilitate their work, gather the following documents:
Within the timeframe specified in the initial agreement, get ready to sign several important documents:
In addition to signing, you'll also need to pay a 10% deposit to the developer or seller.
Your solicitor will handle the application process for state authority consent. This step ensures the sale complies with all regulations. Documents typically required include:
Once state approval is granted, it's time to settle the remaining purchase price according to the terms outlined in the SPA or Schedule H regulations. Schedule H is a set of guidelines established by the Housing Development Regulation Act 1996.
For new launches, Schedule H grants developers a maximum of 36 months (or an approved extension) to deliver vacant possession of the property. Upon taking possession, you'll receive:
In sub-sale transactions, the seller is responsible for delivering vacant possession according to the terms agreed upon in the SPA.
By following these initial steps and consulting with a qualified professional, you can embark on a successful and rewarding journey as a property investor in Malaysia.
Remember, this is just the beginning! Further research is recommended to investigate specific regulations, taxes, and ongoing costs associated with Malaysian real estate ownership.
So, why do foreign investors invest in Malaysia's real estate market? It boils down to a winning combination: strong and steady growth, various property options to choose from, and the potential for good rental returns. Government programs welcoming foreign investment, a strategic Southeast Asian location, and favourable exchange rates add to the appeal. You can be part of Malaysia's property success story with careful planning and professional guidance.
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