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Purchase of Malaysian Property by Foreign Buyers

Purchase of Malaysian Property by Foreign Buyers

Page: 1/6
by Bob Holland

expatriate property

There are several points to consider when purchasing a property in Malaysia. The main point, however, is the same as in the UK, namely Location, Location and Location. Choosing the right location might seem daunting at first, but, as it is generally accepted that immigrants are happiest if they settle in an area that offers the safety net of an expatriate community, this narrows down the choice considerably. There are two large expatriate communities in Malaysia: one is in the capital, Kuala Lumpur, referred to colloquially as KL, and the other is in Penang. While the expatriate community in KL is considerably larger than the community in Penang, the majority of the expatriate community in KL are here in Malaysia on a work permit, while the majority of expatriates in Penang are here as retirees under the Malaysia My Second Home Scheme, often abbreviated to MM2H. It seems logical for a retiree (who is not working) to retire to a non-capital city, where prices are lower, traffic congestion less, and the pace of life more in tune with retirement. Even within Penang there are areas which are more suitable than others for an expatriate to live. Probably the most popular location for an expatriate either to buy or rent in Penang is the north coastal belt between the beach at Batu Ferringhi and the 'Eastern and Oriental' hotel in George Town. However, the usual advice to retirees, given by those who have lived here for several years, is not to buy at first, but to rent, and then only to buy when they are absolutely happy about the chosen area. An otherwise idyllic location can quickly lose its charm when the sound of nearby celebrations wakes the retiree before 6 a.m. every morning.

Choosing a Property: House vs. Flat/Condominium Apartment

In Malaysia, a Condominium apartment is an apartment in a block with several sporting facilities such as swimming pool(s), tennis court(s), gym and normally some form of function room. A flat is a residential unit in a block which has no sporting facilities. The other definition which can be confusing is that of 'bungalow', which in Malaysia means a detached property, but of 1, 2 or even 3 floors. Land on Penang Island is limited, especially within the popular areas of George Town, so landed property is noticeably more expensive to buy, though cheaper to rent (due to the rating system), than Condominium apartments of equal size. In the long term, in spite of the vagaries of the economic cycle, landed property has continued to appreciate, while the value of certain ranges of apartment fluctuates according to supply and demand. Another advantage of a Condominium unit, other than the sporting facilities, is that there is good security and that an owner or tenant can just lock the door and then take off, travelling either around Asia or even back to the UK to visit family and friends with no worries about the property. Security of a house can be a problem, which is normally overcome by fitting security alarms and leaving a maid or 'Amah' living in the property while the owners or tenants are away. Condominiums, especially if built on a single floor (unlike Duplex units), are easy to maintain and clean, and can be run without the services of a full-time maid. Houses with gardens seem great, but, unless a gardener is employed, gardening can be very tiring in the heat of the day. Due also to the high temperatures and bright sunlight, the outer fabric of a house needs constant attention, whereas in a condominium the outer fabric of the building and the gardens are maintained by the management. The cost of this is covered by the monthly management fee, which is in the region of GBP0.02 pence per sq foot per month, and paid by the owner, not the tenant.

There is a wide range of property available both for rental and for purchase. However, under the Malaysia My Second Home Scheme (MM2H) there is no requirement to purchase property, and whatever the value of property purchased, no allowance will given towards the required deposit under the MM2H. To rent any property merely requires a rental agreement, normally for six months or a year - if required, the rental agreement can be for any period up to a maximum of three years. The rental agreement will normally be supplied by the rental agency and is subject to negotiation on a clause by clause basis. Purchasing a property is more complex and, as a foreigner, requires getting both Federal and State permission. The Federal permission is given by the Foreign Investment Committee (FIC), which lays down certain minimum requirements covering all of Malaysia. Once the FIC consent is obtained then State consent is sought. Each state may impose additional requirements to those listed by the FIC. If all these conditions are met, then the permission will be approved. As an example of different conditions, the FIC insist that the minimum value of any property purchased in Malaysia is RM (Malaysian Ringgit) 150,000, but the Penang State authority, unlike the majority of other states, requires a minimum purchase value of RM250,000.

The Ringgit is currently valued at about RM7 to GBP1.

Three-bedroomed condominiums of 1,450 square feet in 'Mount Pleasure', on a hill overlooking the North Coast of Penang, are currently for sale for GBP36,000 to GBP40,000. (Rental of one of these apartments, furnished to a holiday-let standard, would be about GBP170 per month.) If purchased, these apartments would require some form of renovation, such as replacing the original bedroom carpets with marble or tile flooring. It is easy to get renovations done in Malaysia, and the cost of renovations is very low. (As an example, hand-made and fitted kitchen cabinets in Malaysia are cheaper than MFI flat-packs!) A good condominium apartment of about 2,900 square feet with four bedrooms, four bathrooms and good views may be purchased for about GBP125,000 (rental GBP800 -GBP900 per month.) There is, however, a large premium for beach-side properties, and a five-bedroomed, five bathroom condominium of 6,000 square feet with beachside frontage would cost up to GBP240,000 (rental GBP1,000-GBP1,200 per month.) Within the range of GBP36,000 to GBP125,000 there is a very large selection of properties currently available, but above this price level the range is quite restricted. One point, of which UK buyers should be aware, is that, unlike UK properties which are cleaned and presented for sale in a 'move in' condition, Malaysian properties are neither prepared nor cleaned when shown for sale, as it is assumed that the new owner will make major renovations. Properties bought from a developer will often have no light fittings and no fitted furniture unless negotiated and included in the Sale and Purchase Agreement.

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