Can a foreigner buy property in Malaysia?

Malaysia is quite unique compared to other countries in Asia in that foreigners are allowed to buy land on a freehold basis. No 99-year lease. The land is yours.

There is a catch though. A foreigner buying property of any kind in Malaysia, be it land or a condo in downtown KLCC, will have to make a minimum purchase of RM 1,000,000 per property. That’s around US $213,000.

There is also a limit. Foreigners cannot spend more than RM 20,000,000 (USD 4.3 million) on a Malaysian property.

What types of properties can foreigners buy?

The Malaysian property market is reasonably open to foreign investment across various property types. Foreigners are able to buy:

  • Condos and villas
  • Houses on land
  • Commercial and industrial properties
  • Agricultural land under certain conditions

There may be different conditions attached to certain property types depending on which state you buy in.

Different minimum buy-in threshold in different Malaysian states

The most common minimum purchase threshold for buying property in Malaysia is RM 1 million. But there are a couple of variations on this.

The following states have different minimum thresholds under certain conditions:

  • Johor – RM 2 million on landed properties located in designated international zones
  • Selangor – RM 2m in zones 1, 2 and 3
  • Kedah – RM 600k but excluding Langkawi
  • Perlis – RM 500k
  • Sabah – RM 600k for strata titled units
  • Sarawak – RM 500k
  • Penang – RM 2m for Penang island with lower thresholds for overhang units
  • Malacca – RM 500k for strata titled units
  • Negeri Sembilan – RM 600k strata titled overhang units

Some states also offer a discounted minimum buy-in amount for people on the Malaysia My Second Home visa.

Is Malaysian property a good investment?

There is evidence to suggest that some areas of Malaysia have been overbuilt and currently have an oversupply of properties. These are what are referred to as overhang units.

The main areas affected by oversupply are pockets of Kuala Lumpur, Selangor and Johor Bahru.

Overhang is likely to correct itself in time provided that building of new stock slows to meet the lower comparative demand.

But it would not be prudent to not take this into account when considering making a property purchase in Malaysia.

If you are looking to the long term or if you are wanting to buy more for lifestyle reasons, then an overhang of units may be less of a concern for you. That said, no one likes losing money so be sure to do your research and due diligence.

Another factor to be wary of is by the fact that there is a minimum buy-in for foreign purchasers, this creates a dual market. This dual market has a price point that will be out of reach for the average Malaysian. Therefore, there is a good chance that when it comes time to sell, you will be selling to another foreigner.

The foreigner property market is smaller and less liquid than the broader Malaysian market. It could take longer to sell and there is potential for taking a loss if there is an apartment overhang at the time you want to sell.

The Malaysian property market also has some strong points

Looking more to the long term, there are several things going for Malaysia, and Kuala Lumpur in particular. KL is an international city on the way up. It is strategically located and favorably placed to piggy back off Singapore’s dominance as an international financial center.

When Singapore gets expensive, people start to look towards KL and Johor Bahru (also referred to as JB) as an alternative place to live. KL isn’t a powerhouse tier 1 international city yet, but give it time.

We’re relatively bullish on Malaysia in the mid to long term.

Look at how Kuala Lumpur has grown in the last 20 years. This will give you confidence in its future growth prospects.

What does a million Ringgit (US$213k) get you in Malaysia?

The RM 1million plus market is mostly aimed at international investors, but also wealthy locals.

There are several property search websites that can be used to help with your research such as Property Guru, iProperty, and Dot Property.

Can you rent out your Malaysian property?

It is generally okay to rent out your condo in Malaysia to the general public, including to other foreigners. Although there may be some restrictions depending on the type of property and the location.

If renting the property out is an important part of your Malaysian property plan, we would encourage you to cover this off as part of your due diligence and when seeking legal advice prior making a purchase.

If you would like some help getting in touch with a Malaysian lawyer who understands the issues that are important to foreign purchasers, we can help.

There is a thriving Airbnb market in Malaysia and Kuala Lumpur in particular. Renting a high-end condo at a relatively affordable price is popular with many expats and tourists.

As with many places around the world, the regulations surrounding Airbnb and short-term rentals in general are being given some attention. In Malaysia, there are no short-term rental restrictions at the Federal level. However, some states and local councils have introduced their own controls.

Sabah and Penang are examples of places that have introduced controls on short-term rentals. So do your research if the ability to rent your condo out on short-term platforms is important to you.

What are the Malaysian property taxes and ongoing costs?

Stamp duty is charged on purchases at marginal rates ranging from 1-4%. The buyer pays this.

Rental income tax is taxed on a net, after allowable deductions basis. It is taxed at marginal rates ranging from 0-30%

Malaysia has a capital gains tax levied on the profit made when selling a property. Foreigners will pay Real Property Gains Tax at a rate of 30% unless they hold the property for at least 6 years, where the rate reduces to 10%.

Quit rent is a form of annual land tax. Condos also pay a version of land tax called parcel rent, which is their share of land tax for the land that the apartment building sits on.

Assessment rates are paid twice yearly. These are the local council rates.

Condos will pay a common area maintenance fee to cover the upkeep of the building and its facilities.

Is it better to buy or rent in Malaysia?

The age-old question of whether to rent or buy is largely subjective. And a lot of it comes down to what you intend to use your property for – to live in, to rent out, to Airbnb?

If you’re looking to invest purely for profit there will be more questions that you will need to consider.

If you are buying for lifestyle reasons – a permanent home or an offshore base – it becomes easier to justify. That is provided that the minimum buy-in amount is not a restriction to you.

Malaysia can be a wonderful place to set up your offshore in Asia base. Most people that come and spend time here love the place.

Renting has a lot going for it as well. The fact that a luxury condo can be rented for a relatively low amount is attracting many people to Malaysia and KL as a place to live and work from.

If you are interested in buying, it wouldn’t hurt to come here and rent for a few months first before making such a large financial outlay.

Who is Malaysian property good for?

The property market in Malaysia will be best suited to foreigners who have a reasonable budget and are able to comfortably meet the minimum buy-in threshold.

If the threshold is an issue for you, you may be better off looking at Thailand or Cambodia where there is no minimum purchase amount on condos.

People who are here on the MM2H and want to have their own home may be attracted to making a purchase. There is something special about having your own place – a place to leave your things, to decorate as you please, and that you can really make into your home.

MM2H holders may also be tempted to utilize the draw down option on their visa deposit fee to purchase a property.

And with some states offering a lower buy-in threshold for MM2H holders, it starts to look even better.

Lastly, foreigners who want to own land freehold in Asia without having to put the title in someone elses name, or in a company structure, will be looking favorably at Malaysia as a place where they can do just that.

If you want to learn more or if you would like assistance with any part of purchasing property in Malaysia, feel free to reach out.

Thanks for reading.