Have you ever thought, “can a US citizen buy property in Malaysia?” Perhaps what interests you is the idea of living in an exotic country flanked by beautiful sandy beaches, lush, dense juggle, and all the comforts of living in a big city.
Moving to Malaysia might seem like a nice thought at first, but you should consider what it means for an expat. Of Malaysia’s 13 states and three federal territories, which of those would best suit your lifestyle?
The biggest draw for many expats and retirees living in Malaysia is the low cost of living. Consider what you can and cannot live without once you’ve moved.
Many expats base their final decision after spending time in the country—a step that might also help you discover the cost of living from one Malaysian state to another.
In many of the questions above, along with the list shown below, we hope you’ll have the opportunity to coordinate and build a guided plan to answer the ultimate question: Can a US citizen buy property in Malaysia?
- Do I Need To Be a Malaysia Citizen to Own Property?
- Risks of Buying Property in Malaysia
- Can the Malaysian Government Seize Foreigners’ Property?
- Do Property Values Appreciate in Malaysia?
- Three Areas With High Appreciation in Malaysia
- Three Best Websites for Finding Property in Malaysia
- Seven Steps to Buying Property In Malaysia as An American
- Cost Associated with Buying Property in Malaysia
- How Do I Get a Loan for a Property in Malaysia?
In formulating any plan, you generally start with a list of questions, just as we’ve done above. Don’t stop there. To draw a solid conclusion, you must ask more than, “Can a US citizen buy property in Malaysia?” To answer that, there should be at least two preliminary thoughts on your mind:
- How long can US travelers remain in Malaysia?
- Are you planning on working once you’ve settled into your new home?
Related: Cost of Living in Malaysia
How Long Can US Travelers Remain in Malaysia?
The US State Department reports that US citizens may travel to Malaysia for a period of 90-days. Immigration officials issue the 90-day visitor visa upon entry. You can also apply to extend your stay in Malaysia with their Immigration Department for two-month extensions.
Are You Planning on Working Once You’ve Settled Into Your New Home?
The second question has different possible meanings to different buyers—retired, second home investors, or those who are relocating but still working. If you are retired, the answer is pretty simple. If you’re hoping to find employment once there, keep in mind that the Malaysian government made significant employment restrictions in 2020.
The President of the Malaysian Employers’ Federation, Syed Hussain, commented that, “employers are to give Malaysian citizens priority employment before offering job vacancies to expatriates.”
Buying Property in Malaysia
The question remains: Can a US citizen buy property in Malaysia? The short answer is yes. Hold on to that excitement until we’ve had a chance to address those other nine questions for you.
Do I Need to Be a Malaysian Citizen to Own Property?
The Malaysian government uses plain language to explain the regulations, terms, and conditions for foreigners asking, “do I need to be a Malaysian citizen to own property?” No. In 2002, the Malaysian government introduced the Malaysia My Second Home (MM2H) for foreign buyers.
Most property for sale is available for purchase by foreigners, but the law has specific foreign buyers criteria. These terms and conditions help balance the housing market for Malaysian citizens to purchase affordable housing.
Fundamentally, the MM2H program gives foreign buyers an additional ten-year visa for meeting specific conditions outlined below.
- Listed over the one million Malaysian ringgit (Malaysian currency, RM or MYR) within most major cities.
- Use one of two property tenures: freehold or leasehold for 99 years.
- Property constructed on Malay Reserved land.
- Properties spread among the indigenous Malay people.
- Medium to low-cost residential builds, defined by state authorities.
Each state and federal territory in Malaysia regulates property pricing thresholds for foreigners. Four states reduced pricing minimums on housing and vacant land.
The Selangor state government announced the new minimum purchasing price for foreigners is RM1.5 million.
The Penang state government asks foreign buyers to purchase properties listed for RM800,000 on the island and RM400,000 on the mainland. Vacant land pricing also lowered to RM1.8 million on the island and RM750,000 ashore.
The state of Negeri Sembilan also reduced purchasing power to RM1 million, down from RM2 million.
Sabah state’s minimum for 2020 is RM750,000, lowered from the previous year’s cap of RM1 million.
Risks of Buying Property in Malaysia
Investors are generally hit hardest in terms of the risks of buying property in Malaysia. The biggest reason being that it is either a second home or simply a rental property. Either way, investment capital is long-term, with a five-year minimum length for a substantial return.
To turn a profit on a rental investment, you better have the financial confidence to find consistent longer-term tenants, or you can forget about those capital gains when you’re having short-term cash flow problems. The Malaysian Institute of Estate Agents is the country’s top source for real estate projections.
Like home buying in the US, if you can’t get a home loan with a fixed interest rate, it may not be worth your money. You could be looking at increased monthly mortgage payments, which means paying out more for the property and having capital losses.
Can the Malaysian Government Seize Property From Foreigners?
Malaysia’s eminent domain laws fall under the Land Acquisition Act of 1960, whereby the Malaysian government enacted the “compulsory taking of land” if for no other reason than resources. States did not widely adopt the act until recent years. It stands to reason that the answer to the question, “Can the Malaysian government seize property from foreigners,” is that, yes, technically, it can.
However, it’s up to the responsibility of the individual states that adopted the eminent domain act to execute the law on behalf of the Malaysian government.
Do Property Values Appreciate in Malaysia?
Investors interested in purchasing property in Malaysia often ask, “do property values appreciate in Malaysia?” The property market in Malaysia is volatile, changing year over year.
You shouldn’t plan on purchasing property in Malaysia and expect high returns in just three years. Malaysia property investments are long-term, at a minimum of five years for investment returns.
Instability from location to location is a tricky business. There are no assurances you’ll have capital gains over 200% if you don’t complete the research to identify Malaysia’s hottest housing markets.
Related: Benefits of Retiring in Malaysia
Three Areas With High Appreciation in Malaysia
The current state of the erratic housing market here in the US is no different in Malaysia. However, these three areas have high appreciation in Malaysia, rising from these three states:
- Kuala Lumpur
The state of Kuala Lumpur is the most expensive housing market in the country. The average housing price is RM764,000. Figures recorded in early 2019 show this “foodie” haven saw the value of properties appreciate by 9.5% with an increased housing volume of 6.1%.
Those figures helped balance the 7% increase in transactions. The five-year market appreciation for Kuala Lumpur rose 13.7% while ten-year market growth rose 84.2%. Kuala Lumpur’s response to the slump was to increase rental rates by 3.2%.
Second on Malaysia’s housing with the highest appreciation is the state of Selangor where average property prices come in at RM487,000; despite a slumped year down 30%, the state remains the second-best location for property investors.
The dip in property prices didn’t hold the state back in recording the highest transactions in 2019 of 24%. The Selangor government did not let a slumped economy slow progress in 2020, reflecting rental increases of 2.7%.
In third comes the state of Sabah, with average property values of RM460,000. In contrast to Kuala Lumpur and Selangor transaction values, Sabah had the lowest number of increased transactions at 10.7%.
The decline didn’t prevent Sabah from holding onto third, though, as it shows signs of growth on vacant land sales with an increase of 6.50% year-over-year. Condos, on the other hand, edged forward 4.10%. Investors continue to sit and observe the state of property values in Sabah, waiting to see a rise again before placing their properties on the market.
Three Best Websites for Finding Property in Malaysia
Realtor.com is a US-owned company and widely approved by realtors globally. They are now making strides in international growth. The website currently lists 117 Malaysian properties, ranging in price from RM500,000 to over RM43.7 billion.
Expat.com focuses primarily on the top housing market state in Malaysia, Kuala Lumpur. US buyers interested in purchasing a home in Kuala Lumpur should regularly check minimum purchase amounts. Expat.com lists 40 properties, ranging in cost from RM100,000 to RM14.5 million.
iProperty.com.my is an international corporation with headquarters in Australia. They specialize in e-property listings for much of Malaysia. The online search engine publicly lists over 124,000 properties.
Seven Steps to Buying Property in Malaysia as an American
To account for all the seemingly intricate details involved, we highlighted the most significant seven steps to buying property in Malaysia as an American.
Sign the offer letter guaranteeing your intent to purchase the property from the developer as a pre-sale transaction. The agreement letter then goes to the developer along with the earnest money.
Complete a loan application to finance your purchase of the property unless, of course, you intend to pay in full upfront.
You will need to complete or provide the below list of documents to the attorney listed on the property.
- A photocopy of your passport
- A current mailing address, or place of residence, and contact number(s)
- Your social security number and the US internal revenue services contact information on the pre-sale transaction only
You must complete the signing of the following list of documents within 14-days of signing the offer letter agreeing to purchase the developer’s property.
- The sales and purchase agreement (SPA)
- The deed of the mutual covenant, if applicable
- Supply or sign any other transactional documents
- Pay the 10% deposit to the property developer
The developer’s attorney will apply for consent through the state authority, but you must supply the attorney with the documents below.
- An authentic certificate, otherwise known as a notarized copy of the SPA
- A notarized copy of the Foreign Purchaser’s passport
- A valid certified copy of the constitution—only if the buyer is a foreign company
- Latest quit rent, also known as escrow dollars, and receipt on the property assessment
- The application under Section 433B of the NLC
Pay the remaining balance on the purchase as explained in the Third Schedule of Schedule-H Housing Development (control and licensing) Amended Regulations 2015.
Under Schedule-H, the developer will deliver possession of the vacated property within 36 months from the SPA date. After taking ownership of your new property, the developer will provide you with a strata title and certificate of completion and compliance to the foreign US buyer.
Cost Associated With Buying Property in Malaysia
The details involving the cost associated with buying property in Malaysia are complex. Each Malaysian document is often handled and processed by a lawyer familiar with international law, specializing in Malaysia’s foreign property purchases.
Attorney fees vary from practice to practice. The costs are typically a percentage of the property’s final sale price or the amount financed on the property. Be sure to obtain a detailed copy of the attorney’s fee schedule to track later.
Stamp Duty Fee Schedule
The Malaysian government uses two forms of stamp duties for tax levies—ad valorem duty and fixed duty. Under the Stamp Duty Act 1949, the most common stamp duty is for legal documents and commercial and financial instruments.
- Ad valorem duty is the amount payable on the total value of the instrument and the attorney fees
- A fixed duty amount is a partially paid cost that scales out based on the total value of the documents
The Malaysian government requires all foreign documents to hold a stamped duty within 30-days of supplying any documents to Malaysian officials. If the stamp duty documents do not arrive after 30 days, you could face the following penalties:
- Received documents 90 days following the deadline assess a penalty of 5% or RM25.00
- Instruments received between three to six months receive a penalty of 10% or RM50.00
- After six months following the deadline, receive penalties of RM100.00 or 20%
Other documents that assess a penalty for non-receipt of stamp duty documents are:
- Section 15/15A relief
- Rental or Lease
- Selling of Annuity
- General Stamping
- Real Properties Transfer
- Business Transfer
- Compound Duty payment
- Share Transfer
The charges related to Stamp Duty for the transfer of ownership title occasionally referenced as a memorandum of transfer, or MOT, get billed out as a percentage of the Malaysia ringgit:
- 1% on the first RM100,000
- 2% on the second RM400,000
Sales and Purchase Agreement Fee Schedule
Legal fees incurred on the Sale and Purchase Agreement (SPA) generally amount to:
- 1% for the first RM500,000
- 0.8% for the next RM500,000
- Attorney fees on amounts above RM500,000 range from 0.5% to 0.7%
Stamping for the SPA is generally less than RM100.
An SPA legal disbursement fee can cost several hundred Malaysian ringgit, depending upon the attorney.
Loan Agreement Fee Schedule
The legal charges on the loan agreement are:
- 1% for the first RM500,000 of the amount borrowed
- 0.8% on the next RM500,000
- Each subsequent amount over RM500,000 ranges from 0.5% to 0.7%, contingent on the attorney
The fees associated with the loan agreement get a stamp duty that typically runs 0.5% of the total amount financed.
Legal Disbursement Charges
Typically, your attorney will charge up to several hundred ringgit for the legal disbursement process. Then, the cost to transfer ownership of the title runs another few hundred ringgit.
An attorney’s fee for processing the Malaysian government taxes on legal agreements is 6% of its total price.
Loan Document Fee Schedule
The financial institution responsible for executing your loan documents will charge you a processing fee of RM50 to RM200.
How Do I Get a Loan for a Property in Malaysia?
An attorney can answer your question on how to get a loan for a property in Malaysia. Some developers in Malaysia already have an attorney on retainer. You will need to decide if you are willing to work with the developer’s attorney or find your own.
Some buyers prefer to work directly with the bank to assist in saving money. In those cases, the most prominent Malaysian financial institution in Southeast Asia is MayBank. They have a broad and thorough corporate governance structure.
They boost consumer confidence and build customer trust through oversight committees. They offer competitive rates on property loans with interest rates as low as 1.75% at the end of 2020.
There is also LoanCare, offered and operated by iProperty.com.my. The LoanCare program gives consumers better odds at securing a loan by distributing one application to 14 banks.
No one ever said that moving was easy, nor is relocating to an entirely new city outside your country of origin. Moving to the other side of the planet is going to take a bit more planning.
You also need to know some answers to your preliminary questions too. What state or federal territory in Malaysia do you want to live in, and do you plan on working once your move is complete?
Once you’ve finalized your decision to move forward with relocating to Malaysia, and you’ve identified a list of homes you would like to tour, your remaining steps focus on the details of packaging, shipping, flying, and beginning your new life in Malaysia.
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