If you frequently read news and research reports from real estate agencies, you will know that Malaysia is an extremely attractive place for property investments. Adding on to the recent Budget 2020 announcement that declared the ceiling price for foreign property buyers has been reduced from RM1 million to RM600,000, Malaysia has further become a more attractive hub for foreign property investment.
In this listicle, we enumerate the factors and reasons why Malaysia makes a great country for foreign property investment.
1. Malaysia among the world’s best countries to buy a foreign home
Malaysia is renowned for being a peaceful nation, where people of various races like Malays, Indians and Chinese live harmoniously together. In fact, the nation is ranked 16th in the 2018 Global Peace Index and is the second most peaceful country in Asia after Singapore. It is also among the safest countries within the ASEAN region and in Asia.
The nation is also Asia’s third top tourist destination in 2018, according to the annual World Travel Monitor survey. The research named Kuala Lumpur as the region’s 3rd most visited city, besting popular tourist spots like Pattaya, Bali, Seoul, Taipei, Osaka, Hong Kong, and Singapore.
In addition, Malaysia secured the number one spot at the 2018 Global Muslim Travel Index. Apart from being named as the best place to retire by the Japanese in 2013, the country made it to the World’s top 10 best places to retire in International Living magazine’s Annual Global Retirement Index for 2019.
2. Foreigners can fully own Malaysian properties
Unlike in many other countries where overseas nationals are prohibited outright from buying a residential property, in Malaysia, you are able do so – although there are some limitations. But most of the barriers are removed if you take advantage of the Malaysia My Second Home (MM2H) Programme.
For instance, there is a higher minimum purchase price for foreigners, but those who availed of the scheme can buy less pricier homes. In Penang for example, with the MM2H scheme, you can purchase properties costing as low as RM350,000.
Notably, the MM2H scheme allows qualified foreigners to legally reside in the country through a multiple-entry Social Visit Pass. The pass is valid for 10 years and is renewable, but the scheme has strict requirements as shown in the table below:
3. Affordable properties with good upside potential
Home prices in Malaysia are among Asia’s most affordable. In fact, it’s not even close to the top ten most expensive locations in the globe, while neighbouring Singapore and Hong Kong bagged the second and top place respectively, according to the April 2019 report published by CBRE.
Despite the affordability, residential prices here are witnessing strong capital appreciation. Based on a study by Global Property Guide, home prices across Malaysia increase by about 8.0 percent on average over 12 months and by around 54 percent in a five-year period.
In addition, government statistics show home price growth in some states reached up to 35 percent, surpassing initial projections of 25 percent to 30 percent in the past. However, growth has slowed down to 5.5 percent per annum in 2016 to 2018.
4. Strong economic fundamentals
One good investment advice is to buy a home in a nation that is flourishing as property prices are likely to increase. And looking at most economic indicators, Malaysia is one of those places, with its economy continuing to thrive and prosper.
As a matter of fact, the federal government’s Department of Statistics revealed that the country’s gross domestic product (GDP) increased by 5.5 percent on an annual basis to RM1.4 trillion in 2018.
In August 2019, the same department report that the unemployment rate dipped 0.9 percent month-on-month to 3.3 percent. This means most Malaysians have jobs, enabling most of them to rent or buy a home, driving demand for properties.
Malaysia also has a low cost of living, with inflation or the Consumer Price Index (CPI) edging up by only 1.5 percent in June 2019. This indicates that prices of basic goods and services are within the reach of many.
5. Healthy rental prices that’s steadily rising
2018 data from Global Property Guide revealed that gross rental yields of condo units and apartments in Kuala Lumpur typically ranges from over 2.0 percent to 5.0 percent. However, bungalows command a lower rental yield of about 2.5 percent.
According to the Valuation and Property Services Department (JPPH), rents continued to rise but at a modest rate in nearly all of Malaysia’s highly urbanised areas. Penang’s George Town saw the highest annual gain of 2.8 percent in 2018, followed by Johor Bahru (2.7 percent), Kuala Lumpur (1.9 percent), Klang Valley (1.7 percent), and Selangor (1.6 percent). Nonetheless, Kuala Lumpur still recorded the highest rental rate of RM52.54 (US$12.68) per sqm, followed by Klang Valley at RM47.61 (US$11.49) per sqm.
Moreover, the federal government introduced a 50 percent tax exemption on residential rental income at up to RM2,000 (US$ 482) per month that will take into effect until 2020. The authorities also plan to enact a Residential Rental Act to safeguard the rights of both tenants and landlords.
6. Wide financing options at low interest rate
You don’t have to worry about getting funding for your property purchase as there are many local banks and international financial institutions that provide a broad range of credit products from traditional housing loans to Islamic mortgages.
The loan’s interest rate (around 3.9 percent to 4.6 percent as of Oct 2019) is also affordable for overseas nationals, as the central bank or Bank Negara Malaysia has lowered its overnight policy rate (OPR) from 3.25 percent to 3 percent in May 2019. The rate remains at this level as of September 2019.
7. You get more value for your money
In Malaysia, you can purchase landed properties for a fraction of the price in Singapore or Hong Kong, which are among the most expensive housing markets in the world. Overseas nationals are also permitted to own both leasehold and freehold properties in Malaysia.
Furthermore, foreigners can easily buy upscale waterfront homes in the country, such as those in Johor and Langkawi, at a significantly lower cost. This is in comparison to other global property hotspots which such prime properties command exorbitant prices. For instance, Knight Frank’s 2019 Global Waterfront Monitor showed that waterfront homes in London and Hong Kong command a 30 percent and 40 percent premium respectively.
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(Written by G. Zizan, 30th January 2020)
