Guide for Foreigners Purchasing Property in Malaysia: Everything You Need to Know!

Malaysia is an amazing country with a lot to offer. Whether you’re captivated by the delicious food, the vibrant city lights, or the stunning beach views, there’s something for everyone here. As a foreigner, the process of buying property in Malaysia can either be straightforward or complex, depending on your background and expectations. The good news is that Malaysia’s property market is well-regulated, ensuring financial and practical oversight from construction to property loans.

Malaysia is a warm and welcoming country, and this extends to its property market. However, this doesn’t eliminate the need for paperwork. There are regulations in place to protect both you and the industry, ensuring a safe investment. Be prepared for necessary paperwork and regulations designed to safeguard your investment. Here’s everything you need to know about buying a house in Malaysia as a foreigner.

Can Foreigners Buy A Property in Malaysia?

Foreigners are generally permitted to purchase various types of properties in Malaysia under the National Land Code (NLC) 1965. A foreigner, as defined by the NLC, includes any individual who is not a Malaysian permanent resident. This includes residential units (both landed and high-rise), commercial properties, and industrial properties and land. However, specific regulations and procedures for property acquisition may vary between states across Peninsula Malaysia and the states of Sabah and Sarawak, as land matters are under state jurisdiction.

Certain restrictions apply, such as the inability to purchase properties on Malay Reserved land, low and medium-cost residential units defined by state authorities, and properties designated for Bumiputera interest in development projects. Additionally, foreigners are prohibited from acquiring agricultural land, although exceptions may be granted for development purposes with approval from the respective state authorities.

Buying A Property under MM2H

In Malaysia, foreigners have the opportunity to purchase property through the Malaysia My Second Home (MM2H) program, a unique initiative not commonly found in other countries. This program offers a renewable visa, valid for up to five years, and is applicable across all states in Peninsula Malaysia and Sabah (with Sarawak having separate immigration rules).

To apply for MM2H, you need sponsorship from a Malaysian citizen, or in Peninsula Malaysia, you can use a registered MM2H agent instead. As an MM2H visa holder, you may also benefit from discounts on certain types of properties available in the market.

Minimum Property Price for Foreign Investment in 2024

In general, there is a minimum purchase requirement of RM1 million for most types of properties in nearly every state in Malaysia, with a few exceptions (see table below). You might be wondering about property prices in different states and which cities have the highest housing costs.

Property prices in Perak, for instance, are generally lower compared to Selangor. Here’s a quick overview of the minimum property prices across states and the prices applicable under the MM2H programme (limited to residential properties).

Buying A Property in Malaysia As A Foreigner

Here are the typical steps for a foreigner buying property in Malaysia, although the process can vary depending on the agent or developer:

Sign the developer’s sales form or offer to purchase form for sub-sale transactions.
Apply for financing to purchase the property. Approval timelines vary based on the property type (newly launched, under construction, or completed) and the bank.
Provide the solicitor with copies of your passport, correspondence address, contact numbers, and income tax details (if purchasing a sub-sale property).
Once the sales form is signed, proceed to sign the Sales & Purchase Agreement (SPA), and any other necessary documents. Pay a 10% deposit to the developer/vendor.
The solicitor will apply for state authority consent. Provide certified copies of the SPA, your passport, and any relevant documents for foreign companies, along with property tax receipts from the vendor.
Pay the remaining purchase price according to the SPA or Schedule H regulations.
The developer must deliver vacant possession within 36 months from the SPA date (or approved extension). For high-rise properties, the developer applies for the strata title. In sub-sale transactions, the vendor delivers possession as per SPA terms.

What is the Cost of Purchasing A House in Malaysia?

Here are some essential closing costs to factor into your property purchase planning:

Stamp Duty:
This tax is levied on property documents during their sale or transfer. It includes:

Stamp duty on the Sale and Purchase Agreements (SPA) for your property, priced at RM10.
Stamp duty on the instruments of transfer, such as the Memorandum of Transfer (MOT) or Deed of Assignment (DOA). Starting January 1, 2024, foreigners (non-citizens and foreign-owned companies, excluding Malaysian permanent residents) will face a flat rate stamp duty of 4% on the instrument of property transfer.
Stamp duty on your loan agreement, calculated at a flat rate of 0.5% of the total loan amount.

Legal Fees:
On July 15, 2023, the Solicitors Remuneration Order 2023 (SRO 2023) was officially announced and put into effect. This order regulates the legal fees in Malaysia for Sale and Purchase Agreements (SPA) and financing agreements related to immovable properties (land and buildings), as detailed in the table below:

Real Property Gains Tax (RPGT):
An important consideration for foreign buyers, although it is not incurred at the time of purchase. RPGT applies to the profit earned from selling a property in the future. For properties sold within the first five years of ownership, foreigners are subject to RPGT at a rate of 30% on the chargeable gain. If the property is sold from the sixth year onwards, the RPGT rate reduces to 10%.

Is Investing in Property in Malaysia A Wise Choice?

In 2024, investing in Malaysian property presents a promising opportunity due to several favorable factors creating a conducive environment. Malaysia’s projected strong economic growth is a key driver, typically leading to increased demand for real estate and potentially higher property values over time.

A significant advantage is the steady growth of property prices in Malaysia, signaling balanced and sustainable appreciation. This stability reduces the risks associated with sudden price fluctuations, making it attractive for investors seeking consistent returns.

The improving financial conditions of Malaysia’s population also contribute to the appeal of property investment. As prosperity increases, there is likely to be greater demand for housing and real estate, enhancing the potential for capital growth and rental income.

While some indicators are neutral, they still support a positive environment for property investment. Malaysia’s reputation as a stable and reliable investment destination remains strong. Additionally, the cautious outlook among Malaysian business owners towards market conditions suggests a balanced perspective, which can lead to steady demand for real estate.

Despite average rental yields, the combination of economic growth, stable investment climate, increasing prosperity, and moderate inflation make Malaysia a compelling choice for property investment in 2024.