When foreigners buy real estate in Malaysia, you have to pay the cost of purchasing the house and additional expenses. Let’s find out what kind of house that foreigners can buy and how much money is needed from purchasing to selling. This post was written about real estate in Kuala Lumpur and Selangor state.
Table of Contents
1. Real Estate That Foreigners Cannot Buy
2. So, How Much Do You Need To Purchase Real Estate?
3. Zones Of Selangor State
4. Condo in Kuala Lumpur
5. Additional Costs To Consider When Choosing A Condo Unit To Buy
6. Cost To Buy A Condo Unit
7. Additional Costs When Purchasing A Condo Unit
8. Finally When Is The Best Time To Sell?
Real Estate That Foreigners Cannot Buy
Foreigners, including Koreans, can purchase real estate in Malaysia. You can purchase real estate such as apartments, condos, houses, etc. Of course, there are some properties that cannot be purchased. So is there a limit to the number? No, there isn't. There are no restrictions for Malaysian citizens and no restrictions on purchasing multiple properties for foreigners. This is a structure where you only have to pay taxes.
However, below are real estate properties that foreigners cannot purchase.
- Bumi Lot: Real estate targeting Malay Muslims. This is real estate that not only foreigners but even Indians and Chinese people can buy. 15% cheaper than the selling price. Vacant units in condos may also be boomi-lots.
- Properties below price limits per state in Malaysia
- Including properties like Satu Malaysia (1 Malaysia, home for first property owner for locals) and more.
In my personal opinion, houses in Malaysia are divided into leasehold and freehold, but there is no need to buy a leasehold house. Additional example of leasehold and freehold for a three-story house in the same neighborhood.
So, How Much Do You Need To Purchase Real Estate?
The minimum price for real estate that foreigners can purchase is set by each state in Malaysia. The currency unit in Malaysia is the ringgit (RM, Ringgit Malaysia or MYR in 3 digits)
.
- Kuala Lumpur (KL): RM 1 million
- Selangor: RM 2 million (Zones 1 and 2) , RM 1 million (Zones 3), RM 1.5 million for apartments/condos/townhouses (Zones 1 and 2)
- Johor: RM 1 million , International District: RM 2 million (international area)
- Penang: RM 1.8 million for a house in Penang (island, empty house), RM 750,000 (inland, empty house, there are also areas of Penang state inland) and RM 800,000 for an apartment/condo/townhouse in Penang. (Island, empty house), RM 400,000 (inland)
Here, an empty house is called an overhang in Malaysia, and is an empty house that has not been sold 9 months after the construction company completed the condominium and received a 'Certificate of Completion and Compliance (CCC)' from the government. It says.
With a large number of foreigners buying a condo unit in Kuala Lumpur, they can afford to buy a condo unit worth over RM 1 million.
Zones Of Selangor State
Selangor state is the state which includes the capital, Kuala Lumpur. So, it is classified neighborhoods where are close to the capital, Kuala Lumpur. Of course Zone 1 is the most important due to its location.
- Zone 1: Petaling (known as a wealthy area, just west of Kuala Lumpur. Cities include Petaling Jaya, Pujong, Subang Jaya, etc.), Gombak (northern part of Kuala Lumpur), Hulu Langat (south of Kuala Lumpur), Sepang, Klang (beach area to the west of Kuala Lumpur)
- Zone 2: Kuala Selangor (where you can go for a firefly tour, but far from Kuala Lumpur), Kuala Langat
- Zone 3: Hulu Selangor (home to the tourist attraction, Fraser Hill), Sambak Burnam
In Zones 1 and 2 of Selangor Province, the requirement to purchase an empty condominium unit is RM 1.5 million or more. I saw a three-story house a few months ago. A real estate developer said that a foreigner can buy an empty house for RM 900,000 and that there are many foreigners living here.
I don't know how that price is possible. I couldn't understand the real estate developer's explanation 100%. Obviously, legally, that price cannot be determined. But there may be something I don't know about. Because in Malaysia, everything is not what it seems because I am not a local.
Condos in Kuala Lumpur
Let's return from Selangor State to Kuala Lumpur . For Koreans, condominiums in Kuala Lumpur, including Mont Kiara, are attractive places. Transportation is convenient, especially if you go to the city center.
In Malaysia, the benefit of public transportation disappears as soon as you cross the Kuala Lumpur border. Of course, all local people drive cars. As long as you have a record of working for 6 months, you can buy a car with 9 years of installment. This is approximately a condo unit you can buy in Kuala Lumpur for 1 million ringgit.
- On the outskirts of Kuala Lumpur: 1,500 sqft (approximately 139 m²) with 4 bedrooms, 3 bathrooms, and 2 parking spaces.
- Near downtown Kuala Lumpur: 800 square feet (74 m²) with 3 bedrooms, 2 bathrooms, and 1 or 2 parking spaces.
Additional Costs To Consider When Choosing A Condo Unit To Buy
One million ringgit is just the cost of buying a house. Additional costs will apply depending on which a condo unit you choose. Especially the floor. There is no separate royal level like in Korea.
Among local people, some people prefer low floor, while others prefer high floor, but since it is a tall building, I think many people prefer high floor. However, there are two things you consider when you want to buy a high floor unit.
- Low Floor vs. High Floor
- Parking Space
The first thing you need to know is that a condo unit price in Malaysia is based on which floor it is located on. Each level you go up adds approximately RM 1,000 for example. If you live on the 20th floor, you will have to pay an additional RM 20,000.
They provide only one parking space, but if you have two cars, you will need to buy an additional parking space or rent one. Of course, if possible, you can leave your car outside on the road.
The apartment I lived in before didn't provide a parking space, so I bought a separate parking space. Of course, it is advantageous to have a parking space when selling your home. Most Malaysian families have two or more cars. Nowadays, two parking spaces are usually provided per a condo unit.
One more thing related to the parking lot, it is really difficult to park if the parking lot is on the 5th or 6th floor. It gives me a headache to think about starting from the 1st floor and going round and round to get to the 6th floor.
Cost To Buy A Condo Unit
Documents related to contracts in Malaysia are mainly 'Real Estate Sales and Purchase Agreement (SPA)'
and Bank Loan Agreement (Loan Agreement). In the case of SPA's stamp duty, the rate is set according to the price of the house.
For example, the cost is 1% for the first 100,000 RM of the house price, 2% for the next 400,000 RM... and so on. The rate is applied by dividing the house price into sections. This amount is also quite high.
To my surprise, the bank loan is 70% (LVT) of the house price for foreigners and 90% for Malaysians. But this is a legal part. 90% is really difficult for Malaysians.
It is possible if you have a good job and a good salary. Of course, for average Malaysians, around 70% is the upper limit. In the case of foreigners, if you want to receive 70%, you will be given the same amount if you work in Malaysia, have a work permit, and have an Income Tax No. that shows you are paying taxes in Malaysia.
Alternatively, you can purchase a 10-year long-term visa called Malaysia My Second Home (MM2H) and use the money to buy a house. Please note that if you have this visa, you can receive it when you apply for a Malaysian driver's license.
There are many local banks in Malaysia, but the loan screening process for all banks is strict. There is also a Malaysian website that compares bank loans.
I hire a law firm to process SPA and bank loan documents, but when I see the law firm's invoice later, it's really absurd. There are all sorts of fees attached, such as photocopying fees and transportation costs to get to government offices. Nevertheless, you must hire a law firm yourself to proceed with the purchase of real estate. The reason why is explained in the post below. This is the ‘free legal fees’ part. please refer to this.
Last year (2020) and this year (2021), we are conducting a HOC (Home Ownership Campaign) in Malaysia . It means buying a house. Eligible condominiums are free of stamp duty on documents. However, it does not target foreigners and targets local people.
Additional Costs When Purchasing A Condo Unit
These are the costs you have to think when purchasing a condo unit.
- Remodeling Cost
- Maintenance Cost
So you shouldn't spend all your money on buying a house. This is because of remodeling costs. In China, it is said that when you buy a new house, it is empty and empty. But there is a good news that floor tiles, paint, wiring or even sinks would be installed in Malaysia.
If you want to live in a house, you must contract with a remodeling contractor to make new lights, air conditioners, ceiling fans, kitchen cabinets, etc. Of course, an empty house can be rented out to locals or foreigners, but no one, especially foreigners, is looking for an empty house.
Most foreigners look for a fully furnished (F/F) unit. Some fully furnished house even provide bowls, spoons, and chopsticks. As you guess, monthly rent for a F/F unit is more expensive than an empty unit or a half furnished unit with around similar size.
Remodeling costs more than you think. In the case of a condo unit, if you use IKEA furniture and get it as cheap as possible, it can be done around RM 20,000. However, you should usually think about RM 35,000.
And this is the condo management fee. The owner must pay the full maintenance fee every month. Condominium maintenance fees vary depending on the size of a condo unit. And although it depends on the policies set by the condo management company, condos in Kuala Lumpur are typically priced at RM 300 to 400.
Part of the reason I bought a house was because I didn't want to pay maintenance fees. Even though people might think just RM 400 per month is small money, but you would have to pay about RM 1,200 per year. What about 10 years or more?
Finally when is a good time to sell?
From a financial perspective, it is recommended for foreigners to hold on to it for at least 5 years. If you sell within 5 years, 30% of the profit from the sale of real estate is payable as Real Property Gains Tax (RPGT). After 6 years, 10% of profits are paid.
- Within 5 years: 30% of sales profits
- After 6 years: 10% of sales profit
Real estate income tax is a percentage of the sale profit, which is the difference between the selling price and the buying price.
In 2019, the tax rates of the Real Estate Income Tax Act changed. In the case of Malaysian locals, 30% of profits are paid for up to 3 years, 20% for the 4th year, 15% for the 5th year, and 5% from the 6th year onwards. So, local residents pay 5% tax after 6 years.
So, in Malaysia, it is advantageous for both foreigners and locals to hold the certificate for 5 years.
The information written this post may have been updated. Get help from experts for the information you need about buying a house in Malaysia.
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