After half a decade of flirtation with globalization of its real estate market, Malaysia decided this year to make it hard again for foreigners to buy and own a property here.
The new restrictions in the form of higher property gain tax (30%), floor price (RM1 Million) and in some cases imposition of levy have dampened the mood of many foreigners who are lured to this market by the expectations of steady capital appreciation, low prices and an English-based legal system they can understand and depend on.
Unfortunately for foreign house buyers, the new rules in 2014 are not just stricter they are also unhelpfully confusing and even contradictory.
On 1 March 2014, the Prime Minister announced a RM1 Million Property Floor Price for foreigners. However, contrary to public perception, this is not applicable throughout the country. It applies (still I think) to only the Federal Territories of KL, Putrajaya and Labuan.
There are numerous exceptions to the RM1 Million Floor Price.
After months of research and talking to fellow lawyers, officials and other experts I can only say that there is not one but many interpretations of what the rules are.
We all agree (roughly) that a foreigner cannot buy a property priced below RM 1 Million except:
- If he has an MM2H Visa, in which case he can buy one unit of property under RM1 Million as his residence provided this is allowed by the laws of the State in Malaysia in which the property is located; additionally if he writes in to appeal, he is allowed to buy one second hand unit or one unit that comes with land in Selangor;
- If he has an expatriate work visa and is working for the Malaysian Government or NGO then he can buy one unit of residence above RM250,000 subject to the floor price of the State in which the property is located except in KL, Penang and Johor Bahru;
- If he is a permanent resident of Malaysia then he is allowed to buy one unit of residential property above RM250,000 in price but the property must not be in KL, Penang or Johor Bahru and he has to apply for consent from the state in which the property is located and meet the applicable floor price;
- If he is buying outside of KL, Putrajaya or Labuan then he is subject to floor prices set by the State in which the property is located;
- If he is buying a property in PJ, Shah Alam, Klang and the developed parts of Selangor then he can only buy new high rise apartments off plan from a licensed property developer valued at a minimum of RM2 Million;
- If he is buying in less developed parts of Selangor (ie in the districts of Hulu Selangor and Sabak Bernam) then he must buy high rise apartments off plan from a licensed property developer priced at a minimum of RM1 Million;
- If he is buying on the Island of Penang then the minimum price must be RM1 Million (apartment) and RM2 Million (house) and a 3% levy must be paid;
- If he is buying in the Iskandar Development Region in Johor then can buy any number of property so long as the minimum price per unit is RM500,000 and he pays a levy on the unit, and if buying outside Iskandar then the minimum price is RM1 Million;
- If he is buying in Ipoh and the rest of Perak State then he can without MM2H buy above RM350,000;
- If he is buying in Malacca, then the minimum price is set by the State on a ad hoc basis depending on the property development.
With New Year just around the corner we hope that the government will take stock of the situation and bring in one consistent set of nationwide uniform laws that tell foreigners clearly what kind of property they can and cannot invest in.
It is also long overdue for the government to amend the anachronistic law in section 433B of the National Land Code that treats permanent residents (PR) as foreigners. The vast majority of PRs are deep rooted tax-paying legal residents of this country who should be granted the right to freely own at least one unit of property as a home anywhere in Malaysia they wish.
Kerk Boon Leng
10 December 2014