A Comprehensive Guide On Buying Property In Malaysia 2024

Buying property in Malaysia is more than just a transaction—it’s a significant milestone. Unlike buying a cup of coffee, buying a house involves a substantial financial commitment. It transforms your chosen space into more than just a structure; it becomes your sanctuary, where you build a life with your loved ones.

Navigating the process of buying property involves numerous considerations, from location and finances to legal matters, which can be overwhelming. However, it’s also one of life’s most fulfilling endeavors, especially when you’re ready to settle down with your family or explore real estate investment opportunities.

Keen on acquiring a property? Dive into our comprehensive guide for a step-by-step approach to purchasing residential property in Malaysia.

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Knowing Why You Buy?

Before starting your search for the perfect home, it’s essential to understand why you’re buying a property and what you intend to use it for. Typically, people purchase real estate either to reside in or as an investment.

Knowing your motive is crucial as it influences the type of property you should consider. Buying for the wrong reasons can result in quick sales and financial losses due to transaction costs like legal fees.

Additionally, selling property can be challenging in today’s competitive market, potentially leading to lengthy waiting periods for a buyer to emerge.

1. If you buy for own-stay

When purchasing a home for living purposes, prioritize meeting your family’s needs over the property’s investment potential.

2. If you buy for investment purposes

When buying a property for investment purposes, the primary concern is the potential return on investment.

Here are some key factors to research before making a purchase:

• Location: Consider the property’s location carefully, as this will influence its rental yield and potential for appreciation.
• Rental yield: Research the rental yield for properties in the area to determine how much income the property can generate.
• Future potential: Look into the area’s development plans to gauge whether there is potential for future rental and price appreciation. Stay up to date on Malaysia property market.
• Cash back period: Determine how long it will take to recoup the initial investment and consider whether this is a suitable timeline for your financial goals.
• Expected annual return on investment: Crunch the numbers to estimate the annual return on investment, factoring in potential expenses such as mortgage payments, maintenance costs, and property management fees.

By carefully analyzing these factors, you can make an informed decision to buy the property and determine whether a loan agreement a particular property is a wise investment opportunity.

What are you buying?

To choose the perfect property for sale in Malaysia, including purchasing landed residential properties, it’s crucial to have a clear understanding of your preferences. Don’t purchase without proper guidance or investigation in Malaysia’s property market. This is especially if you are not into Malaysia’s property market or have no interest in real estate.

Reconsider your decision if peer pressure is the only reason for your interest in buying property in Malaysia. Identify the ideal size, type, location, and price range of agricultural land to streamline your options. This makes selecting your dream property simpler.

When buying high-rise units, it’s crucial to consider the provided facilities and amenities. Evaluate the condition of facilities like the swimming pool, gym, and recreational areas to ensure they meet your needs. Also, check security features, parking, and nearby amenities to see if they match your lifestyle.

Determine Your Budget

Before venturing into the property market, establish your budget. Experts suggest that your monthly payments should not exceed one-third of your household income. For instance, if your total combined income is over RM1 million, your first home’s monthly installment should not surpass RM3,000.

Ensure financial stability by staying up-to-date on loan repayments, including credit cards, housing, car, and study loans. Prepare at least 3 months’ salary slips for fixed earners and 6 months’ worth for those with variable income.

Who are you buying from?

Knowing who you are buying from is an important aspect of buying a house, as it can impact the entire buying process. You may be buying a new house from foreign company or a:

1. Developer: When purchasing new construction, you’ll engage with a developer. Research the developer’s reputation, track record, and financial stability to ensure property delivery as promised.
2. Individual seller: When purchasing a resale property, you’ll deal with an individual seller. Prioritize due diligence on the seller to confirm the property’s clear title and absence of encumbrances or legal problems.
3. Real estate agent: Before purchasing a property through a real estate agent, research their credentials and track record to ensure reliability.

Whether you’re purchasing property from an individual or a company, it’s vital to safeguard yourself and your investment. This involves thorough due diligence on the property, confirming legal compliance, and seeking expert guidance if needed.

Location

Location is key when buying a home, impacting housing loan costs, commute times, and lifestyle. Rural areas offer peace, while urban neighborhoods provide convenience and vibrancy. Assess your priorities to find the right fit. Factors to consider include:

• Proximity to your workplace, schools, and other essential amenities
• The neighborhood’s safety and security
• Access to public transportation and major roads
• Availability of shopping, entertainment, and recreational facilities
• The local community’s culture and demographics

Financing the purchase of your desired property in Malaysia’s property market

Cash Buyer: Cash buyers must ensure they have funds available when needed, including the full purchase price and additional costs like legal fees and stamp duties. Understanding and securing funds for these expenses can simplify the buying process, especially regarding real property gains tax implications.

Non-Cash Buyer: If you’re not a cash buyer, there are various financing options available to help you to balance the purchase price of your desired property in Malaysia.

Here are some common financing options:

1. Home Loan: The usual way to finance property buys in Malaysia is through a home loan from banks or other financial firms. It usually needs a down payment, a percentage of the property’s value, while the loan covers the rest, with fixed or variable interest rates and a repayment period up to 35 years.
2. EPF Withdrawal: If you have an Employee Provident Fund (EPF) account, you can withdraw a portion of your savings to finance the purchase of your property. The amount you can withdraw depends on your savings and the property’s value.
3. Personal Loan: Consider applying for a personal loan from a bank or financial institution to fund your property purchase. Yet, be aware that personal loans typically carry higher interest rates and shorter repayment periods compared to home loans.
4. Developer Financing: Developers may provide financing choices like deferred payment or rent-to-own schemes, enabling extended payment periods for increased affordability.

Each financing option comes with unique terms and conditions, so consider your financial situation carefully before choosing one. Shop around and compare interest rates and fees from different lenders for the best deal.

However, if you’re a foreigner your financing is a bit different, read this guides on how foreigner buy property in Malaysia!

Securing Property

It is important to note that securing a property in Malaysia involves several legal and financial procedures. Here are some steps that you can take to ensure a smooth and secure property purchase:

1. Hire a reputable lawyer: Engage a lawyer who is well-versed in Malaysian property laws to guide you through the entire process. The lawyer will ensure that all the legal documentation and procedures are in order and will protect your interests throughout the transaction.
2. Conduct due diligence: Before committing to the purchase, conduct a thorough investigation of the property to ensure that there are no legal or financial issues. This includes checking the land title, outstanding debts, and any encumbrances on the property.
3. Sign the sales and purchase agreement (SPA): Sign the SPA within 14 days of the sales form or offer. It should detail the sale terms, price, payment, and other relevant info. Give the solicitor a copy of your passport, address, contact number(s), income tax number, and submission location (for sub-sale purchase).
4. Pay the deposit: Pay the 10% deposit to the seller or developer, as stipulated in the SPA. This deposit will secure the property and show your commitment to the purchase.
5. Obtain state authority consent: Your lawyer will need to obtain state authority consent to transfer the property to you as a foreign buyer. This involves submitting relevant documents such as the SPA, your passport, and other transactional documents.
6. Stamp duty and other payments: When buying property in Malaysia, stamp duty is payable upon stamping the Sales and Purchase Agreement (SPA). Buyers typically pay 3%-4% of the purchase price as stamp duty, along with other fees like taxes and legal charges. Transferring property between family members in Malaysia enjoys full stamp duty exemption, but only for the first RM1 million of the property’s value.

By following these steps and working with a trusted real estate lawyer here, you can ensure a secure and hassle-free property purchase in Malaysia.

Property Sale Completion

Property sales completion in Malaysia may involve additional steps depending on the transaction circumstances. For example, for auction properties or purchases through a trust or company, there may be extra legal and tax considerations.

Submit these documents to meet state property purchase requirements: certified SPA copy, passport, and, if applicable, company constitution. Also, include the latest quit rent assessment receipt and Section 433B-required property application form.

Foreigners buying property should also consider ongoing maintenance and management fees in Malaysia, which vary based on factors like land code, minimum property price, foreign ownership rules, and location. Budgeting for these expenses is crucial to avoid financial surprises post-sale.

If you are a foreigner with a permanent residence status, the tax rate will be from 0-25% depending on the tax bracket. If you are a foreigner without a permanent residence status, the tax rate will be 25%.

Foreigners can buy most properties in Malaysia, except those under RM1 million in major states, properties on Malay Reserved land, low and medium-cost residential units defined by state authorities, and properties allocated to Bumiputra interest in certain development projects.

Overall, with careful research, negotiation, and guidance from trained professional and trusted professionals, buying a property in Malaysia as a foreigner can be a rewarding and profitable investment opportunity.

Find a Good Real Estate Agent

A good real estate agent can help you navigate the complicated process of buying a property in Malaysia. Look for agents who have experience in your desired location and property type. A good agent will be able to provide you with insights into the local property market, help you find properties that meet your needs and budget, and negotiate on your behalf.

Inspect Properties and Negotiate Prices

Once you’ve found suitable residential properties within your budget, schedule viewings with your agent. Assess their condition, location, and amenities carefully. For high-rise units, inspect the facilities too.

Interested in a property? Negotiate the purchase price based on its condition, location, and market value. Your agent will assist you in the negotiation process, especially for landed properties.

Moving Into The House in Malaysia

Congratulations, you’ve made it! After all the hard work, it’s finally time to move into your new home.

Upon receiving Vacant Possession (VP), typically within 36 months for strata properties and 24 months for individual properties, you can begin moving in. During the defect liability period, which is in effect, any cracks or defects should be reported for the builder to rectify. It’s essential to obtain a Certificate of Completion and Compliance (CCC) from the local authority, ensuring your new property complies with legal standards and is safe for occupancy.

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So do not waste time and get to know more about real estate at IQI Global and buy the house of your dream!