According to the Statistics Department Project Population Report 2010-2040, Malaysia’s population has been projected to rise to 41.5 million by 2040, up from 28.6 million in 2010. As with any population growth, demand for housing is expected to follow.
With neighboring cities such as Hong Kong and Singapore home to some of the highest property prices and cost of living in the region, which many Singaporean and Malaysian PR can attest to, it’s definitely worth taking a second look at Malaysia properties for either investment or part of your long-term retirement planning.
Using data obtained from Brickz.my and iPropertyIQ, for MYR1 million in Malaysia, you are able to purchase a 1,190 sq ft property in prime residential areas, compared to a 140 sq ft apartment in Singapore for the same amount.
Apart from getting more bang for your buck when it comes to purchasing a property in Malaysia, the wider range of properties available can also attract Singaporean buyers looking to make a change in their lifestyle by living in Johor and commuting back and forth for work.
For Malaysian PRs who are planning on eventually retiring back in the comforts of their hometown, with GE14 over, this may just be the right time to look at securing a property in your favored area.
What can I buy?
Malaysia has one of the most liberal policy when it comes to property ownership by foreigners. Singapore investors can choose to buy any type of property with the exception of:
- Properties valued less than RM1 million in most of the major states
- Properties built on Malay Reserved land
- Low and medium cost residential units as defined by the state authority
- Properties distributed to Bumiputera interest in any development project as determined by the state authority
For Singapore investors who currently own a HDB, they will have to first fulfill the Minimum Occupation Period (MOP) of five years before they can acquire a private or foreign property.
Malaysian PRs are not bound by the same restrictions as foreigners but they should note that if they had previously purchased a HDB, they would have to dispose of the flat within 6 months of acquiring the Malaysian property.
For many Malaysian PRs who are currently renting in Singapore, the opportunity to be a landlord and earn rental income while having a fully paid home come retirement is too good to pass up.
Making $ense of buying in Malaysia
The Loan-to-Value Ratio (LTV) refers to the amount of loan against the value of the property purchased. Singapore-based banks provide financing between 70-80% of the property price, and for individuals obtaining a second housing loan in Singapore, the Loan-to-value (LTV) limit is lowered to 50% for loan tenures up to 30 years.
Also, Singapore investors would be paying 7% on the Additional Buyers Stamp Duty (ABSD) on the second property, and 10% on the third. Whereas the property stamp duty to be paid for Malaysia property would be only 1-3% (depending on the value of the property)
For investors without ready cash on hand, a higher LTV ratio would be favorable and allows them to finance to purchase a higher valued property instead of having to compromise. Hence, a buyer may choose to go with Malaysia-based banks who can grant up to 85% financing for foreigners and up to 90% for locals.
In addition, investors who plan to rent out their properties in Malaysia may find convenience in using the monthly rental income to offset the monthly installments for the loan.
Where to buy?
Based on the highest potential rates of capital appreciation due to strong economic and population growth as well as being the core economic growth areas in Malaysia, Kuala Lumpur, Penang and Johor Bahru stands out as the top picks.
As Malaysia’s capital, the Greater Kuala Lumpur region has served as the flagship location for most international companies and brands when they make their entry into Malaysia.
With the aggressive transformation plan to transform the region into a world-class metropolis boosting top standards in every area from business infrastructure to livability, Kuala Lumpur is set to boost their population from 6 to 10 million, increase income per capital to USD$15,000 and improve on connectivity within the city, with easier reach to 60% of the world’s population within five hours.
Be it for investment or as a well-connected retirement home for the Malaysian PRs who prefers a cosmopolitan lifestyle similar to Singapore, albeit, with a lower price tag, one would do well not to overlook the Greater KL region as the destination to purchase your next property.
While Iskandar Malaysia has been plagued with news of oversupply in recent times, that does not mean that there is no rental demand. Between the annualized 7% per annum growth in population for Iskandar Malaysia and Johor being the second fastest growing state, there is definitely going to be demand.
In addition, the new incoming supply has started to taper off in 2018, and keen investors have started to spot great deals popping up, including high quality completed freehold properties from as little as RM750 per sq ft.
Also, for Singaporeans or Malaysian PRs who have decided or planning for a cross-border living or for retirement, they could choose to rent out their homes in Singapore and live in Iskandar and enjoy substantial savings while still enjoying a high quality of life.
What to buy?
Ideally be it for own stay or investment, your property should be in close proximity to the city that allows for convenience. And especially for those who are set on cross-border living, having a host of amenities, shopping options and eateries would allow for a lifestyle that is not too dissimilar to the one that you have been used to in Singapore.
Based on the market supply, there is generally a larger supply of condos and apartments in the city centres of Kuala Lumpur, Johor, and other states compared to landed due to developers looking to maximize the project density. Hence, due to the scarcity, most landed properties have enjoyed higher rates of capital appreciation but high-rise apartments or condos have generated better rental yields.
Also, there is usually common recreational facilities as well as gated security services managed by a property management team that will provide maintenance of the property.
However, the type of property you choose will depend largely on your motivation behind your property purchase and your finances.
For immediate returns on rental yields, one would be looking at high rise condos/apartments located near to universities, financial and office hubs, medical facilities or the train stations.
For capital gains over the long term, you may be looking at larger, more spacious landed properties that may be further away from the city centre but offers the laid-back lifestyle for the weekend or retirement that you desire.
Interested to invest? Join us at the Malaysia Home and Investment Expo on the 23 to 24 June 2018.