Foreigners can now purchase high-rise residential properties valued from RM 600,000 and up in Malaysia.

As part of Budget 2020, Finance Minister Lim Guan Eng announced the lowering of the RM 1 million threshold to RM 600,000 on foreign property ownership to address the country’s property overhang.

Malaysia’s property surplus is highest in Kuala Lumpur followed by Penang and then Selangor.

Property overhang is defined as completed units issued with Certificates of Fitness for Occupation or Temporary Certificates of Fitness for Occupation, that have yet remained unsold for at least nine months.

These unsold high-rise units are valued at RM 8.3 billion for the second half of 2019. If implemented successfully, the government can free up much-needed capital to stimulate the economy.

For refer to this article for complete Guideline For Foreigners Buying Property In Malaysia.

Given how closely integrated property markets are to the wider economy, positive spillover effects may extend to more than just lawyers, real estate agents, valuers, and banks.

Demand is predicted to surge from neighbouring countries the likes of Singapore, China, and especially Hong Kong, where a weak ringgit and months of civil unrest are spurring investors to move their money here.

Not everyone however is excited about the injection of foreign capital into the country.

The Finance Minister’s announcement has been construed as a bailout for developers.

It has also sparked debate about housing affordability. Some parties worry about developers building for the foreigner residential market in light of the easing measures.

For now, the government has stipulated that the lower threshold applies only to already completed and unsold condominiums and apartments, not landed property. Moreover, the reduced threshold takes effect Jan 1, 2020 and will last solely for that year.

For the past decade, wages have not kept pace at all with skyrocketing property prices in Malaysia.

According to a report published earlier this year by Khazanah Research Institute (KRI), median house prices increased at a compound annual growth rate or 23.5% between 2012 and 2014. By contrast, median household income grew at a much lower CAGR of 11.7%.

In 2010, a house could cost 14 times the average Malaysian’s annual income. As at 2017, the same house would cost up to 15.6 times this individual’s annual income.

Read this guide on what is the Malaysia My Second Home programme (MM2H) and how to apply for it.

Cutting the foreign ownership threshold may be a temporary salve to the mismatch of property demand and supply. But the government does have the longer-term challenge of investing in labour productivity and continuous education to boost real income levels.

Taking a cautionary stance, PwC Malaysia Tax Leader Jagdev Singh affirms the need for more specific and well-conceived guidelines.

“Questions abound as to whether the relaxation of foreign owners should be limited to the secondary market or extended to the primary market (and) if there is a need for a minimum holding period as well as a limit to whom they can sell to,” he mentions in a statement.

Foreign investors who interest to settle down in Malaysia, can opt to apply Malaysia My Second Home Program (MM2H).

News source: Asean Economist

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