| Malaysia: Investment Potential 2007 |
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| Thursday, 02 August 2007 13:56 | ||||||||
 The residential property market in Malaysia was only opened up to overseas investment at the end of 2006, yet it is already attracting high levels of interest from shrewd speculators. With tourism growth at 6.8% per year, and economic growth at a three year high - both backed by positive government initiatives to encourage foreign investments - it's easy to see why. Furthermore, the widespread use of English, combined with the same systems of law, property ownership, and corporate governance as other Commonwealth states, simplifies the process for all concerned, making Malaysia an ideal investment opportunity.Another significant initiative for overseas investors is the movement 'Malaysia My Second Home' (MM2H). This campaign, aimed at foreign retirees, has so far attracted almost 10,000 participants from the UK, Japan, China, among others. This not only boosts the real estate
Foreign Direct Investments account for about one-third of total private investment in Malaysia. Gross FDI for the past decade has remained steady at a level of US$4.7- 5.3 billion in each year, reflecting the reassuringly stable economic conditions for foreign investors (Source: Department of Statistics Malaysia). Malaysia is growing in significance as a centre for world trade, with low business costs encouraging multinational companies to invest. Global financial services company, UBS, named Malaysia their 'best bargain' for business travellers, with overall costs, including travel and entertainment, running at less than a quarter of those in Tokyo and other major cities. This puts the executive property market in a very strong position, with rental yields in Kuala Lumpur standing at around 7.4 to 8.7%, and new off-plan properties promising guaranteed yields of up to 10%. A large expatriate population, combined with a young, well paid, urbanizing Malaysian workforce, is fuelling demand in the capital, pushing up rents to the level of other major international business centres. Knight Frank noted a strong second half performance in the capital's property market in 2006. Malaysia: Purchase ProcessBelow is the standard purchase process in Malaysia, and issues that may affect that purchase:* Once you have selected your property, a 'Letter of Offer and Acceptance' is signed and a 3% deposit payment is normally expected from the purchaser. * Within 14 days, the buyer must pay a further 7%. * From the date of the signing, the buyer normally has a maximum of three months to complete the sale and make full payment. * Upon signature, the Sale and Purchase Agreement must be stamped at the Stamp Office. After examination of the property by the valuation department, Stamp Duty must be paid to the Stamp Office. The Sale and Purchase Agreement is then sent to the land registry along with the Memorandum of Transfer form 14A to transfer the title deeds into your name. Costs of a standard property purchase in Malaysia include the following: * The stamp duty payable for transfer instruments for real property is 1% to 3% of the market value of the property. * If a buyer uses an estate agent to help them find property for sale in Malaysia they may be liable to pay agency fees of up to 3% of the property's underlying purchase price. * A property tax called 'assessment rates' is levied on the gross annual value of property, and is payable to the city or town council. 'Quit rent' is a form of land tax, and a nominal amount is payable to the state land office. * Lawyer/solicitor fees are 1-3%. * A further measure being taken by the government is the abolition of capital gains tax on property, from April 1st 2007.
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