More clarity please, Malaysia

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

By Khalil Adis

With various media reports and sources coming out from the country post Budget 2014, misreporting by foreign press had caused confusion among foreign investors on the various cooling measures.

If you are a foreigner trying to make sense of the new cooling measures in Malaysia but are confused by it, you are not alone.

Announced almost two weeks ago by Prime Minister Najib Razak, many, including the foreign media, thought the new measures will kick in from 1 January 2014 onwards.

This had caused confusion among foreigners.

Foreign press like Channel News Asia and Reuters had thought the new measures will begin from 1 January 2014.

However, as news reports started to flow out of Malaysia over the past few days, the grey areas have now become a little bit clearer.

Let me list it down for you with a quick recap of Budget 2014:

  • Foreigners can only buy properties above RM1 million
  • Increase in Real Property Gains Tax (RPGT) from 15 per cent, 10 per cent and 0 per cent in the first to third year, third to fifth year and after five years respectively to 30 per cent flat rate for the first to fifth year and 5 per cent after five years respectively– this applies to non-Malaysians and companies.

For measures specific to Johor they include the following:

  • New property tax for foreign owned properties
  • New levy at 4-5 per cent of property price instead of current levy of RM10,000
  • Bumiputras cannot sell property to foreigners in the resale market in Johor

Malaysia clarifies and what they mean

Today, the Real Estate and Housing Developers’ Association (Rehda) Johor Chairman Koh Moo Hing has clarified that the RM1 million minimum purchase price ruling will only be implemented from 1 May 2014.

In addition, it will not apply to projects which had already obtained its development order (DO) approval from the state government.

This means projects that had already been launched like Pinetree Marina Resort in Puteri Harbour, Nusajaya as well as in other states will be exempted.

Investors, what this means is you can still buy projects in Malaysia below the RM1 million price ceiling as long as it has been officially launched.

Therefore, the window period is now a little bit longer meaning you do not have to rush to sign your sales and purchase agreement (SPA)

As for the RPGT, it will be implemented from 1 January 2014.

Within the Medini area, Datuk Ismail Ibrahim the chief executive of Iskandar Regional Development Authority (IRDA) has recently said that he is seeking permission from the federal government to waive off the RPGT within this special economic zone.

If this is approved, not only will you be able to purchase below the price restrictions but also not pay for the RPGT.

Medini will then live up to its reputation as Malaysia’s only free trade zone.

The downside will be plenty of speculations which will inevitably push up property prices.

Unfortunately, no news has yet been announced on how much the new property tax structure will be.

It currently stands at 0.14 per cent of the annual value of the property.

Previously the Chief Minister of Johor Mohamed Khaled Nordin had said he will make an announcement towards end 2013.

As for the state levy, the state of Johor appears to have scaled back the proposed levy originally reported at 4 to 5 per cent of the property price.

Instead, it has now been confirmed at 2 per cent of the property purchase price.

This will come into effect on 1 May 2014.

Previously, foreigners need to only pay RM10,000 regardless of the purchase price of the property.

Deliver message in unison please

Moving forward, it will perhaps be useful for the Malaysian government to have one united voice in a press release provided by the Ministry of Finance rather than bits and pieces of news coming from different sources.

This can be similar to press releases on Singapore’s cooling measures that can be found on the Ministry for National Development and Ministry of Finance news room site.

This will prevent confusion among foreigners as well as those working in the real estate industry who are all still trying to make sense of the various rules and regulations.

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5 thoughts on “More clarity please, Malaysia

  1. Hi,

    I am a foreigner and I need some more info on the policy. You mentioned that “Today, the Real Estate and Housing Developers’ Association (Rehda) Johor Chairman Koh Moo Hing has clarified that the RM1 million minimum purchase price ruling will only be implemented from 1 May 2014.” , is it applicable only to Johor or to all states?
    Also, if a property is bought in 2013, after 25th Oct announcement then is this rule applicable. What documentation should be completed before 1st Jan 2014 to not to fall in the 1 Mn rule category?

    • Hi VJ,

      Thank you for reading my blog.

      The RM1 million minimum purchase price is applicable in all states except in Penang which already has this measure in place. Do bear in mind for landed properties in Penang the minimum purchase price is RM2 million. Only Medini in Iskandar Malaysia is exempted from this ruling.

      You can still buy below RM1 million as long as the project has been launched and approved before 1 May 2014. You need to sign your Sales & Purchase Agreement before this date.

      Hope this helps.

      Khalil Adis

    • Hi Adely,

      Bumi lots will always remain as bumi lots unless state approval has been given for conversion from bumi to non-bumi. Currently, approval seems very hard to get. I know of a bumi lot owner who has been waiting for months for approval. While you can sell your lot to a foreigner, it will be a long, arduous process. You will be better off selling it to a fellow bumi. Do note the new RPGT rate will apply from 1 January this year.

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