What a Foreign Purchaser Needs to Know

Purchasing Property as a Foreigner in Penang Island.

If you're considering purchasing property as a foreigner in Penang, Malaysia, there are several important factors to keep in mind. Penang island is a popular destination for foreigners, especially retirees, and offers attractive opportunities for property ownership.

One advantage of purchasing a property in Penang with the MM2H visa is the lower minimum purchase price.

For Penang Island, non-MM2H foreign purchasers (including those on tourist or employment visas) are generally subject to minimum purchase thresholds. For standard transactions, foreigners may acquire stratified properties (such as condominiums and apartments) with a minimum value of RM1 million per unit, while landed properties (including terrace houses, semi-detached houses, bungalows, heritage properties and land) are subject to a higher minimum threshold of RM3 million per unit/lot.

For Penang island overhang residential units (unsold inventory held by developers), the state allows a reduced threshold. In such cases, foreigners may purchase stratified properties from RM800,000 per unit, and landed properties from RM1.8 million per unit/lot, subject to relevant approvals and conditions.

MM2H Visa Holders - Property Purchase (Residential) Guidelines:

1. Existing MM2H Visa Holders:

• Allowed to purchase up to two residential properties.
• Each property must be valued at a minimum of RM500,000.
• The properties can include houses, bungalows, gated communities, or condominiums, as long as they hold a residential title.
• For the third property onwards, standard rules for foreign purchasers apply.

2. Property Purchase Requirements After Approval of Latest 3-Tier MM2H Application:

• Platinum Category: Minimum property value of RM2 million and above.
• Gold Category: Minimum property value of RM1 million and above.
• Silver Category: Minimum property value of RM600,000 and above.
• MM2H Participants in Special Economic Zones (SEZ) & Special Financial Zones (SFZ): Residential properties must be purchased directly from developers, not from property agents or existing owners. The minimum purchase price is subject to the State Authority and may require approval/consent from the State Authority.
• Properties can only be purchased in Peninsula Malaysia.
• A lock-in period of 10 years applies, meaning properties cannot be sold within this timeframe. However, purchasing properties of higher value than the current ones is allowed.
• Note: Non-compliance with these rules will result in the revocation of the MM2H visa.

It's important to note that land is a state jurisdiction, and these rules apply specifically to Penang island. If you're interested in purchasing property in other areas of Malaysia, it's advisable to check with the respective real estate agent or solicitor for specific regulations.

Additionally, qualified purchasers can explore mortgage options for property financing. Some banks may require the MM2H visa as a prerequisite and will have their own mortgage conditions and loan margins, so it's recommended to reach out to the banks directly for more information.

There are no restrictions on the type of property you can buy, but purchasing agricultural land may require additional documentation, justification, and approval. Many foreigners opt to buy historical heritage houses in George Town, as well as condominiums and houses. Unlike some other countries in the region, property ownership in Malaysia is straightforward. The properties are freehold, you own them outright, and there is no need for complicated purchase structures through companies and proxies.

As a property owner, you have the same rights as a local, and the title will bear your name(s). Malaysia follows the British legal system, ensuring that all transactions are conducted legally. To ensure a smooth process, it's recommended to engage a solicitor to represent your interests and guide you through the legal procedures.

When considering locations in Penang, the northern part of the island, including Batu Ferringhi, Tanjung Tokong, Tanjung Bungah, and Gurney Drive, is particularly popular among foreigners. These areas offer a range of activities, shopping centres, clubs, and events. Some individuals may also choose to stay in the George Town UNESCO World Heritage Site due to its charming historical character and vibrant atmosphere. Others might prefer the southern part of the island, which is closer to the Penang Bridge, Penang International Airport, and Queensbay Mall.

Purchasing property as a foreigner in Penang offers a variety of opportunities and benefits, especially with the MM2H visa. Whether you're looking for a holiday home, a retirement residence, or an investment property, Penang's property market has options to suit different preferences and budgets. With the right legal guidance and thorough research, you can make an informed decision and enjoy the benefits of property ownership in this vibrant Malaysian city.

Tips on Purchasing Property in Malaysia.

This manual provides a step-by-step guide to help you navigate through the procedure of purchasing a property in the secondary market in Malaysia. Secondary market (sub-sale) properties are those that have been previously owned and are usually located in mature areas with established residential communities.

1. Appointing a Real Estate Agent: To start your property search, it is advisable to engage the services of a reputable real estate agent. A good agent can assist you in finding suitable properties based on your requirements and budget.
2. Viewing Properties: Once you have appointed an agent, they will arrange property viewings for you. It is essential to communicate your specific requirements, such as budget and property size, to the agent to ensure that they show you properties that meet your needs.
3. Negotiation: After selecting a property, the next step is to negotiate with the seller regarding the price and other terms of the sale. Your agent will play a vital role in facilitating this negotiation process.
4. Signing the Letter of Offer and Paying Earnest Deposit: Once the negotiation is successful, you will need to sign a Letter of Offer (LO) and pay an earnest deposit, typically around 1-3% of the purchase price. The LO outlines the terms and conditions of the sale.
5. Appointing a Lawyer to Prepare the Sale & Purchase Agreement (SPA): In Malaysia, it is customary for a lawyer to prepare the Sale & Purchase Agreement (SPA) between the buyer and the seller. If you do not have a lawyer, your agent can recommend a suitable one. The preparation of the SPA usually takes between 2 weeks to 1 month, although it may take longer if the lawyer is meticulous.
6. Paying the 10% Down Payment: Upon signing the SPA, the buyer is required to pay a 10% down payment, which is calculated after deducting the earnest deposit. This payment is made to the lawyer.
7. Obtaining Necessary Consents: Certain consents may be required depending on the circumstances:  (a) State consent: If the buyer is a foreigner, state consent may be necessary;  (b) Developer consent: If the property is under a master title, developer consent may be required;  (c) Land office consent: If the property is leasehold and the strata title is not yet issued, land office consent may be necessary. 
8. Paying the 90% Balance Payment: After obtaining all the necessary consents, the buyer must pay the remaining 90% of the purchase price within 90 days. If the buyer is using a bank loan, they may need to pay their own funds first, and the bank will release the loan amount accordingly.
9. Settling Outgoing Payments: Both the buyer and the seller need to settle various payments (your lawyer can assist you in settling these payments), which may include: (a) Maintenance fee and sinking fund; (b) Fire insurance; (c) Assessment fee and quit rent; (d) Utility bills; (e) Rental and security deposit (if the property is tenanted).

10. Handover of Keys (Vacant Possession): Once all the payments are settled, the seller is obligated to hand over all the keys within 3-5 days as stipulated in the SPA. The buyer should inspect the property based on the inventory list provided.

Conclusion: Purchasing a secondary market property in Malaysia requires careful planning and attention to detail. By following the steps outlined in this manual, you can navigate the process more confidently. Remember to engage the services of a reliable real estate agent and lawyer to assist you throughout the transaction. Conduct thorough due diligence and ensure compliance with all legal requirements to protect your interests as a property buyer.

Property Rental Process and Deposits:

The property rental process typically commences with a viewing. Once you've selected a property, your agent will facilitate negotiations with the landlord. Upon reaching a verbal agreement, a 1-month earnest deposit (equivalent to the 1st month's rental) is required.   Subsequently, the Tenancy Agreement (TA) is prepared by the appointed lawyer or agent (with an associated admin fee). As the tenant, you will sign the TA first and make full deposit payments, including a security deposit (typically 2 months' rent), a utility deposit (typically 0.5-1 month's rent), and any required access card deposit. The landlord will then sign the TA, and the document will be stamped for finalisation.

Professional Fee for Property Purchase and Rental:

The professional fee for purchasing a property is 1% + SST, while for renting a property, it is 1 month's rent + SST.

Other fees you may incur include legal fees, levy, state consent fees, and stamp duty fees (for purchase), as well as legal and administration fees along with stamping fees (for rental).

Just to note, in Malaysia the real estate market is generally an open market with predominantly non-exclusive listings, although exclusive listings do exist but are less common. As such, you may occasionally see the same property advertised by different agents at varying prices. In some cases, variations may reflect differing marketing approaches or earlier listing information that has yet to be updated.

Please be assured that the prices we present are based on the latest instructions approved by the property owners, and we will always act in your best interest to negotiate and secure the most favorable terms.

Additionally, certain practices such as rent-to-own arrangements, which may be more common in other countries, are not typically practised in Malaysia, as our property laws and transaction processes differ. We understand you may still be getting familiar with the local system, and we will do our best to guide you and ensure everything is handled smoothly in your best interest.

Visit www.penangpropertyangel.com now for an exciting glimpse into Penang's real estate market and discover your perfect home.

We kindly request you to reach out to us at penangpropertyangel@gmail.com so that we can connect you with the right professionals for further assistance.