Malaysia: Overview

RENTAL YIELDS

Last Updated: Oct 15, 2008

Kuala Lumpur yields “good” for 2008

Gross rental yields in Kuala Lumpur generally stayed in the same range in 2008 as in the previous year, at 7.47% on average for condominiums. However Kuala Lumpur yields are very affected by the unit size. Smaller units of less than 200 sq. m. generate higher yields, the highest average yield being 9.22% for 120 square metre properties . The largest properties have the lowest yields, at 5.11%.

Average gross yields on bungalows have declined this year to an average of 3.86%, down from last year’s average of 4.35%. The lowest average yields are 3.48%, for 575-sq m houses.

Read Rental Yields  »

TAXES AND COSTS

Last Updated: Jan 05, 2009

Rental income tax is high in Malaysia

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000
Tax Rate	22.4%	25.1%
Click here to see a worked example
Source: Disclaimer

Rental Income: The net rental (and other) income of non-residents is taxed at a flat rate of 28%, without any personal relief.

Capital Gains: There is no tax on income earned from selling property.

Inheritance: No inheritance or gift taxes are levied in Malaysia.

Residents: Residents are taxed only on their Malaysian-sourced income at progressive rates, from 1% to 28%.

Read Taxes and Costs  »

BUYING GUIDE

Last Updated: Mar 28, 2007

Buying costs are very low in Malaysia

Total round-trip costs are around 3.4% to 6.75% of the property value, inclusive of the estate agent's commission of 2.75% for the first MYR500,000 (US$135,955), and 2% thereafter. Roundtrip transaction costs in Malaysia are among the lowest in Asia.

Read Buying Guide  »

LANDLORD AND TENANT

Last Updated: Jun 22, 2006

Malaysia is pro-tenant in practice

Because Malaysia's court system is inefficient and slow, rental market practice is pro-tenant, even though the law is pro-landlord.

Rent: With the passage of the Control of Rent (Repeal) Act of 1997, rent control was abolished in 2000.

However although the law states that rents can be freely negotiated, rent increases can be appealed to the courts, if the tenant feels the increase is too high.

Tenant Security: At the end of the contract, the landlord has the right to vacant possession of the premises without payment of any compensation, though a notice to vacate must be given to the tenant three months before the expiration of the contract. Any rent adjustment must be mutually agreed upon. Tenancy agreements usually last for a year.

Recovering unpaid rent is difficult. The court system is inefficient and very costly compared to the amounts recovered.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Last Updated: Sep 26, 2008

Political instability amid strong economic growth

Since its independence from the British in 1957, Malaysia (pop. of 26.4 million) has had a stable federal parliamentary democracy with a constitutional monarchy. An upper middle-income country (GDP/cap of US$5,982), it offers a buoyant and pluralistic culture, and some of the best beaches and natural parks in South-east Asia.

Malaysia has concentrated its efforts on manufacturing, and is now one of the largest exporters of semi-conductor devices, electrical goods, and appliances in the world.

The economy has grown by 5-6% annually between 2002 and 2005. The economy expanded by 6.3% in 2007 and 5.9% in 2006, boosted by strong consumer spending. Even with inflation at 8.5% in July 2008, the highest in more than 15 years, the economy is still expected to expand by 5% in 2008.

The official peg to the US dollar was finally abolished in 2005, allowing the ringgit to float against a basket of currencies within a certain band. The ringgit has appreciated from the initial peg of MYR3.8 per US dollar, to MYR3.25 in July 2008.

Abdullah Ahmad Badawi succeeded Mahathir Mohamad as prime minister in October 2003, the first change at the top for 22 years. Mr. Badawi began a second 5-year term in March 2004 after a landslide victory in parliamentary and regional elections. But March 2008 brought the worst election result in decades to the Barisan Nasional, greatly reducing its parliamentary majority and losing it control of five states. The general presumption is that Badawi will soon resign, and a period of internal in-fighting in the ruling party is possible.

The fact that the People's Justice Party (Parti Keadilan Rakyat), led by former deputy Prime Minister Awar Ibrahim, is now a contender for power, opens up two possibilities:

• It could encourage further reform by the ruling party.
• It could encourage the ruling party to bend the rules.

So the result brings more potential for progress – but also more potential for instability.