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Last Updated: Feb 14, 2017




House prices in Malaysia have slowed.  In Q3 2016, Malaysia's national house price index rose by 5.36% y-o-y (3.81% inflation-adjusted), slightly lower than the 7.35% y-o-y (4.61% inflation-adjusted) price increase during the same period last year. This was the lowest increase since Q3 2009, based on figures from the  Valuation and Property Services Department (JPPH).

The national average house price was MYR 334,736 (US$ 75,390.82) in Q3 2016.

The state of Kedah had the highest annual price increase with an 8.8% increase (7.2% inflation-adjusted) during the year to end-Q3 2016. It was followed by Selangor (7.5%), Negeri Sembilan (6.8%), Johor (5.5%), Melaka (5.5%), and Kuala Lumpur (5.1%).

Other states saw moderate house price hikes including Pahang (4.2%), Sarawak (3.6%), Pulau Pinang (3.4%), Terengganu (3%), and Perak (2.5%). House prices in Perlis and Sabah remained unchanged from the previous year. On the other hand, house prices in the state of Kelantan slightly fell by 0.4% (-1.86% inflation-adjusted) during the year to Q3 2016.

The most expensive housing in Malaysia can be found in Kuala Lumpur, with house prices averaging around MYR 772,126 (US$ 173,902) in Q3 2016. Perlis, on the other hand, had the cheapest housing, with an average price of MYR 153,472 (US$ 34,566).

By property type:
  • Terraced house average prices rose by 5.6% (4% inflation-adjusted) to MYR 299,012 (US$ 67,345) during the year to Q3 2016.
  • High-rise residential properties' average price rose by 6.6% y-o-y (5.1% inflation-adjusted) to MYR 320,782 (US$ 72,248).
  •  Detached house average prices were up by 3.7% y-o-y (2.2% inflation-adjusted) to MYR 560,987 (US$ 126,348).
  • Semi-detached house average prices increased by 5% y-o-y (3.5% inflation-adjusted) to MYR 500,943 (US$ 112,825).
    The housing market is expected to continue slow growth in 2017, due to concerns about the slowing economy and the ringgit's weak performance, among others.

    "This year (2016) has been a subdued year and we expect the same in 2017," says Knight Frank Malaysia's Managing Director, Sarkunan Subramaniam. "Developers will face lower demand whilst implementing strategies to attract and improve sales to counteract the lower consumer demand due to the current state of the economy.

    "On the investment front, vendors have more realistic expectations and purchasers are looking for bargains, therefore we expect to see more sales activity. We anticipate transactions in commercial properties and investment properties to be priced 10% to 20% below perceived market value with realistic and increased yields," Subramaniam added.

    Malaysia house pricesThe stamp duty rate for properties worth more than MYR 1 million (US$ 225,759) will be raised from 3% to 4% starting January 1, 2018. While this is expected to reduce demand, Knight Frank noted that this might actually "boost sales of million ringgit homes before 2018".

    Foreigners can purchase any kind of property with a minimum value of MYR 1 million (US$250,250) as of 2014. They are allowed to purchase up to two residential properties – two condominiums (max. 50% foreign ownership within a block) OR one condominium and one of the following:
    • Terrace or linked houses above two storeys, but limited to 10% of the total number of units built of this type
    • Lands/bungalows and semi-detached houses, but limited to 10% of units built of these types

Analysis of Malaysia Residential Property Market »


RENTAL YIELDS
Last Updated: Nov 30, 2017



Condominium prices in Kuala Lumpur are reasonable at between US$1,800 to US$2,000 per square metre (sq. m.)

A stable country, a stable market.  The extraordinary stability of residential property prices in Malaysia – rising in some years by 2% or 3%, falling in other years by a few per cent – means that the observer is never shocked by a sudden boom or price-collapse. In inflation-adjusted terms, prices have been rather stable for the past 15 years.

Limits to capital appreciation. Given that Malaysia is a large place and relatively thinly populated, there are limits to capital appreciation prospects (arguably, except in ‘dormitory town’ areas neighbouring Singapore). Therefore, the prime attraction of property ownership in Kuala Lumpur is income.

Gross rental yields have however fallen significantly:

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Mar 31, 2016



Rental Income: The net rental (and other) income of nonresidents is taxed at a flat rate of 26%, without any personal relief.

Capital Gains: For non-citizens and non-residents, real property gains tax (RPGT) is levied on disposals of properties held for more than five years at a flat rate of 5%. As of 2014, different RPGT rates apply for citizens, non-citizens, and companies.

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

Residents: Residents are taxed only on their Malaysian-sourced income at progressive rates, from 2% to 26%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Apr 01, 2016



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$135,135), 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 luxury housesBecause 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: Feb 14, 2017


Ringgit: worst-performing Asian currency; Malaysia's economic growth to continue in 2017

Malaysia gdp inflationIn Q3 2016, the country's GDP grew by 4.3% y-o-y. The expansion was attributed to the strong growth of private consumption expenditure (6.4% y-o-y growth), while fixed investment (2% y-o-y) and government consumption (3.1% y-o-y) had weaker gains, according to the Department of Statistics Malaysia. The increase of minimum wage (announced on July 1, 2016), partly aided in the surge of private consumption and domestic demand.

The IMF sees a 4.5% GDP growth for Malaysia in 2017 due to strong private consumption, but slower private investment and weak commodity prices.

Malaysia's economy expanded by almost 5% in 2015, although a slight slowdown from a robust growth of 6% in 2014. This followed years of economic gains of 4.7% in 2013, 5.5% in 2012, and 5.2% in 2011, according to the International Monetary Fund (IMF). From 2002 to 2008, economic growth averaged 5.7%, but growth fell sharply to 1.5% in 2009, during the global financial crisis. In 2010 GDP growth bounced back, surging by 7.5%. 

Malaysia's nationwide inflation rate stood at 1.8% in December 2016, according to the Department of Statistics Malaysia, less than the 2.7% inflation rate in December 2015, as the impact from the Goods and Services Tax (GST) introduced in April 2015 has worn off.

In November 2016, the BNM retained its Overnight Policy Rate (OPR) at 3%, a few months after cutting it by 25 basis points in July 2016.  The BNM's statement explained this:

"In Asia, persistent weakness in the external sector has weighed on growth, although domestic demand remains supportive. Looking ahead, there are increasing signs of moderating growth momentum in the major economies.

"Global growth prospects have also become more susceptible to increased downside risks in light of possible repercussions from the EU referendum in the United Kingdom."

The Malaysian ringgit (MYR) was one of Asia's worst-performing currencies in 2016, falling by more than 20% against the US dollar over the last two years. The situation worsened after Donald Trump's win in the US presidential elections, causing capital to flow back to the US, and leading to a 3.7% loss of  ringgit's one-month non-deliverable forwards (NDFs) from the previous close to MYR 4.5395 per dollar on November 11, 2016, according to Thomson Reuters.

“The ringgit, like other emerging market currencies, has been badly hit by the anti-globalisation fears brought on by Donald Trump’s election and the US Fed’s accelerated plans for interest rate hikes," according to foreign exchange firm Oanda's senior trader, Stephen Innes.

“The ringgit’s problems also lie with the fact that the 1MDB scandal has not left the headlines despite a lot of rhetoric otherwise, and this is agitating global investors,” Innes added.

The 1MDB scandal is an ongoing political scandal about Malaysian Prime Minister Najib Tun Razak transferring around US$ 700 million to his personal account. The 1Malaysia Development Berhad (1MDB) is a strategic development company run by the Malaysian government. Set up in 2009, it aims at building strategic investments to boost the country.

The scandal gained attention in early 2015, as the reports of the company amassing a total of MYR 42 billion (approximately US$ 11 billion) worth of debt, and missing the payment of this debt to banks and bondholders, were revealed to the public. The Wall Street Journal exposed the channeling of US700 million from 1MDB to Prime Minister Najib on July 2, 2015, which was later denied by PM Najib. 

Unemployment was 3.4% in November 2016, higher than the 3.2% unemployment rate in the same month last year, according to the Department of Statistics Malaysia.







  • Low transaction costs
  • High yields for luxury condos
  • Reforms improved rental market
  • High rental income tax
  • Pro-tenant rental market
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $3,441 For a 120 sq. m. property, usually an apartment.
Rental Yield: 3.72% For a 120 sq. m. property, usually an apartment.
Rent/month: $1,281 For a 120 sq. m. property.
Income Tax: 22.40% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 5.18% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 5.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

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