Malaysia: Overview

RENTAL YIELDS

Yields on KL condominiums excellent

While yields in Kuala Lumpur have generally dropped, luxury condominiums still have moderate yields of around 7% on the average. Yields vary widely from 5.31% to 8.91%. Smaller units of less than 200 sq. m. tend to generate higher yields.

Yields on Kuala Lumpur bungalows have greatly declined from 8.13% to 4.35%, even reaching a low of 3.86% for 700-sq. m. houses.

The lower yields may be attributed to property prices increasing much faster than rent. Prices per sq. m. of bungalows, in particular, rose enormously to US$2,844 from US$1,198 in a couple of years.

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TAXES AND COSTS

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%
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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: The income of Malaysian residents is taxed at rates from 1% to 28%.

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BUYING GUIDE

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.

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LANDLORD AND TENANT

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.

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ECONOMIC GROWTH

Stable government, strong growth

Since independence from the British in 1957, Malaysia (pop. of 26.4 million in 2006) has had a stable federal parliamentary democracy with a constitutional monarchy. An upper middle-income country (GDP/cap of US$5,570), it offers a relaxing ambience, vibrant city life, a buoyant and pluralistic culture, and some of the best beaches and natural parks in South-east Asia.

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

Unemployment is low, at 3.5% in 2006. The economy has grown by 5-6% annually, with an annual population growth rate of 2.1%. The economy expanded by 6% in 2006, boosted by strong consumer spending.

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 appreciated from the initial peg of MYR3.8 per US dollar, to MYR3.4 in April 2007

Inflationary pressures from rising oil prices prompted the Central Bank to hike interest rates. Between Nov 2005 and April 2006, the overnight policy rate was raised from 2.7% to 3.5%. Nevertheless, the overall level of interest rates is still conducive to economic growth.