Potential Pitfalls of Buying a Property in Malaysia

Whether you are working in Malaysia or like the idea of retiring in such a beautiful part of the world, there may come a time when you consider investing in property rather than renting a home. Before you take that step, it is important to consider any possible pitfalls. After all, forewarned is forearmed!

Read on for some handy insights into the most common problems you are likely to experience when investing in Malaysian property.

Is Now the Right Time to Buy?

Buying a property anywhere, not just in Malaysia, is a high financial investment. As such, if you buy on a whim, you could end up losing money on the transaction.

The Malaysian property market has been heavily impacted by Covid19, with foreign buyers in short supply. It’s currently a buyer’s market with properties selling for a fraction of the value they achieved three years ago. There are also far fewer buyers, so properties are not seeing much interest even when they are in prime locations.

While this situation is great if you are in the market for a condo in Kuala Lumpur, it would be disastrous if you were in a hurry to sell a property. For this reason, never invest in a property if your long-term plans are fluid or your financial situation is precarious. Be aware that property markets wax and wane according to various economic factors, so a great investment today could be a money pit tomorrow.

Not Researching the Location

It is important to adequately research the location before you narrow down your property shortlist. Make sure local amenities are not too far away and the distance you need to travel to work or to take your kids to school is not immense. Finding out the kids’ school is a 15k drive won’t be much fun during rush-hour traffic.

It is always better to rent for a few months in your preferred location if you are not familiar with the area. This allows you to get a feel for where things are, average travel times, and check out local amenities. A real estate agent might assure you the area is up-and-coming but, once the transaction has been completed and you have no recourse, you could find out it is not at all what you hoped for.

Understand the Restrictions for Foreign Buyers

Malaysia welcomes foreign buyers, but there are a few restrictions you need to be aware of. Before a foreigner purchases a property, permission must be granted by the state authority. There may be additional payment terms or extra requirements – it’s all down to the discretion of the relevant authority and the rules different between each state.

Note that there are some types of properties foreigners can’t buy. These include properties defined as low-cost or affordable, any property built on reserved Malay land, and properties eligible for Bumiputera groups.

It’s worth getting to grips with these restrictions if one of your parents is a Malay Muslim, as you are then considered bumiputera. PropertyGuru delves into the scenario where a developer says they can convert a bumi lot to a non-bumi one. It covers the non bumi lot meaning and more. PropertyGuru is the top property website in Malaysia, so it’s a really useful resource if you are looking to rent or buy a property or find an agent.

Beware of Overpriced Condominiums

Luckily, there are plenty of properties foreigners can buy without any issues, including the ever-popular condominium. Do be careful when buying a condominium, as there is an oversupply in the Malaysian property market and prices can drop after purchase if a developer has overpriced their properties. Verify the price of a condo before you buy. Make sure the price hasn’t been enhanced so the developer can increase their profits.

Leasehold Vs Freehold

It is important to understand the difference between the two. In general, freehold properties are much better as ownership is permanent and no consent is needed to transfer the land from the state authority. It is also relatively faster to complete the sale – typically around 90 days.

Leasehold properties mean you don’t own the land, the state government does. The legal process for transferring a property to a new owner can be long and arduous. It can take as long as seven or more months to complete the process. It’s also difficult to get a mortgage for a leasehold property with a short lease term.

Mortgages are More Expensive

Mortgages can be more expensive due to higher interest rates. Shop around and work with a broker to ensure you get a competitive deal.

Take your time when buying a home in Malaysia. Don’t rush into buying the first property you see. View lots of properties and make a shortlist where you weigh up the pros and cons.