PURCHASING PROPERTY AS A FOREIGNER IN PENANG ISLAND
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.
Here are some key points to consider when navigating the property market in Penang.
One of the first things to note is that property purchase or rental is not a requirement for the Malaysia My Second Home (MM2H) visa. This means that you don't have to show a purchase agreement or a rental contract when applying for the visa. Many MM2H visa applicants choose to apply for the visa first and then buy or rent a property later. Some may buy a property once the visa is stamped on their passport, while others prefer to wait until they are retired. The MM2H visa does not impose any restrictions on property purchase or rental.
One advantage of purchasing a property in Penang with the MM2H visa is the lower minimum purchase price.
Non-MM2H foreigners, such as those on tourist or employment visas, are required to buy stratified properties (i.e. condominiums or apartments) worth more than MYR 1 million each, or landed properties (i.e. terraces, semi-detached houses, bungalows, heritage properties, lands) worth more than MYR 3 million per unit/lot.
Non-MM2H Foreigners who are interested in purchasing overhang residential properties, which are unsold units from developers, the minimum purchase thresholds for foreigners are MYR 800,000 each for overhang residential stratified properties and MYR 1.8 million each for overhang landed properties.
MM2H visa holders are allowed to purchase TWO residential properties, each worth at a minimum of RM500,000. The two properties can be houses, bungalows, gated communities, or condominiums, as long as they are residential titled. For the third property onwards, the rules for foreign purchasers apply.
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.
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).
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