Malaysia Property Market - FIABCI-USA

ASIA PACIFIC REAL ESTATE PANORAMA
Saturday September 12 @ 10:30 am
Malaysia Property Market:
What Keeps You Awake?
By Dr. Yu Kee Su, Secretary General, FIABCI Malaysia
Contents
1.
Where is Malaysia?
2.
General Information
3.
Property Ownership
4.
Type of Property
5.
Title of Property
6.
Cost of Purchase
7.
Purchase By Foreigner
8.
Malaysia Property Market
9.
Kuala Lumpur Property Market
10.
Penang Island Property Market
11.
Johor Property Market
12.
Iskandar Malaysia of Johor
Thank you.
1. Where is Malaysia?
Where is Malaysia?
Main Cities
2. General
Information
General Information
GDP & Economic Outlook
GDP & Unemployment
Major Growth Rate
Malaysia’s Ageing Populations
Bank Lending Rate
Tourist Arrivals and Receipts to Malaysia
3. Property
Ownership
Property Ownership
How to acquire
4. Type of Property
Property Option: Individual

Condominiums
Market prices for condominiums are higher than apartments as these developments are
usually of better quality and offer a wider range of facilities as compared to conventional
apartments. Facilities may include a swimming pool, convenience stores, tennis courts, a
gym and a club house.
A similar category is service apartments. These are usually located in busy commercial
districts and similar to hotels in concept, except that units can be bought or rented for short
to mid-term stays.
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Semi-Detached & Terrace Houses
These consists of houses built side by side as units sharing a wall usual found in the same
design & layout.
Bungalows
In Malaysia, bungalows refer to detached, single unit family residences sometimes two or
three stories high, with its own compound surrounding the structure.
Beach Villas & Marina Homes
Beach villas are usually custom-built to the owner's requirements. Marina homes with
mooring facilities are also available in choice locations in Malaysia.
Residential Land
You can purchase vacant residential land to build your own home - this is subject to approval
from the relevant authorities.
Golf Resort Homes
Malaysia offers a large selection of quality golf courses, some complete with resort homes.
These are usually completed bungalow units or land sold for the construction of bungalows
to the owner's design requirements. Most of these developments offer the privilege of free
or discounted golf club membership to the home owners.
Gated Communities
A gated community is a residential community set within perimeter walls with controlled
access for vehicles and pedestrians. It usually consists of small residential streets and
includes various amenities. Typical amenities include swimming pools, tennis courts, gyms,
club houses and on-site dining. It is common to see a mix of residential properties such as
bungalows, semi-detached houses, terraced houses and condominiums within one gated
community.
Choice of Property: Corporate

Investments in commercial property typically generate a stable rental yield between 6-10%.
 Shop Offices & Shop Houses
Shop offices have combination use and can potentially offer higher return on investment. Owners
can opt to rent out the ground floor to food & beverage outlets or as showroom space. Upper floors
are rented out as office space.
 En Bloc Towers (Offices or Condominiums)
Grade A commercial office buildings in prime areas in the central business district or growing satellite
towns are favoured by large corporations and multinational companies. Occupancy levels fall within
the average range of 80% - 90% in the city centre although turnover could be higher in the suburbs.
Currently, most Grade A buildings are found in Kuala Lumpur.
 Industrial Property
Industrial property is found in clustered areas designated as industrial estates. The terms industrial
parks and technology parks are also commonly used to describe industrial areas, depending on the
industries concentrated there.
 Commercial Land
Vacant land that investors can purchase for commercial use. The purchaser must state their
intentions and provide initial plans on how the plot of land will be developed. The development will
be subject to approval from the relevant authorities.
Choice of Property: Corporate
 Commercial Land
Vacant land that investors can purchase for commercial use. The purchaser must state their
intentions and provide initial plans on how the plot of land will be developed. The development will
be subject to approval from the relevant authorities.
 Hotels
At the end of 2009, Malaysia housed approximately 150 hotels graded 4 stars and above. Average
hotel occupancy rates are fairly stable around 60 – 65%. In tandem with the increased tourist arrivals
expected from this year onwards, at least 10 new international hotels are scheduled to open across
Malaysia in 2010.
 Shopping Malls
Average occupancy rates for retail malls in Malaysia hover around 90%. Compared to the booming
popularity of regional malls in the past, the current trend and demand is moving towards suburban
malls.
As prime land prices in city centres of key Malaysian states continue to appreciate, developers look
towards cheaper land in suburban areas complemented by the strong demand for neighbourhood
malls that serve local communities.
Shopping malls in Malaysia also generate stable recurring income, offering developers further
opportunities through sale and leaseback arrangements or REIT placements.
5. Title of Property
 Freehold
Freehold property belongs to the owner in perpetuity. Transfer of interest in the property can
proceed without any restrictions or approvals from the government.
 Leasehold
Land leased by the government for a specific term, most commonly in the duration of 33 years
or 99 years. The land will automatically return to the State Authority upon the expiry of the
leasehold term. Transfer of interest to another party may require state authority approval.
 Landed
Issued for properties built on individual plots of land that is sub-divided horizontally.
 Strata
A form of ownership commonly found within residential and commercial multi-storey buildings,
as well as landed properties within a gated community. Strata title properties comprise
individual lots owned by individual owners and common property which is defined as everything
else on the parcel of land such as the common stairwell, driveways, roof, etc.
6. Cost of Purchase
Legal Fees
 Legal fees is an attorney fee that is paid by the buyer of a
property for the preparation and recording of official
documents.
 In Malaysia, the 2 legal fees that you have to pay are the
S&P Agreement and Loan Agreement.
 The charges of legal fee for both agreements can be found
in the table below.
 The percentage and calculation of cost for both
agreements are similar. However, the S&P legal fee is
based on the purchase price, while the loan legal fee is
based on the loan amount.
Example : For property value of RM500,000 and 90% (RM450,000) financing
SPA legal fee for first RM 150, 000
= RM 150,000 * 1%
= RM 1500
SPA legal fee for remaining RM 350, 000 = RM 350, 000 * 0.7% = RM 2450
Total SPA legal fee
= RM 3950
Loan legal fee for first RM 150, 000
Loan legal fee for remaining RM 300, 000
Total loan legal fee
Total legal fees (SPA + loan)
= RM 150,000 * 1%
= RM 1500
= RM 300, 000 * 0.7% = RM 2100
= RM 3600
= RM 3950 + RM 3600 = RM 7550
Stamp Duty
 Stamp duty is a tax that is levied on the legal recognition of certain
documents, in this case, the S&P Agreement and Loan Agreement.
 The charges for stamp duty of your S&P documentation can be found in
the table below.
 Example : For property value of RM500,000 and 90% (RM450,000)
financing
 Stamp duty for first RM 100, 000
= RM 100,000 * 1%
= RM 1000
 Stamp duty for remaining RM 400, 000 = RM 400, 000 * 2%
= RM 8000
 Total stamp duty
= RM 1000 + RM 8000 = RM 9000
Stamp Duty of Your Loan Agreement
 The charges for stamp duty of your loan agreement can be found in the table
below.
 Example : For property value of RM500,000 and 90% (RM450,000) financing
 Total stamp duty = RM 450, 000 * 0.5% = RM 2250
 Note: As part of the Malaysian government's efforts to reduce the cost of
ownership for first time home buyers, until 31 Dec 2014, for first time home
buyers, there will be a 50% stamp duty discount on the instrument of transfer
agreements and loan agreements for residential property purchases worth
RM400,000 and below.
Update: The new limit entitlement for the 50% stamp duty exemption is now for properties RM500,000 and
below in accordance to Budget 2015. This will take effect starting 1st January 2015.
Valuation Fees
(When formal valuations are required)
 Valuation fee is a cost that pays for the service of determining the current
worth of an asset. This cost incurs when the buyer buy from a seller who is
not a developer.
 Below is the table for valuation fees
Example : For property value of RM500,000 and 90% (RM450,000) financing
 Valuation fee for first RM 100, 000
= RM 100,000 * 0.25% = RM 250
 Valuation fee for remaining RM 400, 000 = RM 400, 000 * 0.2% = RM 800
 Total valuation fee
= RM 250 + RM 800
= RM 1050
GST
= 6%
PROPERTY MANAGEMENT FEE
 Annual fee based on:
ESTATE AGENCY FEE
Real Property Gain Tax
Maximum Loan-to-Value (LTV) Ratio Restriction
 As part of the efforts to curb property price inflation,
Bank Negara Malaysia (BNM) has mandated that if a
person already has 2 existing residential property
loans, the maximum margin of finance for their 3rd
residential property loan onwards is 70%.
 Commercial property loans do not have such a
restriction, and many property investors use this to
their advantage.
7. Purchase By
Foreigner
Properties Purchase by Foreigners
 Foreign ownership of property is liberal (foreigners can even own 100% of the property)
in Malaysia as long as minimum requirements are met. In law, foreigners can own any
type of properties with the exception of:
 Properties valued less than RM1 million
 Low and medium cost residential units as defined by state authority
 Properties standing on Malay Reserved land
 Properties distributed to Bumiputera interest in any property development project as
determined by state authority
 Having said that, foreigners can easily own a bungalow, terrace house, condominium,
flat, landed property, studio unit, commercial property, industrial property, agricultural
land (except Malay Reserved Land) and industrial land (except Malay Reserved Land).
Malay Reserved Lands (MRL)
What is it?
 A common misconception is that Malay Reserved Lands (MRLs) are the
same as Bumi Lots, when in fact the two types of lands are quite different.
MRLs are lands, which can only be owned and held by Malays.
Inside Scoop:
 Converse to Bumi Lots, MRLs are virtually impossible to be legally ‘released’
to non-Malays. For the land to be granted release, another property of
similar value and size must be declared as a replacement. In order for this to
be done, the Exco will survey surrounding districts for applicable lands.
 Furthermore, there are several other characteristics that distinguish MRLs
from Bumi Lots. The following are a few of those features:
1. Malay owners are not allowed to rent out properties built on MRLs or
the lands to non-Malays
2. All businesses that operate on MRLs must be owned by Malays
3. Publicly traded companies must comprise of only Malay stakeholders
How to Acquire
 Direct Acquisition (Completed or Off-the-plan)
Corporate investors have the option to purchase directly from a developer's master plan,
depending on the degree of specifications provided by the developer. Shop offices usually take 18
– 20 months to complete while Grade A office buildings take about 3 years to complete.
 Land Purchase with Approved Plans
Land can be purchased only with approved development plans or with the submission of
development plans.
 En Bloc Lease
Consult the developers office and certified valuers or real estate agents for available options of en
bloc leases, both residential or commercial.
 Sale & Leaseback
This mode of acquisition ensures rental returns as the property is purchased tenanted. Most sale
& leaseback deals in the market are individually negotiated to the buyer and seller’s requirements.
Foreigner Financing or Home Loan
 The Margin of Finance (MOF) can go up to 80% for MM2H
holders, while non-MM2H holders would generally get 70%
MOF. In this matter, foreigners are usually better off taking
loans from foreign banks in Malaysia. However, all these
come with an exception when they are married to
a Malaysian citizen. In this case, the spouse will be required
to take part in the loan financing to enjoy MOF as high as
90%.
 See more at: http://loanstreet.com.my/learning-centre/buyingproperty-in-malaysia-as-a-foreigner#sthash.blF9byKx.dpuf
Malaysia My Second Home (MM2H)
Number of Approved Participants
Property Purchased by MM2H in Year 2014
Minimum property value that can be
acquired by foreigner
Best Country for Retirement
8. Malaysia Property
Market
Housing Affordability
All House Price Index
Malaysia House Price Index (1997 – 2015)
 Housing Index in Malaysia decreased to 4.1% in the 1st
quarter of 2015 from 7% in the 4th quarter of 2014.
 Housing Index in Malaysia averaged 3.9% from 1997
until 2015, reaching an all time high of 44.5% in the 1st
quarter of 2000 and a record low of -39.20% in the 3rd
quarter of 1998.
 Housing Index in Malaysia is reported by the Central
Bank Of Malaysia
House Price Index Changes
Transacted Total and Value
Residential
Office
Shop/Commercial
Industrial
Retail
9. Kuala Lumpur
Property Market
Greater Kuala Lumpur
Key Office Location in Kuala Lumpur
Kuala Lumpur Prime Office Rental Index
Office Net Absorption
Office Development Pipeline
Significant Deals (Q1 2015)
Retail Market Overview
Top Rents of Shopping Centre in KL
Retail New Supply (NLA) in Kuala Lumpur
Selected upcoming Retail Malls
in Kuala Lumpur
KL Pavilion
Suria KLCC
Bangsar Shopping Centre
1 Utama
Shopping Centre
Mid Valley
Megamall
Sunway Pyramid
Mitsui Outlet Park
First in Southeast Asia
The recently opened Mitsui Outlet Park KLIA is
the first of its kind in Southeast Asia.
2015: 130 shops
2018: +60 shops
2012: +60 shops
Total: 250 shops
Upon completion of phase 3 by 2021, Mitsui
Outlet Park KLIA has the potential of being the
largest factory outlet shopping mall in the
region.
By 2020, the 3-phased RM335 million project
has a projected contribution of RM235 million
to the Gross Domestic Product (GDP) and
RM220 million to the Gross National Income
(GNI).
Kuala Lumpur Residential
Supply of High-End Condominium
in Kuala Lumpur
Rental and Price indicates
of High-End Condominiums in Kuala Lumpur
Other Major Projects in the Pipeline
 Damansara Area
943-hectare township development; will be fed by the Mass Rapid Transit project
which is under construction.
 Tun Razak Exchange
28-hectare international financial and economic hub
 Bandar Malaysia
196-hectare project which will be the main train station in Malaysia for the highspeed rail.
 KL118
The 118-storey skyscraper KL118
 Bukit Bintang City Centre
7.85-hectare residential and commercial development
KL118 - the tallest building in
Malaysia once it’s completed
in 2019. With 682m in height,
this building will be the sixth
tallest building in the world.
8 Conlay - by KSK Land is a 3.95acre integrated development in
a class of its own. Comprising
three glittering skylineredefining towers that range
from 55 to 62 storeys
Banyan Tree Pavilion Signatures –
60-storey building is the tallest
residential complex in Kuala Lumpur
The Four Seasons Place –
65-storey building
10. Penang Island
Property Market
Number of Residential Property Transaction
Number of Residential
Property Transaction
Performance Yield
Performance Yield
Performance Yield
Performance Yield
Performance Yield
11. Johor Property
Market
Number of Transaction for the Principal
Property Sub-Sectors in Johor
Number of Residential Property Transactions
according to type and district in Johor
Number of Residential Property Transaction
for all types according to district in Johor
Iskandar Malaysia
Iskandar Malaysia
Committed Investment in Iskandar Malaysia
Committed Investment in Iskandar Malaysia
Danga Bay Johor Baru
A valuable landbank stretching 3,000 acres from west to east of southern Johor Baru to
be transformed into an integrated waterfront city.
Danga Bay of Johor Baru
Danga Bay Johor
Thank you