Why invest in Malaysia

Risks Assessment
When assessing the risks of investing in property overseas it is important to recognise the sales potential of your property and plan an appropriate exit strategy. As in every country, there are three basic markets available when it comes selling on real estate investments, which are the permanent, temporary and transitory residence markets.

Permanent (or primary) Residences are those used by residents in the country, be it national or foreign residents. The demand for permanent residencies is affected by the economy, stable political situation, unemployment figures and investment in commercial projects both by local investors and foreign direct investment. Some indicators of whether the demand will grow is a healthy growth in GDP, growth in FDI, a growing middle class and decreasing unemployment in the country.

Availability of mortgages or lack thereof can also influence this market quite considerably. Factors which will affect the marketability of a specific property will include location, infrastructure such as roads, schools, hospitals and restaurants nearby, the local employment/unemployment figures, growth in local economy resulting in the creation of employment opportunities nearby, etc. While city centres are normally the mainstream for primary residences, resorts are commonly more favourable for the retired, for families working in and around resorts and more and more, the “wireless workers” who work from home.

Temporary residences are those used as second homes or “holiday homes” by national and international tourists. The demand for temporary residences by the national populace is dictated by all of the aforementioned which affect permanent residences as well as a good supply of mortgage products. The demand for temporary residences by an international market will depend greatly on the political stability and accessibility of the location as well as the global economy. The marketability of a specific product will depend on factors such as duration of the tourist season, location, views, facilities and the proximity to restaurants, beaches or ski slopes, national monuments, nature reserves or other major attractions.

Transitory residences (rentals) are those occupied by tenants, which can be either long term or short term. The factors which will influence the demand for transitory residences are a composite mix of the factors which influence the demand for temporary residences combined with the factors which affect permanent residences. Depending on the target market (long or short term rentals), the factors to take into consideration vary from those affecting temporary to permanent and vice versa.

Geographical and Cultural factors

Member of the Commonwealth of Nations
Legal system based on UK system
No Visa requirements for British passport holders
Population renowned for their hospitality
Multi-varied tourism sector
Freehold property available to foreign nationals and purchasing process recently simplified
Large, cosmopolitan cities with strikingly modern architectural features
Quiet and peaceful luxury beach resorts or rural villages
Celebrating 50 years of independence in 2007

Economic and Political Factors

Economic reforms in the past three decades revolutionised the country’s economy and have resulted in a steady growth predicted to continue growing over several years to come
Inflation is still under 4% having doubled from the normal 2% due to the global increase in retail prices of petroleum product
Unemployment continues to be low, at under 4%
Political situation in the country remains stable
Financial institutions consider mortgages for foreign investors purchasing real estate in Malaysia as a favourable option and therefore there are multiple mortgage options, including those as provided by Islamic banks
Sales of property after the 31st of March 2007 are exempt from Capital Gains Tax
"Malaysia My Second Home" programme promoted by the Malaysian government has removed many of the obstacles preventing foreign investors from purchasing property in Malaysia and offers several substantial incentives for foreign nationals purchasing property in Malaysia
Up to 10% and in some cases even higher rental returns can be found on newly constructed developments in Malaysia.

Return
In certain states of Malaysia, capital appreciation has been seen as high as 35%, exceeding the annual expectations of 25%-30%. Expectations for the coming years are continuing at conservative 20%-30%, with some developments offering up to 10% rental returns per year.

Financing
There are numerous options in Malaysia when it comes to financing the purchase of your property, from traditional western mortgage solutions offered by local and western banks to the Islamic banks mortgage solutions, which are becoming increasingly popular amongst foreign investors.

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