RM500,000 Property Threshold

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hi,

There have already been quite a few posts on the raising of the threshold, but now the new threshold is here it seems a good point to start a fresh topic to track any further developments.

Here's the whole of a current article from the Business Times Malaysia :


January 15, 2010 : Higher floor price may hurt Second-Home Programme
THE government's move to raise the minimum property purchase price for foreigners may hurt its campaign to promote Malaysia as a second home. The Economic Planning Unit released a statement yesterday, saying that the ruling, first announced in June 2009, is effective January 1 2010.

In June, the Prime Minister Datuk Seri Najib Razak said the minimum threshold for acquisition of residential units by foreign interest at RM250,000 and above, would be increased to RM500,000 and above come January 1 2010. It was part of a wider deregulation of FIC guidelines.

Malaysia My Second Home programme or MM2H is an international residency programme promoted by the Ministry of Tourism to allow foreigners to live in the country on a long-stay visa of up to 10 years. "It won't be so much of a problem for Kuala Lumpur, where properties easily cost half a million ringgit, but states like Terengganu and Ipoh ... where can you find properties in that range?" International Real Estate Federation (FIABCI) Malaysia president Datuk Richard Fong told Business Times yesterday.

A survey done by FIABCI found that half of foreign purchases were for properties between the price of RM250,000 and RM500,000.

"So you are really wiping out half of the market by increasing the threshold limit," Fong said.

Some 2.5 per cent of total property investments are by foreigners. However, real estate firm Zerin Properties chief executive officer Previndran Singhe told Business Times that it would not affect the property market, as foreigners are already buying properties of RM500,000 and above.

Real Estate and Housing Developers Association (REHDA), meanwhile, concurred with FIABCI's view.

"The ruling will not affect the property agents, who mainly look at Kuala Lumpur, but I have to look at it on a national level and it will affect outlaying areas such as Terengganu and Malacca," REHDA president Datuk Ng Seiong Liong told Business Times. While applying the rule to Kuala Lumpur would be fine, a blanket policy for the whole country would hurt foreign property investments, he said.
http://www.btimes.com.my/Current_News/BTIMES/articles/h5k/Article/


It's worth remembering that different States also have their own thresholds, in some parts of Pahang (one of the economically poorest states) it's RM750,000.

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Hi Scott

I am finally in Malaysia for 10 weeks and 3 weeks left to go. Checked out a few places like KL and Malacca and decided that Penang is the place to be. Yesterday, I went to see an agent for a 2 bed condo in Times Square at Dato Kramat Road and she told me (and Wife) that MM2H'ers can still buy properties from RM$250k onwards. Today I saw a lady MM2H agent in Chulia Street (Penang Road end) and she too told me that.

How I am confused!

Do you know if the threshold has changed back to the old figure?

Cheers


Rag

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hi, rag,

Welcome to Malaysia.

The new threshold of RM500,000 came into force on Jan 1st 2010. There hasn't been anything that I've come across in the newspapers or TV news to indicate anything else. Maybe it's just changed and no announcement.

However, how strictly anything is being applied is anyone's guess.

My experience is that people who you'd expect to know something sometimes have a "you don't need to bother with that" attitude, either out of their own agenda, or from hearsay, or just being out of date. Or because they think they can get around it.  What accountability is a property agent or MM2H agent being held to.

My experience is that lax enforcement of regulations is normal. Just as officials having different views on what exactly to enforce is also normal. And the impression that I get from the news media is that backhanders for enforcing this, but not that, is also normal.

So, the folks that you spoke to could be right, or not. I think that you need to ask around some more to find out exactly what the situation is.

And maybe members on this site can also help.

If I'm not wrong, the approval for purchase is at State level so I'd check in with a local solicitor. Or go visit the State Offices and ask there.

And make sure that any contract for purchase is subject to getting approval.

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hi, again, rag,

Another thought. As you're in Penang try asking the Penang Consumers Association. They're very active if the newspaper letters they get printed are any indication.

Name   CONSUMERS ASSOCIATION OF PENANG
Email   meenaco@pd.jaring.my
Address   10, JALAN MASJID NEGERI, PENANG, 11600 MALAYSIA
Phone   604-8299511

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Yesterday, I went to see an agent for a 2 bed condo in Times Square at Dato Kramat Road and she told me (and Wife) that MM2H'ers can still buy properties from RM$250k onwards. Today I saw a lady MM2H agent in Chulia Street (Penang Road end) and she too told me that.

How I am confused!

Do you know if the threshold has changed back to the old figure?
Cheers
Rag

I'm leery of that. If you decide to purchase after the agent and developer confirm the min. amount is still RM250K I'd have them sign at S&P a "condition of sale subject to approval by State govt", to protect your deposit and down payment with them. If it doesn't get approved you shd get back almost all minus some admin costs.

If you are going to apply for part of the MM2H FD towards your purchase, you'll need to send MoT a copy of the S&P where the cost of the property is stated there and that could pose a problem.

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Hi Scott & BB

Thanks for your responses. Scott I will email the consumer and see them when I return to Penang island nest week. I am back in Prai for now. This morning I spoke to a agent with Raine & Horne International Realty in Penang St. He confirmed the RM$500k rule as effective from 01/01/2010. However, he said that if I can wait and be patient it may be likely that the rule could change shortly according to industry requests. The agent also stated that the demand from MM2Hers' and foreigners is for properties between RM $250k to $300k and most use it for about 6 months per year as holiday homes.

BB - Thanks for the advise. It is important to remember these when one signs a contract under the circumstance!

Cheers

Rag

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hi,

Raising the property threshold was announced by PM Naib in his budget speech.

REHDA has made several requests for the threshold to revert to RM250,000.

Also announced in the budget speech, and other speeches, were :

(a). Tax for older cars - the proposal has since been scrapped.
(b). Capital Gains Tax at 5% irrespective of ownership period - since amended.
(c). Dual pricing for fuel effective 1st May 2010 - since put off.
(d). Goods & Services Tax 2010 - since put on hold to allow feedback.

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I wish that the government could see that most MM2Hers will not buy, but rent, if the threshold is kept at RM500k.  Where I live, one can rent a house for RM450-600 per month.  The threshold price would get me a house next door to the Sultan!  There are few choices in that high-price range.  A sum of RM500k would allow me to rent a house @ RM500/month for 1000 months, or 83 years!!

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hi,

I agree with you Teak.

I don't believe that the government has taken into account the property situation for mm2h participants when coming up with this policy.

Up to 3 (or was it 4) years ago mm2h participants and property was a distinct area as opposed to foreign investors and their property needs. Then it all got lumped together, and I imagine that the government is now looking into it's position regarding foreign property investors, and mm2h folks are affected by default.

I guess it's the same with those States that have their own property threshold, for example Pahang's RM750,000 for certain areas. All about foreign property investors, and forgetting the mm2h second-home property touristy retired folks.

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I'm not surprised that MM2Hers appear to have been neglected in the latest 500k limit for foreign purchasers because most MM2Hers apparently prefer to rent rather than than buy. This was based on official government records showing minimal property purchasers by MM2Hers - if I recall correctly, no more than a few hundred MM2h property purchases over the entire MM2H program including its predecessor, the silver-hair program.

I personally found those official records hard to believe because many MM2h property purchases have probably not been captured correctly. For example, I have purchased 2 properties in KL but not once did I specify that I was on the Mm2H program, so how would the government statistics pick up on my purchases?

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My Wife and I were looking to retire to Malaysia . My wife is Singaporean ( Malay) . We have a lot of relatives in Malaysia . The raising of the property limit RM500,000 has effectively scuppered our retirement plans. The two of us only require modest accommodation . Has anyone any thoughts on this ?

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hi, redhorse48,

Welcome to the site.

There's been some articles in the newspapers about representations made to the Malaysian government to get the new RM500,000 threshold reduced. No progress on this so far. Maybe it will happen later this year, maybe not.

As you only require modest accommodation then rent somewhere small. I've been renting for 10 years and have moved twice. It suits me fine. The rents are value-for-money, the landlords responsive (maybe I've been lucky) and if they're not then you can move.