Why Singaporeans are seeking out property investments in Malaysia

Against the backdrop of measures aimed at cooling down the local property market,- more recently with stamp duty hikes, tighter loan-to-value (LTV) limits on second housing loans and increases in the minimum cash down payment for second or subsequent housing loans - Singaporeans and Singapore-based investors are looking elsewhere when it comes to making property investments according to international real estate companies Knight Frank, CBRE and Colliers, as reported by Straits Times in January 22, 2013 “Local real estate investors look abroad”.

With the vision for Singapore and Malaysia evolving into a virtual urban community connected by rapid rail links, the unveiling of a number of multi-billion dollar commercial and residential projects in Iskandar Malaysia just across the causeway, and the steady growth of foreign ownership of Malaysian properties, particularly in Penang and Kuala Lumpur - which are among the Top 10 Most Liveable Asian Locations for expatriates according to the 2011 and 2012 Location Ratings by EAC International - there is no denying Malaysia’s growing appeal as an overseas property investment destination for Singaporeans.

A clear advantage of property purchases in Malaysia is the fact that there is an organised, systematic and well-regulated property ownership regime where generally, the same set of laws apply to both locals and foreigners.

Having official documents available in English, including the Sales and Purchase Agreement (SPA) and loan agreements also eases the burden of investors having to negotiate through legal minefields in a foreign language, which is an important consideration when it comes to making any foreign investment.

But ultimately, it is the value driven real estate with sustainable growth potential that has made Malaysia such an attractive property investment for Singaporean investors.

Attractive Foreign Property Purchase Incentives
For Singaporeans who are looking to Malaysia as a place for retirement, the Malaysian government has introduced a number of tax and legal initiatives aimed at easing the process of foreign property investment into the country through its Malaysia My Second Home (MM2H) programme that grants foreigners easy entry and hassle-free residence in Malaysia via a renewable Social Visit Pass.

In addition to the multiple-entry visa that is valid for 10 years, there are also the advantages of tax-free remittances of income from overseas, the waiving of car import duties, as well as the removal of capital gains tax on properties owned for more than 5 years.

Access to Freehold Property
Many Singaporeans find the prospect of being able to own landed and freehold property particularly attractive. Unlike some of the other neighbouring countries Malaysia allows foreigners to have 100% ownership of freehold properties with a minimum property purchase value of RM500,000* (approximately SGD200,000), with no restrictions on the number of properties purchased.

Note: The island of Penang requires a minimum purchase threshold of RM1 million (SGD400,000) for strata-titled properties and RM2 million (SGD800,000) for landed properties.

Easy Financing of Purchases
In terms of financing, Singaporeans will also have access to the foreigner-friendly lending terms offered by Malaysian banks and if conditions are met, margins of financing can be as high as 85%.

Strong Financial Returns
Not only more affordable, there are also the benefits of strong investment returns. An example would be the masterplanned seafront development of Seri Tanjung Pinang, which is comparable to the likes of Singapore’s Sentosa Cove and Australia’s Sovereign Islands.

Savvy overseas buyers and investors have found the pricing of luxury seafront properties there extremely attractive, affording them access to the quality of prime property that would otherwise be completely unattainable elsewhere in other countries.

Besides being attractive price-wise, on the whole, well-located Malaysian properties, especially those built by reputable developers, offer great value with viable upside potential. The market has witnessed healthy capital appreciation for both landed and strata properties, generally with a 4-5% gross rental yield.

With this knowledge that Malaysia’s properties offer significant value in the region, compared to those in the neighbouring countries, the bullish Singapore Dollar, favourable financing terms geographical proximity, a foreigner-friendly property ownership, similar culture and background, and most importantly, family ties; Malaysia remains one of the top favourite property destinations for Singaporeans and Singapore-based investors.