bakedbean

As well as the restrictions/thresholds for buying property for foreigners and we have an existing sticky thread on that subject here:
http://britishexpats.com/forum/malay...eigner-813295/
there are numerous other costs and taxes to think about.

Here is how it is, as at April 2016.
(If I've missed anything, let me know)

1. Agents Fee. In Penang that is generally 1 percent plus GST. (I think the Seller will also pay 1 percent?)

2. Penang State Government Levy. 3 percent of the property price.

3. Penang State Consent Fee (for foreigners). RM 10,000.

4. Legal Fees.

5. Moving Costs.

6. Stamp Duty (Malaysian Government)
1 percent on the first 100,000
2 percent on the next 400,000
3 percent thereafter

7. Renovation costs (if applicable)

I reckon on buying a new unrenovated property of say RM 2 million, you would need to fork out something like RM 200,000 to 300,000 in extras. Anyone want to query my maths?

In addition to that, you need to be really really really sure you want to live there as there will be:

1. In Penang.... a 3 year lock-in. You cannot sell for 3 years.

2. If you do sell after that, RPGT (Real Property Gains Tax) will kick in.
For foreigners, in years 1 to 5, that will be 30 percent*. From Year 6, it reduces to 5 percent and stays at 5 percent.

*RPGT is taxed on the profit you make from the sale (less renovation and other costs).

Is it worth buying a property here?

OriginalSunshine

The 10% purchase charges is relatively normal in Europe. The capital gains tax is not.

Add into that currency fluctuations (we lost a huge value arriving mid 2014 and converting USD savings to MYR to find some car purchases, and it all starts to look a bit iffy.

bakedbean

Well the currency conversion depends if you plan to move on somewhere else in the future.

Davita

Correct.....and that's a problem for all expats who might get pensions or income in one currency but spend in another.

I'm a bit worried over the potantial exit from EU over the sterling value. A lot of forummers here, like myself, earn a UK pension of one sort or another and, if UK leaves EU in June, sterling could easily slide...as has been seen last week.

I've managed to diversify all my other UK holdings except for the pension. I wish I could have cashed out the UK OAP years ago...could have doubled its performance.
Fortunately Malaysia and Indonesia are relatively cheap places to live so the money goes further for the same lifestyle...IMO.

Gunnar45

''The 10% purchase charges is relatively normal in Europe. The capital gains tax is not.''

Capital Gains Tax in Europe | European Capital Gains Rate

JC3

For many Europeans often their sole or principle residence in their own country is exempt from Capital Gains Tax. Only second and third homes etc are subject to CGT on disposal.
Here in Malaysia foreigners pay RPGT on disposal whether or not the property is their sole or principle residence.
Malaysian citizens must pay RPGT on the sale of their properties too. But an individual who is a Malaysian citizen or a permanent resident will be given an once-in-a-lifetime exemption on any chargeable gain arising from the disposal of his/her private residence if he/she elects in writing for the exemption to apply to that private residence.

JC3

JC3

Agents Commission

If you are interested in a property it’s best to make it clear upfront to the Seller and his Agent who you will / won’t be paying a fee to. This may affect the purchase price you are able to negotiate.

In Malaysia, the maximum permissible agent’s commission is 3% of the transacted purchase price. In KL, realtors are commonly paid 2% commission solely by the seller.

In Penang, it is common practice for agents to ask for 1% commission from the seller and another 1% from the buyer. Reason being is that (local) sellers are unwilling to provide commission of 2%. But this dual charging is dodgy practice, and you don't have to accept it.

Remember the Agent was engaged by the Seller, not you the Buyer (and is acting for the Seller not you). Therefore only the Seller should pay the Agents’ Fee.

The Board of Valuers, Appraisers and Estate Agents Malaysia Code of Conduct and Ethics clearly states:

'A registered estate agent shall not accept fees from more than one client in any one transaction'.

My advice would be that if you (the buyer) are asked by the Seller’s agent to (also) pay a fee, you refer the agent to the Code of Conduct and tell them that as you did not engage them, no fee is payable.

My view is that when you pay an agent a fee, he/she needs to be working exclusively for you to avoid a conflict of interests.

Strata Title Registration

Strata Title Registration is another potential cost to budget for if the property you are buying does not have its individual Strata Title yet. Extremely long delays in the issue of individual strata title is a common problem in Malaysia, even properties over 10 years old often don't have individual strata title yet.

Foreigners pay about 700% more than Malaysian citizens for registration in Penang– i.e. a minimum of RM10,000.

From February 2014 - under the Penang Land Rules (Amendments) 2013 Schedule 2 item 28 (m) (ii) the registration fee for a non-citizen is :- RM10,000 for the 1st RM1 million, with the balance at 0.5% of the purchase price.

The additional legal fees for the Strata Title transfer equate to about 25% of the fees you pay for the Sale & Purchase Agreement.

JC3

Gunnar45

In Scandinavia tax exemption doesn't seem to be the apply.
In Germany no CGT after 10 years of ownership.
What about UK? (Unless you have lived overseas >5 years)

InVinoVeritas

In UK, no CGT on the sale of your principal residence, same in France.

NeonHippy

In the UK if the property has land then you could be liable for CGT on the increase in the value of the land even if it is your principle residence. Unless you can convince the HMRC that the land is 'necessary for the enjoyment of the house'. That phrase does not mean your ability to enjoy the house and if you are in this situation I strongly suggest you get professional advice.

Davita

If the property land is under an acre there is no CGT in UK on Principal Residences.

https://www.gov.uk/tax-sell-home

the troubadour

Begs the question why not just rent? Availability is not an issue as I believe. One can easy exist if events turn out less than desirable and can change location, if in need, of well a change a scenery.

bakedbean

It's what a lot of folks are doing, Troubadour. There is a glut of empty flats. Having said that, a lot of local owners will have no qualms in leaving their property empty. It costs very little to leave a property empty. Maintenance costs low and little taxes here. And it is capital that is growing.

From the expat point of view, it seems like a no brainer.

I suspect the only issue (apart from all the usual problems with renting) is when one gets to late retirement (say in 80s), will you be comfortable (or able) to move property every year or couple of years?

eCdD

This is correct. I have talked about this with some Malaysian friends and nobody heard about the buyer or the tenant paying a fee for the agent as this has always to be paid by the owner. The only possible way is that you hire a real estate agent to find a special object for you and negotiate a price that meets your ideas with the owner for you.

I guess as there are so many foreigners in Penang unfamiliar with Malaysian practices, agents and owners try this "trick".

eCdD

There is a (to me) mystical thing called "MOT" when buying a property. It is quite high (1,5% of purchase price), anybody knows what this is? Google only has ideas that have nothing to do with this topic...