Malaysian Properties and its Investment Worth

Malaysian Properties and its Investment Worth

Looking for properties, especially for first-time home buyers, can get overloaded by the many options available which may in return be baffling. With a plethora of properties available in the market, it can get difficult trying to cope with all the agents, brokers and developers including the financiers. Although the physical variations among some properties are faint, the consequences for buyers and investors can affect significantly.

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Before knowing the property’s worth and potential risk factors involve, let’s briefly find out the major types of properties available :-

Types of Properties

Terrace Houses

These houses generally share a wall with the connected property on both sides. They are usually one or two floors high however sometimes they come in three stories.

Townhouses

These are significantly the same as terraced houses only they are highly upmarket and expensive. Some possess an internal patio too.

Semi-D

This is an acronym for semi-detached and applies to a house which is connected on one side to another property. Two homes comprise of one building.

Bungalows

This is a free, non-attached standalone house on its personal land. Compared to some nations, bungalow refers to a single-story, smaller house however in Malaysia, it can be of any size. Some are massive with built-up areas surpassing 10,000 square feet.

Apartments/Flats

Apartments are accessible in almost all major towns and cities. They differ in sizes and pricing. Nowadays apartments are more premium with enhanced facilities such as security and some basic recreational offerings ie a playground, pool and etc.

Condominiums

Dissimilar to few nations, where there is a legal contrast between a condominium and an apartment (flat), in Malaysia the terms can be interchangeable. Generally, employing the term condominium means the development has enhanced facilities and amenities.

Gated Community

This usually refers to developments that have monitored access with a guard house and fencing enclosed in the entire development. This generally means improved security, but it is recommended to check precisely what security is provided.

Read about – Property Investment Company in Malaysia.

Investment Advice

Opt for your Kind of Property

Many investors state rental income as a prime intent to invest in housing, however commercial properties can provide comparatively better earning potential. Businesses pay more in rental earnings in long-term, although the capital outlay would be greater. However, that will be easily compensated by reduced maintenance costs. Apart from commercial properties, retail investments or industrial properties are good options too.

Leasehold and Freehold

Particularly in Malaysia for investing real estate properties freehold is deemed as the better alternative over leasehold. Freehold titles signify that the owner of said titles don’t have to worry about the tenure of their land expiring, as opposed to leasehold titles. Renewal of leasehold titles after the lease expires can get expensive.

Essential Risk Factors

  1. Costs are Affected by Intricate Aspects

While some may see property investment as lucrative option, however there are various aspects to determine if it is true. Comprehending these threats is essential but frequently detailed. Location plays an important role. This type of return can make you excited about investing in property, however the same return can’t be assured in another domain. Conduct proper research and know that threats differ from location to location.

  1. Perspective Alters Every Year

Historical property costs can be a great index of return in a specific domain, but it’s essential not to assume that such trend will sustain. Property investment in Malaysia this year can seem like a great deal and vary from what it did in 2011 when Malaysia’s property sector enjoyed a duration of substantial growth.

  1. Be Cautious of Rental Returns

Rental return is a significant aspect of the equation when it comes to evaluating the financial profitability of several property investments. Renovations and unexpected prices to a property must be considered prior, something which can essentially offset the worth returned by a rental property for a said duration. You require to factor these possible threats into your cash flow when considering about investing in properties.

Benefits of Investing in Malaysian Properties with a Labuan Company

  • A Labuan company can hold properties provided the buying value of a property is minimum MYR 1 million in Kuala Lumpur and MYR 2 million in Selangor state.
  • The corporate tax payable by a Labuan company holding a local private limited company is zero percent. Additionally, no audit of accounts is required.
  • The corporate tax payable by a local private limited company on rental receivables is 24 percent. Local people can be employed to cater to the business and the office can be situated anywhere in Malaysia. It costs much more for a Labuan company to set up a marketing office and pay a fee annually. Additionally, only a maximum of 4 people can be employed, and the office can be located anywhere in Malaysia. Also, a Labuan company can apply for setting up a marketing office only if there is an office in Labuan.
  • It is comparatively simpler to keep track of the accounting books of the organisations, the offshore Labuan company which acts as the investment holding company and the local private limited company which handles the operations in Malaysia.
  • The dividend paid by the local company to the shareholder, the Labuan company, is exempted from the payment of tax.

Current Market Scenario in Malaysia

Malaysia’s property market gained traction as transaction activity in 3Q 2019 went up by 5.6% to 83,186 transactions and 4.7% to MYR 34.7 billion respectively from the same time previous year.

Residential– Knowing homebuyers’ taste in harmony with product positioning and local profile is the core. Foreign buyers and investors may benefit to lower the residential overhang after the proposed lowering of the foreign price threshold in Budget 2020.

Retail – Traditional shopping is presently challenged by modern approaches, leveraging on technology and increasing customers’ demand for lifestyle experiences while shopping. Millennials have also pushed retail boundaries towards a community concept; everything is in one place.

Industrial – Raising demand for last-mile deliveries are in line with the expansion of e-commerce. Efficiency and accessibility will top as the main criteria for logistics players to meet the requirements between air or seaports and end users.

Hotel – Visit Malaysia 2020 will raise tourist arrivals, partly fueled by global issues steering tourists away from the other traditional destinations.

To get a detailed outlook of the Malaysia property market, new updates, potential risk factors, prospects for foreigners and how to setup a Labuan company to hold your investments, book a complimentary session with QX Trust consultants at +60 3 9212 6940 or consultant@qx-trust.com.