Early this month, Malaysian Finance Minister Lim Guan Eng revealed that the government intends to lower the foreign ownership price requirements for high-rise condominium units in the country’s urban areas.
Overseas buyers will be able to purchase high-rise condo units for a minimum of MYR600,000 (USD143,400). This is down from the current price floor of MYR1 million (USD239,000) which was put in place to prevent a bubble from forming. The new regulations go into effect at the start of next year.
“Since there are not enough Malaysians buying high-rise condominiums and apartments in urban areas, there is a property overhang. We have to sell them or developers will get into trouble. And overhang in property will result in a national crisis, which has happened in Hong Kong and Tokyo due to overdevelopment,” Lim told reporters during a recent conference. “We have to get rid of this overhang so that the market for property becomes healthy again.”
Jagdev Singh, PwC Malaysia Tax Leader, welcomed the move, but also warned that more information was needed in order to determine the full impact of the lower foreign ownership price requirements.
“Questions abound as to whether the relaxation of foreign owners should be limited to the secondary market or extended to the primary market and if there is a need for a minimum holding period as well as a limit in whom they can sell to,” he told Edge Property.
According to data from the National Property Information Centre, nearly 4,000 condo units in the country would now be eligible for foreign ownership. More than 75 percent of these properties are located in Kuala Lumpur, Johor and Penang.
However, many experts point out that the condo glut in Malaysia can’t solely be attributed to the restrictions of foreign ownership.
“The property overhang is attributed to various factors such as mismatch of products and location rather than pricing alone,” Knight Frank Managing Director Sarkunan Subramaniam was quoted as saying by the Malay Mail. “Some units remain unsold due to less favourable location in terms of accessibilities, distance and lack of amenities as well as product type.”
The Malaysian government has no plans to supplement the new foreign ownership price requirements with a citizenship or permanent residency scheme. Some had hoped this would be the case, but Malaysia Prime Minister Mahathir Mohamad dismissed the idea.
“If foreigners bought the property, we will not give them Malaysian citizenship. They can only use it as their holiday home,” the Prime Minister stated.