Effective January 2010 the Federal Government announced that the minimum price at which foreigners could buy property was being raised to RM500,000 from RM250,000. This came as a shock to many expats and people in the property industry. It was pointed out that over half the sales of properties to foreigners were priced between RM250,000 and RM500,000. The new rule seemed to be contrary to the government’s expressed intention of attracting more foreign buyers.

However, most MM2Hers choose to buy bigger properties which cost more than RM500,000 so this has not had a major impact on most of them. However some have been affected, particularly those who bought a smaller second home here and kept their major property elsewhere.

Many foreigners and some Malaysians don’t know that property regulations come under the control of the State Governments. This often causes confusion because people think announcements regarding Federal policy apply to their property purchase.

Several States took a different approach to the minimum prices they imposed. Johor initially decided to keep their minimum price at RM250,000 but for reasons which are not clear they decided to follow the government guideline effective July 1st this year. It should be noted that Johor is the only State which imposes a tax on foreigners who buy property. There is a onetime tax of RM10,000 but this is sometimes included in the price if you buy in a new development.

Selangor State initially decided to drop their minimum price for foreigners to RM150,000 but have now raised it to RM250,000 which is still the lowest minimum price in Malaysia.

Penang raised their minimum price for foreigners to RM500,000 along with the Federal Government’s guideline but made a special exemption for Malaysia My Second Homers. For MM2Hers the minimum price is RM250,000 and if they buy two properties the minimum drops to RM150,000. For some reason this exemption was not publically announced. The result was widespread confusion and misinformation with many people (including us) advising MM2Hers that the minimum price was RM500,000. We only found out the truth because of the perseverance of one MM2H couple who dug deep to get past the unintended misinformation. We have now confirmed with the Penang land office that the minimum is RM250,000 RM150,000 if you buy two properties) for MM2Hers even the new ones coming in.

Pahang has gone the other direction. They clearly do not like the idea of foreigners buying their property and have set a minimum price of RM750,000 in their three most populous areas – Kuantan, Bentong and Cameron Highlands. The fact is that most foreigners choose to buy apartments and Pahang has very few priced over RM750,000 so that ensures the foreigners stay out. Some MM2Hers were caught out when they bought into new developments and on making the down payment and then trying to get State approval were told about the new rules and had to pull out.

Sarawak has always had different rules. They set the minimum price for foreigners at RM300,000. They also have different rules for foreigners wanting to join their version of the MM2H programme which makes it a lot less attractive than say Sabah which seem keener on attracting this segment.

We understand the rationale of having a minimum limit as it makes sense to reduce inflationary pressures on homes that lower income Malaysian would be hoping to buy. However one could argue that doubling the amount was a bit severe. It is also odd that this limit was recommended for the whole country when prices in Kuala Lumpur typically run almost double the price of most other cities and the gap widens even further when you get outside the major cities. Penang has many very attractive apartments which expats would like to buy as holiday homes or even as residences which are priced below RM500,000. These are now closed to all but MM2Hers. .