What Foreign Buyers Need to Pay When Purchasing Property in Penang and Kuala Lumpur, Malaysia

Malaysia remains one of Southeast Asia’s most attractive property markets for foreign investors, particularly in key locations such as Penang and Kuala Lumpur. However, foreign buyers are subject to specific regulations and costs that differ from those applied to Malaysian citizens. Understanding these costs is essential before committing to a property purchase.

This article provides a comprehensive overview of all payments foreign buyers should expect when purchasing a new residential property in Penang or Kuala Lumpur.

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Minimum Property Purchase Price for Foreign Buyers

Foreign ownership of residential property in Malaysia is regulated at the state level. As a result, minimum purchase price thresholds apply.

• Penang: Foreign buyers are generally required to purchase properties priced at RM1,000,000 and above, depending on property type and location.

• Kuala Lumpur (Federal Territory): The minimum purchase price for foreign buyers is typically RM1,000,000 and above for residential properties.

These thresholds are designed to protect affordable housing for local buyers and may be revised periodically by state authorities.

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Upfront Costs for Foreign Property Buyers

Stamp Duty (Property Transfer Tax)

Stamp duty is a mandatory government tax payable upon the transfer of property ownership.

• Foreign buyers are subject to a flat stamp duty rate, which is higher than the progressive rates applicable to Malaysians.

• The rate is calculated based on the purchase price stated in the Sale and Purchase Agreement.

For example, a property priced at RM1,000,000 would typically incur stamp duty of approximately RM40,000 or more.

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State Authority Consent Fee

Foreign buyers must obtain state authority consent before the property can be legally transferred.

• This requirement applies in both Penang and Kuala Lumpur.

• A state consent application fee is payable, with the amount varying depending on the state and property value.

In many new developments, developers assist buyers in coordinating this approval process, though the fee remains payable by the purchaser unless stated otherwise.

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Legal Fees

Legal representation is required to prepare and register all transaction documents, including the Sale and Purchase Agreement and title transfer.

• Legal fees are regulated and typically range from 0.7% to 1.5% of the purchase price, based on a prescribed fee scale.

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Booking Fee and Down Payment

Upon selecting a property:

• A booking fee is paid to secure the unit. This amount is later deducted from the total purchase price.

• A down payment, usually 10% of the property price, is payable upon signing the Sale and Purchase Agreement.

Certain developers may offer promotions that reduce the initial cash outlay.

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Bank and Valuation Fees (If Financing Is Required)

For foreign buyers applying for a mortgage in Malaysia:

• A valuation fee is charged by the bank to assess the property’s market value.

• Additional loan agreement legal fees may apply.

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Ongoing Ownership Costs

Once ownership is transferred, foreign buyers are responsible for recurring costs.

Annual Property Taxes

These include:

• Quit rent, a nominal annual land tax.

• Assessment tax, payable to the local council and based on the property’s assessed value.

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Maintenance and Sinking Fund (Strata Properties)

For condominiums and other strata properties:

• Monthly maintenance fees are charged for building management and facilities.

• A sinking fund contribution is required for long-term repairs and capital expenditure.

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Taxes Payable Upon Sale of the Property

Real Property Gains Tax (RPGT)

Foreign property owners are subject to Real Property Gains Tax when selling their property.

• Higher tax rates apply if the property is sold within the first few years of ownership.

• Holding the property for a longer period generally results in reduced tax liability.

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Summary of Costs for Foreign Buyers in Malaysia

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Key Considerations for Foreign Buyers

Foreign buyers are advised to work with licensed real estate professionals and qualified solicitors to ensure compliance with Malaysian property regulations. Costs and policies may vary depending on state regulations and project-specific conditions, so professional guidance is essential.