The prospect of foreign property ownership is an aspiration for many Malaysians.

An increasing number of Malaysians are extending their house-hunting endeavours beyond the nation's borders in search of more housing options. Presently, the United Kingdom (UK) stands as the top choice for Malaysians seeking to invest in real estate overseas. There is no indication that this trend will slow down, with Malaysian investment in UK real estate rising by 68% annually to £1bil (RM6bil).

As an example, according to Malaysian-based London property consultant Red Bean Consultancy, property purchases are done on a private loan basis typically by individuals. Three-quarters of these loans are undertaken by Chinese, Indian and British citizens (77%), though the remaining 25% is split between other nationalities. The value of a mortgage for Malaysians purchasing UK property ranges from £400,000 (RM2.3mil).

Malaysians purchase real estate overseas for a variety of reasons. Some look for investment opportunities in order to profit from overseas markets that have larger potential returns. Some long for a second house, a safe haven where they can spend their retirement or vacations and experience various environments and cultures. This trend is fueled in part by children's educational opportunities, asset diversification and even the prestige of owning real estate abroad.

Of the bricked houses of London or even the bustling streets of finance hub Singapore, the prospect of foreign property ownership is an aspiration for many Malaysians. However, it's essential to comprehend the complexities of purchasing property abroad as a Malaysian before starting this thrilling adventure.

Foreign political landscape

There are undoubtedly a lot of political factors to consider. For instance, has the destination country had multiple rapid changes in its ruling party? Investors might not be pleased with a change in government as it could result in modifications to the regulatory environment. Strikes, protests and anti-foreign campaigns all work to deter foreign capital investment, which may lead a potential investor to give up on their real estate investment altogether from the hassle.

Exchange rate fluctuations

Regardless of renting out or selling a property, the risks of foreign exchange rates that experience constant fluctuations will persist over time. Desired income amounts will shift accordingly and the homeowner may experience less income some months and more the next. That is why it is crucial to be in a financially stable position to even consider foreign homeownership.

Unfortunately, getting finance for the purchase of a foreign property can be difficult. Malaysian banks might have more stringent laws, limiting loan amounts and interest rates, even though some foreign banks lend to overseas consumers. It may be necessary to look into alternative financing options like private equity or foreign lenders.

Housing price movement

Take a look at the local housing trend as of late. Finding an accurate valuation will let an investor see how prices are moving and identify general market trends. It seems senseless to purchase real estate in a neighbourhood where there is an excess of available housing or where many homeowners are closing on their properties. 

Furthermore, a number of countries may offer temporary stimulus packages, such as lowered immigration costs, waived legal fees or an increase in the number of foreigners allowed. However, these measures to pique foreign interest in local real estate may be abandoned later. Therefore, always investigate the past of these packages if needed to avoid getting into problems.

Extra costs

There are extra obligations associated with foreign property ownership. An investor should consider factors such as property management, maintenance expenses, currency fluctuations and potential taxation on rental income before making a purchase decision. To get the most out of an investment, understanding the local rental market and the property management services that are offered are essential. 

In terms of taxation, the taxes collected by foreign governments come in different forms such as taxes levied when buying the property, property rental taxes, capital gain tax or property tax during the occupation period or stamp duties. These taxes are often designed to curb speculation behaviour.

Property services in Malaysia

There are plenty of real estate developers in Malaysia that offer international property services for local buyers. These services help reduce the daunting anxiety that accompanies the prospect of international property purchases. They will help investors gain insights into the foreign markets of their choice and advise accordingly.

A second home abroad and potential rental income are among the many reasons why Malaysians are drawn to foreign real estate. Malaysians are buying more real estate outside of their country, whether for a vacation spot, an investment opportunity or a retirement nest. As a result, understanding the complexities of the foreign real estate market is essential before making the leap and living life beyond Malaysian borders.

This article was first published on Starbiz7.

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