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The Differences Between Properties In China and Malaysia
Date: 27 November 2019   Published by: IBN

Due to the difference in country governance and policies, the properties in Malaysia differs significantly from those of China. Understanding these differences is necessary for property investors so that can minimise risk and ensure they choose the right property.

1: Difference in property right

In China, the Land Use Rights (LUR) for residential lasts up to 70 years. The LUR for industrial and commercial have an even shorter period of 40 years. After the LUR expires, the residents must reapply for the right from the government and they are required to pay the difference in property/land cost based its current value.

On the other hand, most of the properties in Malaysia are freehold properties and some of them are 99-year leasehold properties. For landed properties, the purchaser does not only gain possession of the house, but also the land that comes together with the house, including the buried natural resources such as natural gas and petroleum.

What is the significance of owning a freehold property? In the event the Malaysian Government decides to reclaim the land, not only will you be compensated with the current value of your house, the government also needs to compensate you for the land. For instance, if the government plans to build a road that passes through your house, they have to choose between purchasing the land from you for the project or find alternative solution. You are protected by the property law of the country.

In China, it is impossible to own a piece of land. You can only purchase the house built on the land with a LUR of 70 years only.

For 99-year leasehold property, you are required to pay the government a land premium to extend the tenure of the lease. Regardless of land tenure, all properties that you purchase in Malaysia belongs to you. If the government or other private companies wish to reclaim the land after the 99-year tenure has ended, they are required to compensate you for your property based on current property value.

2: Difference in tax payable

China does not tax any real estate holdings. However, property owners need to pay land tax as the land right belongs to the country. Property developers are also required to pay a large amount of tax to use the land, which will be paid by buyers in a one-off manner.

In Malaysia, property owners need to pay for property assessment tax and quit rent - property assessment tax is paid on half-annual basis (approximately RM400 to RM1,500); quit rent is paid on an annual basis (approximately RM100 to RM250).

One of the advantages of properties in Malaysia is that there is no inheritance tax. You can pass down your properties to the next generation freely.

3: Difference in property purchase

In Malaysia, you can get a house loan of up to 60%. If you are a foreigner under the Malaysia My Second Home (MM2H) Programme, you are eligible to get a house loan of up to 80%. The interest for house loan in Malaysia is approximately 4%, which is lower than the loan interest in China (approximately 5-6%). The properties in Malaysia is definitely much more affordable as compared to China.

The houses advertised in Malaysia are the actual unit size without taking into consideration the shared areas. In addition, most units are delivered fully-furnished.

Most of the houses in Malaysia and Singapore come with a parking bay. For smaller units, you might only get a parking bay for 2 units; for big units, you may get up to 2 parking bays for free.

It is very rare to find basement parking in high rise buildings in Malaysia. Most of the parking lot are located above ground (floor 1 to 4) and everything above the parking lot are the residential units/ offices.