FOREIGNERS buying property in Penang will have to cough up substantially more when new guidelines kick in, come July.
In a move to ease its runaway property prices, the bustling northern Malaysian state has decided to bump up the floor price of real estate that foreigners are eligible.
Currently, foreigners can purchase property that is priced above RM500,000 (S$205,000). Penang plans to raise this floor.
"Penang has boldly taken the lead by imposing a limit on all property purchases by foreigners in Penang to above RM1 million and landed properties in Penang Island to above RM2 million beginning on July 1, 2012," Penang chief minister Lim Guan Eng said in a media statement on Tuesday.
He had previously hinted of the move after news emerged the federal government was looking to double the current minimum purchase for foreigners to RM1 million in an attempt to control prices from spiralling too rapidly.
In Malaysia, land matters fall under state jurisdiction and Penang's speedy decision is likely in response to the limited space - especially on the island side - coupled with very robust demand in recent years. The Federal Territory (Kuala Lumpur) is another area with land constraints and Selangor because of its larger size, only has pockets of expensive real estate, property players said.
But Penang has stood out for a number of reasons.
"The island is becoming a valuable real estate play. There are many Penangites working all over the region who intend to retire (there). They are adding to higher values as well. As an island, land is finite in supply so values are rising from both local and foreign interest," Malaysia Property Inc chief executive Kumar Tharmalingam said.
Indeed, the large Penang diaspora (including in Singapore) as well as international community from Singapore, Indonesia, Hong Kong, Japan, and United Kingdom constitute significant components of the market, Henry Butcher Malaysia noted in a report earlier this year. The property firm said that a double-storey terrace house built in the 1970s cost RM450,000 in 2006 and RM850,000 five years later.
Participants of Malaysia's My Second Home Programme and retirees have identified the state as "a preferred destination of choice" for a number of reasons, it said, including its high standard of living but low living costs, international health care standards, economic and political stability, and lack of natural or man-made disasters. As a result, a number of Klang Valley developers had also moved north.
A federal opposition coalition Pakatan Rakyat leader, Mr Lim contends the rise in property prices is also because of "rising public confidence" in his administration. Pakatan took control of the state after the 2008 general election. His media statement came on the heels of claims by the state opposition that rising land premiums had led to property price increases. Denying the claims, he pointed out land conversion rates had been maintained from the previous administration.
In Penang, foreigners comprise nearly 8 per cent of total residential property buyers, four times the national average. Because most Malaysians bemoan the ringgit's feeble purchasing power, stronger foreign currencies and their superior purchasing power can rankle.
"I fully concur with LGE's (Lim Guan Eng) policy pricing on property purchases by foreigners lest local purchasers are left out of buying houses/condos to stay if there are no restrictions on foreign purchasers." commented "Jimmy" in an online post.