At US$145,000, Malaysian homes get cheaper for foreign buyers. Will locals pay the price?

Foreigners looking to buy property in Malaysia can now do so for as little as 600,000 ringgit (US$145,000) following a controversial move by the government to slash the threshold for foreign buyers by 40 per cent to address an oversupply of high-rise units.

Finance Minister Lim Guan Eng announced the measure last month when he outlined Malaysia’s 2020 federal budget, saying that addressing the oversupply would boost the economy. Just days later, Prime Minister Mahathir Mohamad warned that “crisis” loomed if the glut in supply was not resolved.

The housing industry hopes the move will help shift 8.3 billion ringgit worth of high-rise units in a property market that has traditionally attracted keen interest from Singapore, Hong Kong and mainland China. However, detractors say lowering the threshold from one million ringgit (US$240,000) could trigger an influx of foreign buyers and encourage developers to inflate prices in a nation where more than one in four people cannot afford to own a home. Critics fear the lower threshold will be exploited by middle-income earners speculating on price increases rather than actually living in the units, but backers of the new measure point out that it will apply only to an estimated 14,000 units that have already been built and not future developments.