How to buy a house in Penang?

Authored by the expert who managed and guided the team behind the Malaysia Property Pack

Everything you need to know before buying real estate is included in our Malaysia Property Pack

Who is the author of this content?

BAMBOOROUTES

A team specialized in real estate investing in APAC countries (Japan, Thailand, Indonesia, Australia, etc.).

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Penang. If you'd like to learn more about us, you can check our presentation page.

How this content was created 🔎📝

At BambooRoutes, we explore the Malaysian real estate market every day. Our team doesn't just analyze data from a distance—we're actively engaging with local realtors, investors, and property managers in cities like Kuala Lumpur, Penang, and Johor Bahru. This hands-on approach allows us to gain a deep understanding of the market from the inside out.

These observations are originally based on what we've learned through these conversations and our observations. But it was not enough. To back them up, we also needed to rely on trusted resources

We prioritize accuracy and authority. Trends lacking solid data or expert validation were excluded.

Trustworthiness is central to our work. Every source and citation is clearly listed, ensuring transparency. A writing AI-powered tool was used solely to refine readability and engagement.

To make the information accessible, our team designed custom infographics that clarify key points. We hope you will like them! All illustrations and media were created in-house and added manually.

How easy is it for a foreigner to buy a house in Penang compared to western countries?

Buying property in Penang as a foreigner is more restrictive than most Western countries but more accessible than many other Asian markets.

The main barriers include strict minimum price requirements (RM800,000 for condos and RM1.8 million for landed properties on Penang Island), mandatory state government approval that takes 2-4 months, and restrictions on certain property types. Western countries like Canada, Australia, or the UK typically allow foreign purchases at any price level, though some have implemented foreign buyer taxes.

However, Malaysia offers a significant advantage: foreigners can own freehold property, meaning you get full ownership rights indefinitely. This is unlike countries such as Thailand where foreigners are limited to leasehold or must use complex ownership structures.

The approval process adds complexity compared to Western markets, but the legal framework is well-established and transparent. As of September 2025, the process has become more streamlined with digital submissions available in most states.

It's something we develop in our Malaysia property pack.

What kinds of properties can foreigners actually buy, and what are they not allowed to purchase?

Foreigners can purchase high-rise condominiums, apartments, landed properties (bungalows, terraces, semi-detached houses), and certain commercial properties above specified minimum values.

On Penang Island, the minimum thresholds are RM800,000 for strata-titled properties (condos/apartments) and RM1.8 million for landed properties. On Penang Mainland (Seberang Perai), these minimums drop to RM400,000 for strata properties and RM750,000 for landed properties.

Foreigners are prohibited from purchasing affordable housing schemes, properties on Malay reserve land, low-cost housing units (typically under RM250,000), and most medium-cost housing developments. Properties designated for bumiputera quotas are also off-limits.

Industrial properties and certain commercial developments may be available but require case-by-case approval from state authorities. Agricultural land purchases are generally restricted, though some exceptions exist for large-scale developments.

What is the exact step-by-step process of buying a property in Penang from start to finish?

Step	Action Required	Timeline
1. Property Research	Identify suitable properties meeting minimum price requirements	1-4 weeks
2. Engage Professionals	Hire registered real estate agent and lawyer experienced with foreign transactions	1-2 weeks
3. Submit Offer	Make formal offer and pay earnest deposit (2-3% of property value)	1-3 days
4. Financing Application	Apply for mortgage if needed (optional step)	2-4 weeks
5. Sign SPA	Execute Sale & Purchase Agreement and pay 10% deposit	1-2 weeks
6. State Consent	Lawyer submits application to state authority for foreign buyer approval	2-4 months
7. Final Payment	Pay remaining balance according to contract schedule	As per SPA terms
8. Legal Completion	Complete documentation, pay stamp duty (4%) and registration fees	1-2 weeks
9. Title Transfer	Register title transfer and take possession of keys	1-2 weeks

Do you need to be physically in Malaysia to complete the purchase, or can it be done remotely?

Physical presence in Malaysia is not mandatory for completing a property purchase in Penang.

The entire transaction can be handled remotely through a properly appointed lawyer or representative using a power of attorney. This legal document allows your Malaysian lawyer to sign documents, complete banking transactions, and handle the property transfer on your behalf.

However, you'll need to ensure your power of attorney is properly notarized and apostilled in your home country before being recognized in Malaysia. Some banks may require a video call or additional verification for mortgage applications, but this doesn't require physical presence.

Many foreign buyers choose to visit Penang for the initial property viewing and lawyer meetings, then complete the remaining steps remotely. This approach provides confidence in the purchase while maintaining convenience.

What documents are mandatory, and which ones are optional or just recommended?

1. **Passport copy** - certified true copy required for identification2. **Proof of funds** - bank statements showing source of purchase funds3. **Sale & Purchase Agreement** - legally binding contract between parties4. **State consent application forms** - specific forms for foreign buyer approval5. **Loan documentation** - if financing is involved, complete mortgage application package

Optional but highly recommended documents include a power of attorney if purchasing remotely, professional property valuation report, building inspection report, and pre-approval mortgage letter to strengthen your offer.

Additional helpful documents are proof of address from your home country, tax identification numbers, and translated versions of any non-English documents, though English documents are generally accepted without translation.

It's something we develop in our Malaysia property pack.

Are real estate agents in Penang generally reliable, and how do you choose a trustworthy one?

Real estate agents in Penang are generally reliable when properly licensed and registered with the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP).

Choose agents who specialize in foreign buyer transactions and can demonstrate experience with state consent applications and cross-border documentation. Verify their registration number and check their track record with previous international clients.

Reputable agents typically work with established agencies, maintain professional websites, and can provide references from other foreign buyers. Avoid agents who promise unrealistic timelines, request unusual upfront fees, or cannot provide proper licensing documentation.

Use established platforms like PropertyGuru, iProperty.com.my, and EdgeProp to find licensed agents, and always verify their credentials independently before engaging their services.

Will the legal system protect a foreign buyer, and what legal checks or safeguards are in place?

Malaysia's legal system provides substantial protection for foreign property buyers through established frameworks and mandatory professional oversight.

All property transactions must involve qualified lawyers who conduct title searches, verify property ownership, check for encumbrances or legal issues, and ensure proper transfer procedures. The state consent requirement adds an additional layer of government verification.

Legal safeguards include mandatory escrow accounts for deposits, standardized Sale & Purchase Agreement formats, title insurance availability, and clear dispute resolution mechanisms through Malaysian courts. The Strata Management Act provides specific protections for condominium buyers.

Foreign buyers have the same legal recourse as local buyers, and Malaysian property law is based on English common law, making it familiar to buyers from Commonwealth countries. Professional indemnity insurance by lawyers provides additional financial protection.

What are the typical mistakes and pitfalls foreigners make when buying property in Penang?

The most common mistake is underestimating total costs beyond the property price.

1. **Inadequate budgeting** - failing to account for 4% stamp duty, legal fees, transfer costs, and ongoing maintenance fees2. **Insufficient due diligence** - not properly researching the developer's track record, especially for off-plan purchases3. **Poor location research** - buying in areas without considering future infrastructure development or rental demand4. **Rushing state consent** - not allowing sufficient time for the 2-4 month approval process5. **Currency risk ignorance** - not hedging against exchange rate fluctuations during the purchase period

Other frequent pitfalls include choosing unregistered agents, not understanding strata management fees and sinking fund requirements, and failing to research the property's rental potential if buying for investment purposes.

Many buyers also underestimate the importance of proper legal representation and try to cut costs on professional services, which can lead to expensive problems later.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Malaysia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

What taxes, fees, and other costs should you expect to pay, and what's the detailed breakdown?

Cost Item	Rate/Amount	When Paid
Earnest Deposit	2-3% of property value	Upon offer acceptance
SPA Deposit	10% (minus earnest deposit)	Upon signing SPA
Stamp Duty	4% of property value	Within 30 days of SPA
Legal Fees	1-2% of property value	Throughout transaction
Memorandum of Transfer Fee	1% of property value	Upon completion
Loan Agreement Stamp Duty	0.5% of loan amount	If financing used
Property Valuation	RM300-800	Before loan approval
Real Property Gains Tax	5-30% on future sale	Upon resale only

Can you buy a house in Penang with cash, or do you need financing?

Cash purchases are completely acceptable and often preferred by sellers for their speed and certainty of completion.

Financing is available to foreigners through Malaysian banks, with typical loan-to-value ratios of 60-80% depending on the buyer's financial profile and property type. International banks like HSBC, Standard Chartered, and Citibank often provide more favorable terms to their existing customers.

Cash buyers benefit from faster transaction completion, stronger negotiating position, and elimination of financing-related delays or complications. However, financing can help preserve capital for other investments or expenses.

As of September 2025, cash transactions represent approximately 40% of foreign purchases in Penang, with the remainder using various financing options including overseas mortgages secured against foreign assets.

Is it possible for foreigners to get a mortgage in Malaysia, and if so, what are the usual rates, conditions, and tips for approval?

Foreign buyers can obtain mortgages from Malaysian banks, though requirements are stricter than for Malaysian citizens.

1. **Income requirements** - minimum monthly income of RM10,000-15,000 or equivalent in foreign currency2. **Down payment** - typically 20-40% of property value required upfront3. **Documentation** - extensive income proof, bank statements, employment letters, and credit reports4. **Interest rates** - generally 4.5-6.5% per annum as of September 2025, depending on bank and borrower profile5. **Loan tenure** - maximum 30-35 years, with some banks limiting to 25 years for foreigners

Tips for approval include maintaining strong credit history, providing comprehensive income documentation from multiple sources, choosing properties in prime locations that banks view favorably, and working with mortgage brokers experienced in foreign applications.

Some buyers use international private banking relationships or offshore financing secured against assets in their home countries to achieve better terms than local Malaysian mortgages.

It's something we develop in our Malaysia property pack.

Does buying property in Penang give you any path to residency or citizenship, and where do foreigners usually buy the most?

Purchasing property in Penang does not automatically grant residency or citizenship rights in Malaysia.

However, property ownership may support applications for the Malaysia My Second Home (MM2H) program, which provides long-term residency for qualifying applicants. The MM2H program has specific financial requirements including minimum income, fixed deposits, and property purchase thresholds that vary by state.

Foreigners typically concentrate their purchases in several key areas of Penang Island: Tanjung Tokong and Gurney Drive for luxury high-rises, Batu Ferringhi for beachfront properties, George Town for heritage shophouses and modern condos, and areas near international schools like Dalat International School and Fairview International School.

Popular mainland locations include Bayan Lepas (near the airport and tech hub), Butterworth (for value-oriented buyers), and newer townships like Bayan Baru. Rental yields vary significantly by location, with tourist areas offering higher short-term rental potential but greater seasonality.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. EmerHub - Buying Property in Malaysia
2. BambooRoutes - Penang Property Guide
3. ArabMLS - Foreigners Buying Property in Penang
4. Conventus Law - Strategic Guide for Foreign Property Buyers
5. Housing Watch - Foreign Property Buying Guide 2025
6. Kredium - Best Countries for American Property Buyers
7. Wise - Foreigner Guide to Malaysian Property
8. InvestAsian - Countries Where Foreigners Can Own Land