The 4 factors that affect construction costs
Various factors influence the cost of building a house in Malaysia, including location, size and design, materials, labor, utilities, and infrastructure. These factors should be considered when allocating the budget since they account for most home construction expenses. Below is a list of factors affecting construction costs in Malaysia.
1. Location
The location in Malaysia where the house will be built influences the construction costs. Home construction in challenging environments, such as high elevations, flood-prone regions, rocky or sloped terrain, or areas with a high water table, can significantly complicate construction projects. These conditions strain the project and require more effort to manage, increasing the cost of building a house in Malaysia. When a site is complex for house builders to access, the costs rise, as extra resources must be dedicated to securing, maintaining, and protecting the area. Furthermore, rural sites often present additional difficulties, such as limited labor availability and the high cost of transporting supplies over long distances.
2. Size and design
House size and complexity always directly affect the cost of building a house in Malaysia. Larger homes require more labor, materials, and sometimes specialized equipment, especially when dealing with more prominent elements like glass windows or large countertops. One cost-effective approach is designing smaller, more efficient floor plans to minimize the cost of building a house in Malaysia. A smaller home reduces material usage, heating and cooling expenses, and maintenance time. Efficient floor plans allow you to design a home that meets your needs without wasting space or money.
3. Materials
Material cost to build a house in Malaysia plays a crucial role in determining the overall expenses, with factors like market conditions and material choices significantly impacting the budget. House builders and homeowners must carefully assess these factors to manage construction costs effectively. The prices of essential raw materials, such as lumber, steel, bricks, and plumbing fixtures, can fluctuate due to supply chain issues or tariffs, directly affecting the total construction cost. Making informed material decisions is crucial to keeping the project within budget and building a dream home without financial stress. Furthermore, allocating an extra budget to prepare for sudden inflation can help you manage the cost of building a house in Malaysia.
4. Labor
Labor costs can account for a significant portion of total project expenses, ranging from 50% to 60% for specific projects and contracts. The labor cost to build a house in Malaysia involves more than wages and salaries, as contractors bear additional expenses like benefits, allowances, and payroll taxes. Furthermore, the labor cost to build a house in Malaysia is influenced by worker productivity, skill level, project complexity, and market demand. Productivity measures tasks’ efficiency, while skill level reflects the expertise required. Project complexity adds to labor costs due to the coordination needed, and high demand for qualified workers in competitive markets can further increase expenses.
Breakdown of costs to build a house in Malaysia
Foreigners must be familiar with the cost of building a house in Malaysia to manage their finances better. Below are comprehensive details of the house construction cost in Malaysia.
Land purchase costs
Foreigners can buy land in Malaysia to construct a house. However, there can be a few restrictions, including a minimum purchase price of RM 1 million ($210,000), which may vary in every state, and the restriction from buying Malay Reserved Lands. The land cost per acre differs considerably depending on location, purpose, and local market trends. One acre of agricultural land in Malaysia would cost an average of RM 250,000 ($52,500) to RM 550,000 ($115,500). In Selangor, land can cost an average of RM 1.2 million ($252,000) or RM 224 ($47.04) per square meter. Meanwhile, land in Kuala Lumpur can cost an average of RM 952,756 ($200,079) or RM 1,353 ($284) per square meter.
Construction costs
Construction dramatically influences the cost of building a house in Malaysia since labor is one of the essential factors of home building. House construction cannot progress without manpower, so it is necessary to account for the labor cost. Below is the 2022 Construction Cost Handbook of a well-known construction firm, Arcadis, for reference on the construction cost in Malaysia.
| House type | Cost | |||
| Kuala Lumpur | Penang | Johor Bahru | Kota Kinabalu | |
| Detached houses (mass housing) | RM 2,545 ($534) to RM 3,565 ($749) | RM 2,375 ($499) to RM 3,190 ($670) | RM 2,570 ($540) to RM 3,445 ($723) | RM 2,250 ($473) to RM 2,510 ($527) |
| Detached houses (high-end housing) | RM 3,230 ($678) to RM 4,450 ($935) | RM 3,045 ($639) to RM 3,800 ($798) | RM 3,270 ($687) to RM 4,155 ($873) | RM 3,850 ($809) to RM 4,710 ($989) |
| Standard apartment | RM 1,335 ($280) to RM 2,670 ($561) | RM 1,390 ($292) to RM 2,200 ($462) | RM 1,375 ($289) to RM 2,645 ($555) | RM 1,605 ($337) to RM 2,300 ($483) |
Architectural and design fees
Architect fees in Malaysia are governed by the Architects (Scale of Minimum Fees) Rules 2010 under the Architects Act 1967. This regulation outlines the minimum fees architects can charge for their professional services. Supplementary services offered by an architectural consultancy can include project planning, site assessment, preparing master plans, providing interior design, and designing project graphics and signage. The architectural cost to build a house in Malaysia is based on housing estates under category two of the Schedule, as outlined in the table below.
| Total cost of works | Minimum percentage fee |
|---|---|
| RM 500,000 ($105,000) and below | 7.50% |
| RM 500,001 ($105,000) to RM 1 million ($210,000) | 7% |
| RM 1 million ($210,000) to RM 2 million ($420,000) | 6.50% |
| RM 2 million ($420,000) to RM 4 million ($840,000) | 6% |
| RM 4 million ($840,000) to RM 8 million ($1.68 million) | 5.50% |
| RM 8 million ($1.68 million) to RM 16 million ($3.36 million) | 5% |
| RM 16 million ($3.36 million) to RM 32 million ($6.72 million) | 4.75% |
| RM 32 million ($6.72 million) to RM 48 million ($10.08 million) | 4.50% |
| RM 48 million ($10.08 million) to RM 64 million ($13.44 million) | 4.25% |
| RM 64 million ($13.44 million) to RM 80 million ($16.8 million) | 4% |
| RM 80 million ($16.8 million) to RM 96 million ($20.16 million) | 3.75% |
| RM 96 million ($20.16 million) to RM 112 million ($23.52 million) | 3.50% |
| RM 112 million ($23.52 million) and above | 3.25% |
Legal and regulatory fees
You will likely seek legal assistance when buying properties, which will contribute to the cost of building a house in Malaysia. Your chosen lawyer will prepare all the required documents and contracts to complete the property transfer. Legal fees for drafting the sale and purchase of properties are typically a percentage of the property’s purchase price, depending on the home’s value. According to the First Schedule of the Solicitors’ Remuneration Order 2023, the scale of professional fees is as follows.
| Adjudicated value | Scale fees |
|---|---|
| For the first RM 500,000 ($105,000) | 1.25% (subject to a minimum of RM 500 ($105)) |
| For the next RM 7 million ($1.47 million) | 1% |
| Exceeding RM 7.5 million ($1.58 million) | Subject to negotiation on the excess but shall not exceed 1% of such excess. |
Furthermore, the building permit cost to build a house in Malaysia adds to the total expenses. Accounting for the property and documentary taxes is necessary for better cost allocation and budgeting for home construction. Below is a table of the regulatory costs for building a house in Malaysia.
| Regulatory fees | Amount |
|---|---|
| Stamp Duty | 4% flat rate of the property value for foreigners |
| Loan Agreement Stamp Duty | 0.1% to 0.5% of the loan value for properties bought through loan agreements |
| Building plan approval | RM 30 ($6.30) to RM 70 ($14.70), depending on the number of floors in the building |
| Design plan approval | RM 500 ($105) for manual filing and RM 480 ($101) for online filing |
Utility and infrastructure costs
Utility and infrastructure costs must be accounted for because they contribute to the cost to build a house in Malaysia. This includes approving essential utilities like water, sewerage systems, roads, and drainage. Below is a table of utility and infrastructure costs for building a house in Malaysia.
| Utility and infrastructure | Estimated fees |
|---|---|
| Water supply plan | RM 1,300 ($273) |
| Sewerage plan | RM 420 ($88.20) |
| Road, drainage, and street lighting plan | RM 100 ($21) |
| Water inspection | RM 1,250 ($263) |
| Sewerage inspection | RM 600 ($126) |
| Fire safety inspection | RM 312.50 ($65.63) |
| Site clearing work | RM 50 ($10.50) per hectare |
Hidden costs you should not forget
It is crucial also to account for the hidden cost of building a house in Malaysia. Some foreigners may overlook these hidden costs, but you must include them in your budget allocation to avoid unexpected expenses. Here are the hidden costs you should not forget, including:
- Construction insurance: The insurance cost to build a house in Malaysia can be unnecessary for some; however, it covers liabilities and damage during the build. Construction All Risk (CAR) Insurance in Malaysia is a policy that provides comprehensive coverage for construction projects.
- Waste disposal and clean-up: Depending on the project size, waste disposal and clean-up services can add to the total cost of building a house in Malaysia. Accounting for these services is necessary to finalize the budget.
- Material price fluctuation: Unexpected increases in the material cost of building a house in Malaysia can negatively impact budget allocation. It is crucial to allocate an additional 5-10% of the construction budget for such price changes.
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Frequently Asked Questions (FAQs)
How much does it cost to build a house in Malaysia as a foreigner?
The average cost for a foreigner to build a house in Malaysia is RM 200 ($42) to RM 500 ($105) per square foot. However, this cost is not fixed since home construction value primarily depends on many factors, including location, size, design, construction cost, and other relevant fees.
Are there restrictions for foreigners buying land in Malaysia?
Yes, there are restrictions for foreigners buying land in Malaysia, including a minimum purchase price of RM 1 million ($210,000), a restriction from purchasing Malay Reserved Lands, and other state-specific land regulations.
How much does it cost to build a double-storey house in Malaysia?
The cost to build a double-story house in Malaysia can range from an average of RM 300,000 ($63,000) to RM 600,000 ($126,000), depending on many factors such as location, house size and design, materials, construction fees, and other relevant fees.
Do I need special permits to build a house as a foreigner in Malaysia?
No, you do not need special permits to build a house as a foreigner in Malaysia. However, you are required to submit all necessary documents and pay for building approvals to build a home in Malaysia, just like any other Malaysian citizen.
How much is the average architect fee in Malaysia?
The average architect fee in Malaysia can range from 3.25% to 7.5%, depending on the total cost of the house indicated in the Architects (Scale of Minimum Fees) Rules 2010.
What is the average cost to build a single-story house in Malaysia?
The average cost to build a single-storey house in Malaysia is RM 150,000 ($31,500) to RM 300,000 ($63,000). However, this amount can change depending on the factors affecting home construction.
Is it cheaper to buy or build a house in Malaysia?
Buying a house in Malaysia is cheaper because there are fewer expenses than building one. Home construction can be costly due to the necessary approvals, fees, and construction expenses. Moreover, construction services and insurance are required, adding to the cost to build a house in Malaysia.
