Foreign investors are driving a boom in Malaysia's luxury condominium market, lured by the relaxation of purchasing rules, a strong economy and low prices compared to other Asian capitals.

"Malaysia was off the international radar screen for years and it seems to have crept back in," said general manager of sales and marketing with the high-end Bandar Raya Developments Berhad, Rohan Cavaliero.

"There is a feeling that there is value in Malaysia. People recognise that over a reasonable period of time, values are likely to go up," he said.

Malaysia's general residential property market was blighted by oversupply in 2006, producing a dismal year of soft sales. Steep fuel price hikes pushed inflation to a seven-year high, weighing heavily on Malaysian purchasing power.

However, the middle and luxury markets performed much better, with the number of transactions in the 500,000 to 1.0 million ringgit (142,000 to 284,000 dollars) level rising by 15.8 percent, according to consultants Rahim and Co.

Analysts say the high-end market received a further boost in December when the government eased rules for foreign nationals who previously had to get approval to buy investment properties above 250,000 ringgit.

With gourmet kitchens, lush gardens for meditation, hi-tech security and even individual swimming pools, foreign interest is now on the rise, focused on luxury hotspots in the centre of Kuala Lumpur and its trendy southwestern suburbs.

"In the high-end market we are seeing a lot of interest from foreigners ... A lot of foreigners are coming in and buying in prime areas," said fund manager with Aberdeen Asset Management, Vicknesan Balakrishnan.

Investors and home buyers see Kuala Lumpur's top properties as cheap compared to neighbouring capitals, and are also attracted by a positive economic outlook for 2007, with inflation under control and interest rates at competitive levels.

The most sought-after location is around the city's famed Petronas Twin Towers, once the world's tallest buildings, where more than 5,500 condominium units are in the pipeline.

High ceilings, city and tower views, marble floors and jacuzzis are de rigueur for luxury flats in the area, and new developments are selling from around 700 ringgit per square foot.

In neighbouring Singapore, by comparison, the price of luxury apartments rose by a third last year, pushing the cost of top new developments to more than 3,000 Singapore dollars (1,950 US dollars or 6,800 ringgit) per square foot.

Balakrishnan said appetites are also whetted by a strengthening ringgit, which has appreciated by nearly 8.0 percent since its peg of 3.8 to the US dollar was lifted in 2005.

A stronger ringgit "means ringgit assets which appreciate more," he said.

Bandar Raya's glass and steel Troika apartments start from 1,000 ringgit per square foot, with units between 1.0 million ringgit to more than 3.0 million ringgit -- well over the 200,000 to 300,000 ringgit that buys a new three-bedroom flat in a middle-income suburb.

"We're seeing in Troika that more than 50 percent of our buyers are non-Malaysians," said Cavaliero, adding they included buyers from Hong Kong, Britain, Switzerland, and the United States.

Senior Vice President for consultants Jones Lang Wootton Malaysia, David Jarnell, said some 30 to 35 percent of high-end purchases in Malaysia are made by foreigners.

While buyers from Singapore and Hong Kong have been in the Malaysian market for a number of years, industry players say interest is growing further afield.

Majority-Muslim Malaysia is a popular destination for Middle East tourists, and growing numbers of Arab arrivals is helping to create awareness among investors from that market.

The low-density Suria Stonor, in a quiet street near the Petronas Towers, is 85 percent sold, with prices ranging from 2.1 to over 6.3 million ringgit.

Seventy percent of buyers are from overseas, with those from Middle Eastern financial institutions well represented, according to company sources.

"There is definitely a lot of Middle East interest coming through and we expect the largest region to bring money into Malaysia could well be the Middle East," said Jarnell.