PETALING JAYA: The relaxation of the Malaysia My Second Home (MM2H) programme, with changes to the eligibility criteria and financial requirements aimed at attracting a large pool of foreigners, may be a much needed boost to the property sector.
However, more needs to be done to encourage more uptake of the programme, given the competition from the neighbouring countries looking to woo foreigners with similar programme.
Professor Geoffrey Williams, who is an economist and Provost for Research and Innovation at Malaysia University of Science and Technology, agreed that the revised MM2H is better than the previous version, but still gives the impression that this is a revenue-raiser for the Immigration Department rather than a scheme to encourage expatriate residents in Malaysia.
“It is still relatively unfriendly, with a bad feeling for foreigners, and would only be attractive for tax avoidance to provide multiple residency for high tax payers to avoid paying tax at all in any single country.
“People with less than half a year’s residence pay no taxes so if you can get residence in three places you have one third residence in each and pay no taxes,” he told StarBiz.
He added that the MM2H programme will not have much of an impact on the economy.
Last Friday, the Tourism, Arts and Culture Ministry unveiled a revamped version of the MM2H programme. introducing a three-tiered structure along with updated financial requirements. The revised guideline brings several changes to the eligibility criteria.
The government has lowered the minimum age requirement to 30 years from 35 years previously, widening the accessibility for individuals who seek to make Malaysia their second home.
A measure aimed at streamlining and fortifying the application process requires that applications are now exclusively accepted through licensed MM2H agents accredited by the ministry under the Tourism Industry Act 1992.
Another significant change relates to the expanded range of eligible dependents. The programme now covers children between 21 and 34 years old, who are neither employed in Malaysia nor married. Parents and parents-in-law are now considered eligible dependents.
“I do not believe it will boost the economy much. The claims of a big economic impact for previous MM2H were not really delivered, which is why the Malaysia Premium Visa Programme (PVIP) scheme was introduced to raise more money quickly,” Prof Geoffrey said.
PVIP, which was launched in September 2022, is a “Residency Through Investment” concept that allows wealthy foreigners to invest and reside in Malaysia for 20 years, with an option to extend for another 20 years.
“The damage done to Malaysia’s reputation is serious and competition from other countries with better schemes and lower costs of living is intense,” he added.
He explained that the changes under PVIP were to attract “the right type of people” with lots of money.
“These changes attract more people but even the rich are likely to choose the lower tier options because the main incentive is residential access not other perks. So you may attract the wrong type of people in the form of tax avoiders,” he said.
Prof Geoffrey stressed that the government needs to create a positive sentiment and a welcoming environment, which is essential for foreigners when choosing long-term options in life.
MM2H was launched in 2002 with the purpose of attracting foreigners to retire and live in Malaysia for an extended period.
The programme was suspended in November 2019 and was re-launched in October 2021 with more stringent application conditions.
According to RHB Research, the stricter conditions led to the collapse of the MM2H market whereby there were only 1,905 MM2H applications approved between November 2021 to September 2023 (23 months) versus 5,610 in 2018.
During the same year, there were 197,385 transactions in the residential market according to National Property Information Centre.
The research house said this meant the MM2H approval represented 2.8% of the residential transaction volume, which is a rough gauge of the potential addressable market from MM2H holders.
“PVIP struggled to gain traction given the large upfront processing fees of RM200,000 needed versus RM5,000 for MM2H. PViP had only processed 57 applications where 28 were approved as at October 2023,” RHB Research added.
Nevertheless, RHB Research believes UEM Sunrise Bhd
, Sunway and Eastern & Oriental Bhd are key beneficiaries under the new MM2H programme.
“We reiterate our ‘overweight’ call on the sector, as government policies, investment flow, infrastructure developments and the US Federal Reserve’s signal of a potential rate cut next year are favourable to stimulate demand for property,” the research house said.
Meanwhile, HLIB Research said the revised MM2H programme, with better clarity on the relaxed conditions, gives developers a better picture and visibility of the market and could potentially translate to more launches in the high-end residential segment.
“The development is an overall positive for the sector, especially for the high-end residential segment. Maintain ‘neutral’ for the sector with top picks Sunway Bhd, OSK Holdings Bhd, Sime Darby Property Bhd and IOI Properties Group Bhd,” it said.
The research house pointed out that given the main nationality of the MM2H holders are Chinese (32.8%), this may potentially benefit Sunway’s development in Velocity, Jalan Cochrane, as there is a high proportion of Chinese residents in the area.
It added that the MM2H programme should also have spillover economic benefits to tourism and healthcare, benefiting in particular Sunway through its senior living, healthcare and hospitality businesses.
“Having said that, we also cautioned about increased competition from neighbouring countries like Thailand and Indonesia which had in recent years launched similar programmes.
“Thailand launched its Long-Term Residence Visa programme in September 2022, while Indonesia launched its 10-Year Visa Second Home Programme in December 2022,” HLIB Research said.
Similarly, TA Research, which maintained its “overweight” stance on the property sector, anticipated it to be a main beneficiary of increased domestic activities, driven by a surge in infrastructure projects and investments.
“This adjustment could attract more foreigners to our shores, positively impacting the real estate market.
“Moreover, by relaxing the MM2H programme, Malaysia can continue to vie for highly skilled foreign individuals, fostering their contributions to the nation’s growth through residency and investment,” it added.
However, TA Research suggested that the government remove the high RM40,000 monthly income requirement introduced in the 2021 revamp to enhance the appeal of the new MM2H programme.
“If the government reintroduces a monthly income requirement later, we propose setting it at RM10,000.
“This adjustment is particularly relevant when compared to countries like the Philippines, Indonesia and Cambodia, which do not impose a stipulated minimum income for enrollment in their long-stay visa programmes,” it added.
