Revised MM2H guidelines to renew interest in the programme, revive high-end segment – analyst [BTTV]

June 18, 2024

KUALA LUMPUR: The revised Malaysia My Second Home (MM2H) is expected to renew interest in the programme and spur the high-end segment of the property market.

Hong Leong Investment Bank Bhd (HLIB) Research in a note today said the new MM2H guidelines, which received cabinet approval, are more relaxed  than the 2021 version, with reduced requirements for fixed deposits, offshore income, and liquid assets, but introduces a new requirement for house purchase, which is mandatory for MM2H holders.

The new MM2H programme, now includes three categories: Silver, Gold, and Platinum, along with a special category for Special Economic Zones (SEZ) and Special Financial Zones (SFZ).

Three out of four requirements which had led to the collapse of the MM2H programme in after 2021, were revissed.

For the silver category the fixed deposit requirement  has been reduced to RM500,000 from RM1 million previously; no requirement is imposed on offshore income versus RM40,000 per month previously;  and there was no mention of liquid asset requirement when previously at least RM1.5 million was required.

There is no change to the 90-day minimum stay period in Malaysia rule.

HLIB Research said while the relaxed requirements is a positive change that is expected to renew interest in the program, the new mandate that MM2H holders must purchase and own a house may deter some potential applicants.

“From the property sector’s perspective, this is beneficial, as the relaxed conditions will attract a broader range of interests, while the house purchase requirement acts as an automatic filter, ensuring all MM2H applicants buy a property rather than rent,” HLIB Research said.

Additionally, the minimum property value threshold for the Silver category is set at RM600,000, which is lower than the minimum property purchase price for foreigners in most states.

In 2018, prior to the suspension of the programme in November 2019, there were 5,610 MM2H applications approval.

It represented about 2.8 per cent of the 197,385 transactions in the residential market then, according to National Property Information Centre.

The re-launch of the programme in October 2021, with more stringent application conditions, led to the collapse of the MM2H market.

From Nov 2021 to Sep 2023 (23 months), only 1,905 MM2H applications were approved (vs. 5,610 in 2018).

“We understand that developers and foreign property purchasers alike have been adopting a wait-and-see approach pending the announcement from government on the new MM2H conditions. With better clarity on the relaxed conditions, developers now have a better picture and visibility of the market and we could potentially see more launches in the high-end residential segment,” HLIB Research said.

On the demand end, the firm said, there is also likely some latent demand from prospective buyers whom were waiting for the new MM2H conditions to be announced.

“We think this development is an overall positive for most developers. Given that under the SEZ/SFZ category, MM2H holders are restricted to purchase property from the primary  market, this is especially positive for Forest City which is designated as a SFZ,” HLIB Research said.

It cautioned however that the programme could face competition from similar programmes in Thailand and Indonesia.

Thailand introduced its Long Term Residence Visa programme in Sep 2022, while Indonesia launched its 10-Year Visa Second Home Programme in Dec 2022.

Most notably, neighbouring countries such as Indonesia,  Thailand, Cambodia and The Philippines do not impose minimum annual days of stay  in the country compared to 90 days of minimum stay imposed by MM2H.

HLIB Research has upgraded its call on the property sector to “Overweight” with IOI Properties Group Bhd, OSK Holdings Bhd, Sime Darby Property Bhd, and Sunway Bhd as its top picks.

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