The temporary suspension of the Malaysia My Second Home (MM2H) programme to contain the spread of Covid-19 in the country has brought the high-end property market to its knees.
A review of the programme is scheduled to take place by the end of the year, and there are concerns about the impact of the suspension on the economy as foreign investors continue to shy away.
A prompt response by the government with proactive solutions to aid in the recovery of the property market is needed.
According to the International Real Estate Federation (FIABCI) Malaysia Chapter, a prolonged delay and silence on the MM2H programme will affect the image of Malaysia as an ideal destination for retirement.
“The government should take this opportunity to expedite and finalise an enhanced MM2H programme by engaging with all parties concerned.
“These include state authorities, to lower the threshold price of residential properties, and make the MM2H programme part of the post-Covid economic recovery plan,” said a FIABCI spokesman.
“We must be prepared for a potential economic upsurge during the recovery phase once a vaccine is available.”
Hartamas Real Estate (M) Sdn Bhd managing director Eric Lim said reviewing the MM2H programme is necessary if foreign buyers are to be attracted to purchase high-end properties in Kuala Lumpur, Johor Bahru and Penang.
“Despite being less than 2% of the property market share, the majority of city centre properties priced above RM1 million are bought by foreign buyers.
“Without them, there will be a glut of unsold properties. Locals tend to stay away from the city centre, which is common in most major cities and metropolitan areas,” he told Property Advisor.
Bernard Lau – the co-founder of Gravity Property Holdings, a Hong Kong-based consultancy focused on sourcing and facilitating investment-grade assets for mostly mainland China and Hong Kong investors – believes the uncertainty around MM2H needs to be resolved as soon as possible, not only to revive the economy but to maintain its position as a viable residency option.
“The government needs to generate new income into the system rather than recycle what is available.
“Malaysia is on top when it comes to education and healthcare. It is the preferred choice for investors as we are mainly English speaking, with a much lower price tag than Singapore, and most East Asians and Chinese can easily blend into society and have a comfortable life.”
Lau, who has been active in the Hong Kong and China property markets for nine years, said there is always demand for property from people who want a second property option, either as an investment or to migrate.
“We have clients who made (MM2H) deposits in September/October last year that were cancelled abruptly, and the funds returned while, at the same time, other clients have successfully obtained an MM2H visa.
“Despite the uncertainty surrounding MM2H, what is clear is that the demand is still there,” he said.
He said the present situation could damage the credibility of the country and could be a leading reason preventing foreign investment from coming in.
“I think the government should shorten the application process to three to six months from the current nine to 12 months. We understand it is important to impose investment conditions, but beyond that, the government should focus on improving the investor experience.”
Impact of the suspension of MM2H
The impact of the suspension of MM2H has been tremendous.
“Many potential buyers from Hong Kong and China have been holding back their purchases. Due to the border closure, sales have dropped 90%.
“MM2H seems to be the key attraction. Banks also have a preference and give a better margin of financing for MM2H holders,” said Hartamas’ Lim, adding that apart from China and South Korea, there are many applicants or potential applicants from Japan, Hong Kong, Bangladesh and Taiwan.
Budget 2021 wish list for the property market
FIABCI Malaysia immediate past president Michael Geh said 2020 is unique in the country’s economic history.
“What I am most concerned about is that people are losing their jobs and businesses. My first wish is that the banking system would implement assistance to ensure properties are not auctioned off but the terms of the loan repayments can be renegotiated.
“The targeted loan repayment moratorium has assured home prices will not tumble. My other wish is that effective policies, such as the Short-Term Economic Recovery Plan (Penjana) initiatives, will continue until the end of next year.”
Lim hoped that relaxation of lending guidelines will be announced in Budget 2021 as many buyers face difficulty in obtaining financing.
“This is the key factor in the current dilemma. We also need down payment assistance for first-time homebuyers, who can afford the monthly mortgage payments but not the 10% to 20% down payment.
“There should be a flexible financing scheme with interest payment only for the first five years.”
Gravity’s Lau said the government should continue the MM2H programme or provide a golden visa programme for investors to get a long-term visa if they purchase property here, similar to some European countries.
“If that happens, you’ll see a huge boon in the education and healthcare industry. Retail will be much stronger. Give them a reason to stay and to start businesses here.”
Property outlook 2021
Despite a gloomy property market this year, Geh is optimistic that the property market next year will be active, with brisk activity and transaction levels.
“As 2021 is an expected election year, Budget 2021 is expected to be ‘Rakyat Friendly’. This is good for the whole economy as next year will be the pandemic recovery period for the country to ride out of the economic storm.”
Hartamas’ Lim said the outlook for the property market next year is moderate to mildly bullish and the situation will improve in the second half of the year.
However, Lau sees uncertainty up ahead for the property industry. “We have not flattened the Covid-19 curve. There will be some good opportunities for investors, most likely in auctions and from developers with problems clearing their inventory.”