HONG Leong Investment Bank (HLIB) Research has upgraded the property sector rating to “overweight” from “neutral” as it believes that the sector has entered a new cycle.

This is following the Tourism, Arts and Culture Ministry’s (MOTAC) recent announcement of the updated Malaysia My Second Home (MM2H) guidelines, although its effective date has yet to be announced. 

The programme, according to its minister Datuk Seri Tiong King Sing, is now divided into three categories (Silver, Gold and Platinum), while a new category for MM2H application to the special economic zone (SEZ) and the special financial zone (SFZ) is also introduced (see Figure 1).

For context, MM2H was launched in 2002 to attract foreigners to retire and live in Malaysia for an extended period. However, the programme was suspended in Nov 2019 and was re-launched in Oct 2021 with more stringent application conditions.

The stricter 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).

New requirement

HLIB noted that while there is relaxation of several conditions (see Figure 2), there is also the introduction of a new requirement, where MM2H holders are now required to purchase and own a house with minimum house purchase value of RM600k for Silver, RM1 mil for Gold and RM2 mil for Platinum.

For application under SEZ/SFZ category, the minimum purchase price will depend on the respective state requirements. There is no such requirement under the previous versions of MM2H.

In a sector update on Monday (June 18), the research house said the relaxation of several requirements for the MM2H programme such as those for fixed deposits, offshore income and liquid assets is a positive change that is expected to renew interest in the programme.

“However, the new mandate that MM2H holders must purchase and own a house may deter some potential applicants,” it reckoned.

“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 renting.

“Additionally, the minimum property value threshold for the Silver category is set at RM600k, which is lower than the minimum property purchase price for foreigners in most states.”

HLIB further acknowledged that developers and foreign property purchasers alike have been adopting a wait-and-see approach pending the government’s announcement 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,” it noted.

“Similarly, on the demand end, there is also likely some latent demand as these prospective buyers 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.”

The research house also noted that the MM2H programme should have spill-over economic benefits for tourism and healthcare, although it warned that there is increased competition from neighbouring countries like Thailand and Indonesia, which have recently launched similar programmes.

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. - June 18, 2024 

https://focusmalaysia.my/hlib-research-upgrades-property-sector-rating-to-overweight-in-line-with-updated-mm2h-guidelines/