Three-tiered system in the revamped MM2H programme

Last Friday, Tourism, Arts, and Culture (Motac) Minister Datuk Seri Tiong King Sing announced the relaxation of the Malaysia My Second Home (MM2H) programme, introducing a three-tiered structure along with updated financial requirements.

The revised guideline brings several changes to the eligibility criteria.

Firstly, The Malaysian government has lowered the minimum age requirement to 30 years (previously 35 years), 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 pertains to the expanded range of eligible dependents. Besides spouses, children under 21, and children with disabilities, the programme now covers children between 21 and 34 years old who are neither employed in Malaysia nor married. Furthermore, parents and parents-in-law are now considered eligible dependents.

The Three-tiered System Defines Distinct Financial Thresholds:

• The Platinum tier requires a fixed deposit (FD) of RM5.0mn (approximately USD1.05mn). After a year, a maximum withdrawal of 50% is permitted for property purchases (with a minimum value of RM1.5mn and above), healthcare, and domestic travel within Malaysia.

• The Gold tier mandates a FD requirement of RM2.0mn (approximately USD420,800) with similar withdrawal provisions for property purchases (minimum value of RM750,000 and above), healthcare and domestic travel.

• The Silver tier sets the FD requirement at RM500,000 (approximately USD105,000) in FD with similar withdrawal provisions.

However, under the latest guidelines, expenses for children's education in Malaysia are not listed as approved withdrawals. Irrespective of the chosen tier, all participants must fulfil the minimum stay requirement of residing in Malaysia for a cumulative total of 60 days annually.

Our View

The latest revamped MM2H program shows promising improvements compared to the rebranded MM2H program introduced in 2021. The introduction of the Silver category and the reduced age requirement widen opportunities for younger individuals who were previously ineligible. Moreover, the eligibility of attaining permanent resident status in the Platinum tier is bound to attract those eyeing a relocation to Malaysia – see Figure 1.

Nevertheless, the stipulation of a 60-day residency may present a challenge for individuals looking to participate in MM2H as long-stay tourist visa holders. This condition may restrict their eligibility for the program. In contrast, Indonesia's Second Home and Cambodia's My Second Home programmes do not impose a minimum annual stay – see Figure 2. Looking at the brighter side, the mandatory 60-day stay for MM2H participants in Malaysia could potentially encourage them to contemplate property ownership rather than opting for short-term rentals.

According to Motac Minister Datuk Seri Tiong King Sing, the new MM2H programme will undergo a one-year trial and remain adaptable to evolving circumstances to ensure its relevance and effectiveness. Notably, the latest iteration of the MM2H programme does not specify a monthly income requirement, unlike its older version. To enhance the appeal of the new MM2H programme, we suggest the government eliminate the high RM40,000 monthly income requirement introduced in the 2021 revamp. 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 enrolment in their long-stay visa programmes.

That said, we eagerly anticipate further positive adjustments to position the new MM2H programme as a more competitive option internationally compared to our neighbouring countries. Overall, we believe the latest conditions set for the MM2H programme hold the potential to boost foreign real estate investments and potentially address overhang issues in the country. The more favourable MM2H terms are expected to rekindle interest among tourists and foreign investors in Malaysia. In our opinion, 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.

Potential beneficiaries of these relaxations include developers engaged in upscale projects on Penang Island, such as E&O (Not Rated) and IJM Land, as well as those in the Klang Valley, such as IOIPG (Buy, RM2.07), SPSETIA (Buy, RM1.07), SIMEPROP (Buy, RM0.89), ECOWLD (Not Rated) and Gamuda Land. Similarly, in Genting Highlands, developers like LBS (Not Rated), TROP (Not Rated), and GOB (Not Rated) might see positive impacts, while in Johor, SUNWAY (Buy, RM2.40), UEMS (Not Rated), and IWCITY (Not Rated) could potentially gain from these improvements.

Maintain Overweight

All in, we maintain our Overweight stance on the property sector, anticipating it to be a primary beneficiary of increased domestic activities, driven by a surge in infrastructure projects and investments.

We upgrade Ibraco to Buy from Hold with an unchanged TP of RM1.02 due to recent weakness in share price. We maintain our Buy recommendation for other developers under our coverage.

Top Buy Picks for the sector are SIMEPROP and SUNWAY. We like SIMEPROP (TP: RM0.89, ★★★★★) for its growth transformation journey from a pure-play developer to a real estate firm by 2025 and its improved earnings outlook with a healthy balance sheet. We also see SIMEPROP as a beneficiary of various government initiatives in promoting industrial development and green investments. In addition, SUNWAY (TP: RM2.40, ★★★★★) is our top Buy pick for the sector as we continue to like its diverse business portfolio that benefits from domestic economic expansion. In addition, SUNWAY also sets out to benefit from Johor’s supercharged growth phase. Given its sizeable landbank in the Iskandar Malaysia region, SUNWAY is an excellent proxy for the Iskandar Malaysia recovery story.

Risks to our sector call include: (i) weaker-than-expected economic growth, (ii) spike in raw material and labour costs, (iii) central bank increasing interest rates aggressively, and (iv) unfavourable government policies.

Source: TA Research - 18 Dec 2023