Will strict MM2H criteria worsen a property overhang?

March 24, 2024
Malaysia

The MM2H programme was frozen in 2020 but was reintroduced in October of 2021 with revised criteria

Monthly income to qualify is increased from RM10,000 to RM40,000 a month, and liquid assets amounting to RM1,500,000 have to be shown.

The fixed deposit requirement is increased to RM1,000,000, although RM500,000 can be withdrawn for education, healthcare or to purchase a home. It was previously RM150,000 for those over 50 and RM300,000 for applicants below that age. RM50,000 must be placed for each additional dependent.

Applicants must spend at least 90 days in the country, and the minimum age has changed from 21 to 35.

The social pass previously renewable for 10 years has now been reduced to a mere five years.

Additionally, the annual visa fee has been raised from RM90 to RM500. There will now be a processing fee of RM5,000 on principal applicants, plus RM2,500 for each dependent, charged by the Immigration Department.

According to the Home Minister Hamzah Zainudin, the immigration department has received 267 new applications for the Malaysia My Second Home (MM2H) programme since it resumed.

Hamzah also said in the written parliamentary reply this month that 1,461 people had applied to withdraw from the programme from September 2021 until June this year.

The new criteria did not apply retrospectively as existing MM2H participants are not subject to the new conditions, save for the new pass renewal period, processing fee and RM500 renewal fee.

“Among the factors for the participants’ withdrawal are their inability to commit to the programme, personal reasons as well as the Covid-19 pandemic’s effect on their (finances),” he said.

The minister added there were currently 53,356 active MM2H and Silver Hair programme pass holders.

According to mm2h.com, there were 3,929 new MM2H applicants in 2019 although a lower accumulated number of approved participants (48,471).

Overview of property overhang

Amid the various movement control orders, the volume of residential overhang reached an all-time high in 2021 of 36,863 units valued at RM22.79 billion.

However, NAPIC’s property market snapshot for the first quarter of this year (Q1 2022) shows residential overhang has dropped marginally to 35,592 units valued at RM22.45 billion.

The bulk of residential overhang properties are priced below RM1 million. High-end properties above RM 1 million which are typically allowed for foreign purchasers (the threshold varies by state), only make up 13.2% of the total overhang - amounting to RM9.37 billion across 4,706 units.

Serviced apartment overhang has also seen a negligible drop from 24,295 units in Q4 2021 to 24,050 units in the first quarter. However, the total value of serviced apartment overhang has remained stagnant at RM20.45 billion.

The statistics are more concerning upon deeper examination of the data behind the service apartment overhang. A staggering 64.4% of the serviced apartment overhang consists of properties priced between RM500,000 and RM1 million. It carries a value of RM11.61 billion.

This is followed by properties priced above RM1 million, making up 23.8% with a volume of 5,720 units and value of RM7.75 billion – the category applicable to foreign purchasers and would be MM2H applicants.

When it comes to volume by state, Johor leads the serviced apartment overhang by a drastic margin with 16,425 units. Kuala Lumpur and Selangor take second and third spots, respectively, with 4,459 and 2,337 units.

As long as supply outweighs demand, stakeholders will continue to face repercussions in the primary and secondary real estate markets.

Property developers, real estate agents, investors and homeowners face tougher competition selling property in an aggravated buyer’s market, more so if the property is priced beyond the reach of the average Malaysian.

The bulk of the overhang properties so a friendlier MM2H programme is not a comprehensive solution to reducing oversupply, given that the bulk of overhang residential properties can only be purchased by Malaysians due to state limitations.

Nevertheless, the MM2H programme can ease a sizable chunk of the residential and service apartment overhang. The coming months will be close to a year since the resumption of the MM2H programme and the number of applicants have since been left wanting when compared to the past.

Moreover, with the overhang still a cause for concern and the bulk of the properties generally below the price range allowed for MM2H applicants, it begs another question - is it time for the minimum price when it comes for foreign property purchasers be?

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