Property Purchase and MM2H visa: A Reality Check

First, this is not a puff piece about investing in properties in Malaysia but rather a sobering down-to-earth reality check that we at Alter Domus present to our prospective clients. If you do not like to read, then the essence of this write up is “In Malaysia, property is a dwelling and MM2H visa is an investment in your mental and spiritual wellbeing and health, not financial”. For those who are unaware, MM2H or Malaysia My Second Home is a live-long grandfathered and transferrable visa for foreigner to stay in Malaysia.

Yes, we do tell all our prospective clients who come to us that properties in Malaysia are not financial investments but a place for you to live. At the present moment, there are only a few places in Kuala Lumpur and Penang where the prices of properties, at best, will maintain their value. It is an inconvenient fact that if you happen to purchase a property within the last few years, the present price is very likely to be lower than the prices you have paid. It is a blanket statement, and I am confident about it and as stated earlier, there are some exceptions, but those developments and areas are exceedingly small in numbers. Of course, people will come to me and say that the property they bought ten or twenty years ago has risen dramatically. Of course, those were the sane days, and it was only recently that the valuation went up but the buyers were not there. That is why it stagnates. Moreover, ten or twenty years ago, a plate of noodle was probably half the price, and the natural inflation rate will ensure that the prices will go up. Having said that, someone will counter me by saying that since I mentioned natural inflation rate will ensure that the prices go up, then the property that is bought now will also go up in price. I will answer that it is unlikely due to a few reasons – buyers are tapped out, strict mortgage underwriting standards and too many new properties coming online.

Malaysia did not participate in financialization and debt Ponzi/bubble that started early 2000s. Malaysian Ringgit is not valid outside of Malaysia and this made Malaysia unappetizing to the financial community especially speculators. It is a fact that rising property prices causes high inflation. Property prices go up, rentals go up and shops must increase their prices. It is a vicious cycle that will only stop with a big crash. Prices going up will correlate with quality of life going down and that is an undeniable fact. Physical and mental health will take a leg down too.

The Malaysian central bank or Bank Negara is dedicated in doing its job well. I have quite a lot of knowledge of central banks of other countries and Bank Negara is very different from the rest. There are many restrictions and rules for banking and insurance in Malaysia and in one way or other, it is for the benefit of Malaysia. You can debate with me privately if you wish.

Local mortgages are difficult to obtain, be it for locals or foreigners. Major currencies are declining against the Ringgit and the reason for the decline is very clear – currency debasement and this downward trend will be more acute in the immediate future. Thus, the pool of upper- and middle-class foreigners has shrunk. They are selling their existing properties in Malaysia and demographics are not helping. The older ones passed on and properties are put on the market.

To prevent property speculation by foreigners, a minimum purchase price requirement is put in place by state governments. State governments have jurisdiction on land matters and thus thresholds are different. Penang is the friendliest state to MM2H where visa holders are allowed to purchase a maximum of two units at RM500,000 each. Selangor has the highest threshold at RM2m per property. The rest of the states in Peninsula Malaysia has it at RM1m. This is a very clever rule that prevents foreign speculators from buying properties that low-income locals buy.

Malaysia is not comparable with other countries. It is not even comparing apples to oranges but blueberries to watermelons. Compared to Thailand and Indonesia, there are no arcane or complex rules like setting up a company to own the property or marrying a local spouse. In Malaysia, foreigners can buy landed or high rise under their own name. Leasehold or freehold applies to everyone – local and foreigners. Properties can be put into a will. There are no large property taxes that you need to pay regularly. This makes property purchase in Malaysia transparent. Furthermore, the contracts are in English.

MM2H program was enhanced by PriceWaterhouseCoopers (PwC) in 2020/2021. Although I did not manage to read the report, I believe that one of the reasons a property purchase was required is because rental is dead money. We have many clients who have rented for decades and when their pension or investment returns drop, their lives here become hard. For seniors getting older, rental becomes a very large component of their expenditure. They are too old to relocate or it is too expensive to go back live in their home country. If one plans to make Malaysia their primary residence, then buying a property should not be an issue.

If you have the thought that “buying a property as a financial investment”, then MM2H will not work for you. MM2H is not about financial investment; it is an investment in your wellbeing – your physical health, mental health and spiritual health.

Anyone who goes to Google and type “Where is the best place for me to live or retire?” has a motive to move away from what is causing them discomfort (high cost of living), hurt (crazy ideology) or harm (safety is compromised). It is an investment in your happiness and not for financial gain. If you view MM2H this way, you can go no wrong with a property that you purchase to live in. The rules are requirements are here to stay. You cannot have the cake and eat it anyway.

Contact me if you would like to discuss with me on MM2H or any other matters.

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