This article first appeared in City & Country, The Edge Malaysia Weekly on February 13, 2023 - February 19, 2023

The Covid-19 pandemic has had a devastating effect on countries the world over. It has been especially hard on China, which finally reopened its borders on Jan 9. 

The reopening of its borders marked an important milestone as it signified the dismantling of the country’s zero-Covid policy, which had shielded its 1.4 billion population from the severe impact of the virus by cutting them off from the rest of the world for the past three years. The strict policy, however, spurred greater interest among wealthy Chinese to migrate to other countries, with Southeast Asia being one of their top destinations. 

“If someone tested positive in a building, the rest of the residents would be placed under lockdown until further notice, and food was hard to come by. There were people screaming from the windows of their high-rise apartment buildings because they could not take the stress. It was easily the darkest years in my life,” a 43-year-old financial consultant, who wants to be known only as Rui, tells City & Country in a virtual interview. 

Currently living in Shanghai, he is preparing to migrate to this country under the Malaysia My Second Home (MM2H) programme.

“I only considered leaving [China] when we [he and his colleagues] were asked to live in the office during Shanghai’s lockdown in March last year to ensure smooth business operations. I was so sick of this kind of life,” Rui recalls.

“The zero-Covid policy was notoriously strict and we could not see the light at the end of the tunnel. I wanted to leave the country when the border reopened because something similar may happen again in the future.” 

He did not consider moving to a Western country because of the high cost of living, language barrier and generally high unemployment rate. 

“Singapore and Malaysia are my top destinations, mainly because of the language. I [eventually] chose Malaysia because I have friends and relatives there and the cost of living is much lower than in Singapore. I don’t have to worry too much even if I cannot get a permanent job there. My monthly passive and side income from China should be able to sustain my life comfortably in Kuala Lumpur,” he says. 

Rui’s story is also that of thousands of Chinese who are embracing “runology”, orrun xue in Mandarin. The term went viral at the beginning of the two-month Shanghai lockdown in April last year, when people were confined to their homes or offices with limited access to food and healthcare. 

Although Shanghai was not the first city in China to be locked down, the impact garnered greater attention as it is a relatively liberal city and an international financial hub with a diverse population. For many Chinese, this lockdown was emblematic of the disillusionment with the government’s policies, which has led to people leaving the country.

This sentiment continued to simmer when the government doubled down on its zero-Covid policy after the Shanghai lockdown. “Immigration” was the most searched word on WeChat in April 2022, a 440% increase from the previous month. Canada was the most popular search destination, along with the phrase “conditions for moving to Canada”, which increased 2,846% in just a week, according to data provided by Tencent Holdings Ltd.  

With the reopening of China’s borders, many Chinese nationals immediately sought new homes around the world. While high-net-worth individuals mainly focused on Western countries, those in the middle- to high-income groups explored affordable options in Southeast Asia. Malaysia was among their top choices for its comfortable weather, low language barrier and relatively affordable cost of living compared to other countries. 

“Southeast Asia has always been an attractive region for foreign investors as we have a growing middle class and vibrant economies. Of the 11 economies [in the region], Malaysia often stands out because of its investor-friendly approach, English-speaking population, multi-cultural society and affordability. In fact, over the years, Kuala Lumpur has been touted as having one of the most affordable property markets in Asean,” says Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk N K Tong.

He adds that Malaysia has always been an attractive real estate destination, thanks to the robust regulations developed by the Ministry of Local Government Development (KPKT) over the years that protect homeowners and keep the industry vibrant.

Agreeing with Tong, Malaysian Institute of Estate Agents (MIEA) president Chan Ai Cheng points out that the fundamentals of the country’s property industry remain strong, evidenced by its better-than-expected performance over the past two years, which was mainly supported by the domestic market. 

“Bilateral relations between Malaysia and China have progressed significantly over the years. This explains why we have received hundreds of thousands of visitors from China. And China has always been one of the majority countries whose nationals apply for MM2H visas,” says Chan. 

While she believes that Malaysia’s property market will benefit from the reopening of China’s borders, she does not expect to see an immediate impact. 

“It is still too early to see an impact. The Chinese, like those from any other country, will most likely go sightseeing and shopping first before considering an investment. However, I believe Malaysia has a better chance of attracting Chinese investors than other countries [in Southeast Asia] for a variety of reasons, including the fact that our property prices are among the lowest in the region and our property market has been vibrant,” says Chan. 

She adds that MM2H is the key to capitalising on the migration of Chinese nationals to stimulate the local property market. “We have to make the entire process easier and friendlier [to attract the Chinese] before the potential investors turn to neighbouring countries such as Thailand.” 

To recap, the MM2H programme was suspended for 14 months before the Malaysian government reactivated it in October 2021 with much stricter rules and criteria. These include a higher fixed deposit of RM1 million, a minimum stay of 90 days cumulative in Malaysia per year, an offshore monthly income of RM40,000 and liquid assets worth RM1.5 million. 

The duration of the visa has been reduced to five years from 10 years previously, while a processing fee of RM5,000 is imposed on the principal applicant and RM2,500 on each dependent. The visa renewal fee has been increased to RM500 per year from RM90.

Sarawak and Sabah, which control their own immigration policies, have introduced their own version of MM2H with friendlier terms.

The much criticised revamp of the MM2H programme has seen many foreigners lose interest. The latest statistics released by the Ministry of Home Affairs last August showed that only 267 new applications were received by the Immigration Department between September 2021 and June 2022, while 1,461 participants decided to pull out of the programme during the same period. 

“Meanwhile, according to our latest internal data, the number of applicants has dropped by up to 90% since the introduction of the new MM2H criteria, mainly because they [the applicants] no longer meet the requirements and there are better options outside Malaysia,” Malaysia My Second Home Consultants Association (MM2HCA) president Anthony Liew tells City & Country. 

He adds that many Chinese have decided to pull out since the revamp of the programme. “It is worth noting that many existing MM2H holders from China have given up the visa, sold their properties here in Malaysia and moved somewhere else despite the fact that the new rules and criteria do not apply to existing MM2H holders. 

“While there are many valid reasons for giving up the visa, such as needing to cash out in order to save their business or because their children have completed their studies here in Malaysia and will be going to another country to further their studies, there is also a small group that have lost their trust in our government. So, they decided to move to somewhere else.”

Kith & Kin Realty Sdn Bhd co-founder Freeman Woo, a real estate agent who specialises in high-end residential properties in Mont’Kiara, has experienced the Chinese “moving out” wave. 

“I have Chinese clients who packed their bags and left the country during the lockdown due to the instability of our politics earlier on. Some of them simply wanted to return to their home country to be with their families,” he says. 

“We did receive some inquiries from our previous [Chinese] clients on property prices and rents recently, but no transactions yet. The key problem is the difficulty of transferring money out of China.” 

In China, companies, banks and individuals must comply with a closed capital account policy, which means money cannot be freely moved into or out of the country unless they abide by the strict foreign exchange rules. 

“It also explains why there were very few [Chinese] investors in the past few years compared to previous years. In the past, Chinese investors didn’t even bother to visit the place before they signed the SPA (sales and purchase agreement), as long as the project was in one of the prime locations,” Woo recalls. 

With the reopening of China’s borders, he believes that Malaysia will still be one of the top property investment destinations for the Chinese. However, he foresees that there will be more homebuyers than investors. 

“In terms of ROI (return on investment), we are losing out to Singapore and other countries with very good property market prospects such as Indonesia and Vietnam. Our strength is our language and we have many good international schools, but Thailand is catching up with us. I believe our language strength will have less impact now because many Chinese can speak good English,” he says. 

He adds that MM2H is the key to attracting Chinese property buyers. “Whoever relocates to a new country, lodging would be their first priority. It is a very crucial way of drawing the Chinese to come and buy property in Malaysia.” 

Hartamas Real Estate Group chief operating officer Desmond Tho observes that the number of inquiries from Chinese buyers has not been as exciting as the market expected. “As one of the people on the ground, I have yet to see the so-called ‘Chinese buyer wave’ in Malaysia. I am sure they will come back, but I wouldn’t be so confident that it will be a wave.”

Tho describes the revamp of the MM2H programme as a fallback policy while the rest of the countries in Southeast Asia have been introducing more attractive packages to entice foreigners to be contributors to their economic growth. 

“While some market observers are excited about the Chinese wave, there are also people who worry that Chinese buyers may disrupt the local property market. However, if there is a Chinese wave, I believe it will do more good than harm,” says Tho. 

He points out that in Malaysia, foreigners are only allowed to buy residential properties priced RM1 million and above in almost every state. “We actually need them to help us reduce our overhang properties. It is too soon to worry about market disruption,” he adds. 

According to MIEA’s Chan, the affordable housing segment is unlikely to be disrupted even if more Chinese property buyers come to Malaysia in the future. 

“It is a different market segment. Foreign buyers will help move the high-end residential property market, which has been stagnant during the pandemic. It is not healthy that the industry only focuses on launching products in the same segment. We need to have more product types in the market,” she notes. 

Rehda’s Tong concurs. “Over the decades, while there has been consistent foreign interest in Malaysian real estate, the level of foreign ownership has not been significant and doesn’t impact the overall market,” he points out. 

He goes on to say that many foreign owners are expatriates who have worked in the country for many years and decided to buy a property for their own use. “Moreover, Malaysia protects the rakyat by ensuring that foreigners are only allowed to buy properties above RM1 million, so that the more affordable properties are sold to Malaysians.”

MM2HCA’s Liew says the association is trying to schedule a meeting with the Ministry of Home Affairs to review the MM2H criteria before it is too late.

“Many MM2H applicants are withdrawing to apply for a Thai Elite Visa, while Indonesia will soon launch a similar residence programme. We should review the rules before we lose out to neighbouring countries, and stop looking at just the income levels but also the skills, networking opportunities and entrepreneurship that the foreigners bring, so that the programme is more impactful,” he adds. 

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