This article first appeared in The Edge Malaysia Weekly on July 22, 2024 - July 28, 2024

WHEN 55-year-old Li, who lives in China, received a call last year informing him that his application for a Malaysia My Second Home (eMM2H) visa had been granted and that he was to go to Malaysia for the final endorsements, he decided to pass on the opportunity and wait for a revamped version of the programme that was then in the works.

Li had what he thought were good reasons for waiting it out.

Last December, Minister of Tourism, Arts and Culture Datuk Seri Tiong King Sing signalled a relaxing of the eMM2H programme — implemented since August 2021 — to make the country more attractive to well-to-do foreigners seeking a second home. The proposals included a halving of the minimum fixed deposit (FD) sum of RM1 million required for security under the long-stay multiple-entry visa scheme to RM500,000, and applicants potentially being able to convert their visa into permanent residency (PR) status for those willing to deposit RM5 million.

Six months later, the goalposts were moved again. Tiong released new guidelines for the programme (MM2H 2024) on June 15 that caught MM2H agents and applicants off-guard.

There was very little to celebrate. The latest guidelines, approved by the cabinet, require applicants to place at least US$150,000 into an FD account, which works out to about RM700,000 — higher than the RM500,000 proposed earlier. The guidelines also made no mention of granting PR status to MM2H applicants. And in a surprise move, to qualify for the new MM2H visa, applicants are now required to buy a property in Malaysia worth between RM600,000 and RM2 million, depending on which visa category they apply for. It’s safe to say that this did not go down well.

Li is one of many eMM2H applicants who are less than happy with the latest changes. To this day, he regrets rejecting the chance to join the previous programme, according to Anthony Liew Yong Huat, president of the Malaysia My Second Home Consultants Association (MM2HCA).

“At the time, he (Li) said he was in no rush to join his relative who is residing in Malaysia. He now regrets making that decision as he did not expect the threshold to qualify would increase,” Liew tells The Edge in an interview.

The new programme has three categories: silver, gold and platinum, along with a special category for special economic zones (SEZ) and special financial zones (SFZ).

The silver category has the lowest minimum requirements. Liew says foreigners applying under this category will need to fork out at least RM1.3 million before their applications can be processed. This sum involves a one-off government processing fee of RM1,000, US$150,000 (RM700,000) in fixed deposits and a minimum property value threshold of RM600,000.

Considering that the minimum threshold for foreigners to acquire a property in Kuala Lumpur is RM1 million, this means that those who want to stay in the capital city will have to shell out more, at least RM1.7 million, he notes.

In comparison to the previous eMM2H, which drew flak for its strict requirements, the latest changes do not make it any easier for foreigners to obtain the MM2H pass. Under eMM2H, applicants had to pay a processing fee of RM5,000, place RM1 million in a Malaysian FD, show proof of liquid assets worth RM1.5 million, and have a monthly income of RM40,000. However, it didn’t require applicants to purchase and to own a house in the country.

“I won’t say RM1.7 million is totally out of reach for the rich. These [individuals] would be people with a net worth of above RM10 million who are willing to move out of their country and live in Malaysia. However, this group of people will be small.

“Bear in mind, for this group of high-net-worth individuals, there are also other Western countries such as Portugal vying for them, where buying a property is a route to being granted a European Union residency,” Liew says.

The Ministry of Tourism, Arts and Culture (Motac) did not respond to a request for comment.

Once a popular second home programme, MM2H has witnessed a sharp dip in popularity over the years. Introduced in 2002 to attract foreign retirees to stay in Malaysia for extended periods, the scheme is actually an improved version of the Silver Hair Programme, which was launched in 1996.

Despite its success, critics had decried the earlier version of MM2H as being too lenient on foreign applicants, as they said the applicants were using the programme in name only but were not actually residing here. Even worse were the claims that some foreign retirees were using the country as a transit point for undesirable activities.

Another criticism was that it prioritised quantity over the quality of applicants.

Under pressure, Malaysia imposed a temporary freeze on the programme between July 2020 and July 2021 to allow for further review and assessment by Motac. The suspension had come on top of the Covid-19 crisis, which had hit the tourism and travel industry hardest, piling more misery on the sector, which was one of the highest contributors of foreign receipts previously.

Many MM2H agents were left in the lurch when applications submitted to Motac in late 2019 were returned, Liew recalls. More than 1,000 applications were reportedly pending approval.

Data from Motac showed that from 2002 to 2019, Malaysia granted MM2H status to 48,471 foreigners. The data also revealed that 2017 was a record year for MM2H approvals, at 6,195.

By comparison, the programme recorded 1,905 approved applications post-pandemic, between November 2021 and end-September 2023.

As at May 31 this year, the number of active MM2H visa holders stood at 57,608, comprising 28,312 principal holders and 29,296 dependents.

After a one-year absence, the government rolled out a revamped version of the programme, known as eMM2H, in August 2021, which then home minister Datuk Seri Hamzah Zainudin said would ensure that the country could still attract the “higher quality” participants it needed while also reducing the vulnerability of the programme to exploitation.

Yeah Kim Leng, professor of economics at Sunway University Business School, says in attracting foreign residents, it is more important to focus on quality rather than quantity because of potentially adverse social and economic consequences, especially in creating foreign enclaves and causing excess demand and price escalations.

“Besides contributing to local consumption and investment, the high-quality foreign residents that the MM2H programme seeks to attract can be harnessed to bridge skills and knowledge gaps, contribute to technological innovations and create jobs and income generation opportunities for locals,” he tells The Edge.

Still, industry players found the new terms of the eMM2H too strict. For one, they required applicants to have a minimum of RM1 million in a Malaysian FD account, much more than the previous condition of at least RM150,000 for applicants above 50 years old and RM300,000 for those 50 years old and below. Applicants were also required to have an offshore income of at least RM40,000 a month, compared with RM10,000 previously. They also had to show proof of an additional RM1.5 million in liquid assets, from the previous condition of RM350,000 for applicants above 50 years old and RM500,000 for those 50 years old and below.

And under eMM2H, applicants had to spend at least 90 days a year in Malaysia. Previously, there was no such requirement.

Separately, in September 2022, the government launched a competing programme dubbed Malaysia Premium Visa Programme (PVIP) aimed at attracting wealthy foreigners to invest and reside in the country for 20 years, with an option to extend for another 20 years.

“With PVIP, the minimum age for the main applicant is 21 years compared with eMM2H’s 35 years. PVIP participants are also able to work in Malaysia,” says Liew.

However, the long-term residency visa struggled to gain traction given the high upfront processing fee of RM200,000 versus RM5,000 for eMM2H. The lack of promotion was another factor.

Liew points out that MM2H agents aren’t enthusiastic about pushing the PVIP programme because they are required to pay the Immigration Department 10% of the RM200,000 processing fee, or RM20,000, for each applicant in advance.

“This quota is valid for three years. Let’s say if I cannot find anyone to participate in the programme by the end of the third year, then the RM20,000 deposit will be burned,” he explains.

Data from Motac supports this. Tiong was reported as saying that 57 applications had been processed under PVIP, of which 28 had been approved as at last October. While eMM2H ended on Dec 15 last year, PVIP remains open for applications.

According to industry observers, PVIP may be dropped as it is quite similar to the platinum category of the latest MM2H. But a noticeable difference is the FD requirement of US$1 million for the platinum category and RM1 million under PVIP, they say.

As the government attempts to draw foreign participants back into the country, a potential problem is emerging — the new requirement of a house purchase, which participants need to hold for at least 10 years.

For many Westerners, Japanese and South Koreans, this new mandate is a major turn-off, says First Home Properties (MM2H) Sdn Bhd managing director Joyce Hooy Sock Kuan.

“Typically, Westerners, Japanese and South Koreans prefer to rent rather than buy property in a foreign country,” she explains.

Still, Hooy concedes that the property prerequisite is positive for the property sector, especially since there is an overhang.

The Penang-based agency sees increasing interest among Chinese families with schoolgoing children to live on the island. “They come to Malaysia with their wives and children, and sometimes parents. They like Penang for its more leisure-type pace of life and lower living costs, with many international schools and private hospitals available.

“Language is also not a problem. Also, renting a property in Penang is still cheaper than in Singapore. For example, rent for an apartment in Singapore is around S$3,000 per month while that in Penang costs about RM3,000 per month,” she says.

First Home Properties has seen its customers decline by 40% to fewer than 50 since 2020 due to the pandemic. “Also, the government keeps changing the rules to the MM2H programme, making customers wait [so] long that they turn to competing countries like Thailand, which has built many international schools aimed at attracting students from China,” Hooy notes.

In Thailand, the financial requirements for applicants are less demanding. Its retirement visa programme is divided into four categories: gold, platinum, diamond and reserve. The gold category has the most relaxed requirements of a five-year multiple entry visa and costs THB900,000 or about RM116,000 to apply for. The application fee is THB1.5 million for platinum, THB2.5 million for diamond and THB5 million for reserve. All the categories have no age restriction.

Japanese MM2H consultant Ryuji Ota lauds Malaysia’s decision to scrap the income requirement to qualify for MM2H. That said, he agrees that the new requirement for house purchase is not so attractive to the Japanese.

“Many Japanese live on a conservative investment plan. They can meet the US$150,000 FD amount (for silver category) or US$500,000 (for gold category), but to purchase a property especially in a foreign country like Malaysia may deter some potential applicants,” he says.

He also sees the minimum stay period in Malaysia of 90 days each year as a deterrent to potential Japanese applicants.

“Many of these high-income Japanese are executives and entrepreneurs who are still working (in Japan) and cannot migrate immediately to Malaysia. There was no requirement on minimum stay period previously, which made the programme attractive for those not looking for a permanent move.”

It has been 12 years since Ota started life as an MM2H consultant in Malaysia. “Before Covid-19, the number of cases that I handled hovered around 250 to 300. Malaysia was the most popular destination to live in for retirees and young families in Japan,” he says.

However, the number has dropped 95% since Malaysia shifted its focus to high net-worth individuals with the launch of eMM2H.

Nevertheless, Hong Leong Investment Bank Research is of the view that mandating MM2H holders to purchase and own a house would be a boon for the property sector as it acts as an automatic filter, ensuring all MM2H applicants buy a property rather than rent.

“Additionally, the minimum property value threshold for the silver category is set at RM600,000, which is lower than the minimum property purchase price for foreigners in most states,” it said in a June 18 report.

KGV International Property Consultants (Johor) Sdn Bhd executive director Samuel Tan, however, believes that applicants should be given the option of buying or renting.

“It is a noble intention to boost the local property market. However, one needs to understand the dynamics of MM2H applicants. Some of them may want to rent instead of committing to big-ticket investments, at least not at the immediate stage,” Tan tells The Edge. “Others who buy may not keep them for 10 years. Demand for housing changes over time. Ten years is a long period for foreign buyers. Hence, this requirement may become a deterrent to them.”

He believes that applicants should be given the liberty to choose. “Those who opt to buy can be given a longer visa. Or the requirement to purchase should [only] kick in after three years of staying in Malaysia as they need to have a better understanding of their needs and the property market here.”

Another option is to reduce the holding period of 10 years to a shorter period, as frequent transactions bring in more revenue for the government, he says.

Tan also points out that the new SEZ and SFZ categories, which have the lowest FD and renewal fee requirements, are a creative way to promote the Johor-Singapore SEZ and SFZ.

“The lower threshold will attract more applicants into these areas. This is on top of other incentives, which will be announced in September. Basically, these cater to the fundamental needs of interested parties but in a friendlier manner.”

Tan believes the measures will go a long way towards rejuvenating the struggling Forest City mega development in Johor. “Forest City has in the past been too dependent on one country,” he says. The US$100 billion development is a joint venture between Chinese developer Country Garden Holdings Ltd and Esplanade Danga 88 Sdn Bhd, a private Malaysian company backed by the Johor government and the Johor Sultan.

In August 2023, Forest City was designated as an SFZ to boost investment. Last Thursday, regulations that will enable an island under the Forest City development to be gazetted a duty-free zone were passed.

Yeah concurs with Tan, noting however that the ability of the new MM2H category to revive Forest City or other townships in Johor will be highly dependent on investment, job and business opportunities created through the joint pursuit of the SEZ by the governments of Singapore and Malaysia.

Yeah expects the high-end property market to be a key beneficiary of the new house purchase requirement. He points out, however, that the number is not expected to be sizeable given the intense competition among countries to attract high-value foreign residents.

He believes that the revised minimum property values based on visa category appear to be not prohibitive for foreign applicants, especially from countries with strong currencies relative to the ringgit.

“(However,) while the need to hold the property for at least 10 years is intended to promote long-term stayers, the requirement may deter applicants who do not wish to be tied down or who have a shorter investment horizon,” Yeah says.

The Chinese remain the largest overseas participants of MM2H, accounting for 44% of the total participants of 56,066 as at end-January this year, followed by Australians (16.5%),South Koreans (8.8%), Japanese (8.4%) and Bangladeshis (6.4%), said Tiong.

MM2HCA’s Liew says Malaysia still appeals to the Chinese because of its multilingual and multicultural society, tropical climate and food.

“The diplomatic ties between China and Malaysia are also good. The Chinese can access international-standard education institutions and healthcare facilities in Malaysia.

“Also, in China, if a student is not accepted into high school, he or she has just two options: vocational high school or working in society. So some of the affluent Chinese families would send their children to study here, be that high school education or university. They would apply to bring the whole family including the grandparents,” he explains.

“However, with the visa-free travel for Chinese citizens for short-term visits to Malaysia, Chinese businessmen may not want to apply to MM2H anymore because they don’t want to live here and they are not allowed to carry out business activities and work under the silver and gold categories.”

MM2H consultant Ota says likewise. Malaysia has been the top choice for many Japanese for its year-round warm weather, polite and kind people, good food, lower cost of living, good healthcare system and high-quality education.

“Before 2021, most of the Japanese who came here were those from the middle-income group. But since the launch of eMM2H and now the revamped MM2H 2024, the applicants would consist of high-net-worth individuals. And now, the latest programme would face competition from other destinations like Singapore, Australia and Dubai,” he says, adding that he has been receiving “many enquiries” from potential Japanese applicants on the new guidelines of the MM2H, especially on the property purchase requirement.

As for the middle-income Japanese, they may now opt for Thailand, Taiwan, the Philippines and Indonesia, as well European countries such as Portugal, Spain and Malta, as their preferred second home destination.

As the federal government temporarily paused, revamped, reintroduced and once again revamped its MM2H programme, Sarawak kicked off a revamped version of the long-term residency visa specifically for the state during the height of the pandemic and has not looked back. There are plans to refine the terms and conditions of the Sarawak-MM2H programme.

“The programme was relaunched in September 2020 following a revamp, and since then, we have seen a good mix of applicants including British, Americans, Australians, Chinese, Hongkongers, Japanese and Singaporeans. The majority of these applicants are retirees, while younger applicants send their children to study in Sarawak,” says Teresa Chai, director of Kuching-based ­Aramaz Borneo (MM2H) Sdn Bhd.

It was reported that between 2007 and 2020, there were 1,306 participants in the Sarawak programme. The five highest groups of participants were from the UK, China, Taiwan, Indonesia and Singapore.

Sarawak-MM2H has more lenient residency requirements, including a lower FD requirement of RM150,000 for individual applicants and RM300,000 for couples. It also does not require applicants above 50 years old to buy a house. Other than this, the minimum stay period in Sarawak is 30 days a year compared with 90 days in Peninsular Malaysia.

“Previously, applicants of Sarawak-MM2H must have a sponsor who is a Sarawakian residing in the state. That’s why you don’t hear much about Sarawak-MM2H except from people who really want to live in Sarawak. Under the revamped programme, agents can now act as sponsors on behalf of overseas applicants,” Chai tells The Edge.

Aramaz Borneo is one of the 35 licensed agents in Sarawak, listed on the Sarawak Tourism, Creative Industry and Performing Arts Ministry’s website. “To date, we have submitted more than 500 applications to the authorities under the revamped Sarawak-MM2H,” she says.

Both Sarawak-MM2H and Sabah-MM2H prohibit holders from working. Holders under MM2H’s platinum category are the only ones allowed to work or invest without conditions.

Sabah is also in the process of fine-tuning its MM2H programme.

In September 2022, Sabah Chief Minister Datuk Seri Hajiji Noor had said Sabah would launch its own iteration of the MM2H programme once adjustments and final details were firmed up. Sabah-MM2H would not follow the new requirements set out under the federal MM2H programme.

It should come as no surprise then that agents promoting the federal MM2H programme have expressed concerns that potential applicants hoping to relocate to Malaysia or extend their stay are increasingly looking to apply for Sarawak’s MM2H programme instead of the federal government’s scheme.

Under Sarawak-MM2H, a so-called “loophole” allows participants to live in Peninsular Malaysia despite being on the Sarawak programme.

In a July 5 report, Sarawak Tourism, Creative Industry and Performing Arts Minister Datuk Seri Abdul Karim Rahman Hamzah told CNA that Sarawak-MM2H participants can live anywhere in Malaysia and only need to fulfil a minimum stay of 30 days a year in Sarawak.

In a separate report, Abdul Karim said Motac had on July 1 delegated full authority over the Sarawak-MM2H programme to Sarawak. This allows the state to independently process and issue permits and licences and develop its own terms and conditions. It is worth noting that Motac minister Tiong is president of the Progressive Democratic Party, a component party of Gabungan Parti Sarawak.

Sabah, meanwhile, is also reportedly looking to bypass Motac’s licensing process and independently process the licences of Sabah agents after the federal government ordered the cancellation of all licensed agents recently.

In the meantime, MM2H agents in Peninsular Malaysia are still waiting for Motac to release further details of the latest programme. It is understood that Motac, together with the Home Ministry and the Immigration Department, are in the process of finalising the scheme’s terms and conditions, and the reinstatement of MM2H 2024 will be announced soon.

Tiong has reportedly said the MM2H 2024 programme will undergo a one-year trial period, during which adjustments may be made to enhance its effectiveness and relevance. Till then, it remains to be seen if there will be tweaks to the new guidelines. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.