It is remarkable how much misinformation has been appearing in the national press following the Minister of Housing saying the government should try and reduce the property overhang by getting more Malaysia My Second Home(MM2H) visa holders to buy property here.
This comment seems to have sparked a variety of emotions, running from fear of the country being overrun by foreigners to people urging the government to act faster.
‘Property overhang’ refers to those properties which have been completed and remain unsold. It’s certainly a concern for the developers, because it’s typically the sale of the last few units which produce the profit for the whole development. The number of unsold units has increased dramatically in the last few years, growing from almost 11,000 in 2015 to over 33,000 at the end of the first quarter of this year.
However, it should be noted that only around 4,000 of these unsold properties – barely more than 10% – are priced over RM1 million, and most states will not permit foreigners to buy properties below this price. So even if a lot of foreigners did decide to buy, there is a very limited number of units from which they could choose for purchase. In some states, the minimum property purchase price for foreigners, especially for MM2Hers, has been set at a lower level, but usually it’s RM1 million and sometimes more.
In fact, the decision to buy properties is not really linked to the MM2H programme in any specific way. Any foreigner can buy property in Malaysia, as long as it’s in a category available to foreigners. That’s why so many property companies have road shows overseas to attract foreign buyers for their developments.
In the 18 years since the MM2H programme was launched, only around 42,000 applications have been approved, so it has not even reached an average 3,000 a year, many of whom do not move to Malaysia to live. So it’s easy to see that the number of potential MM2H property buyers is negligible compared to Malaysian buyers. The Malaysian population grows by around 500,000 a year, so each year, another segment of the country’s population reaches the ‘property buying’ age.
As noted, a majority of people who are approved and receive the MM2H visa choose not to live here. No one knows the exact number because it is not tracked, but it is thought to be a lot less than half of the ones who acquire the visa. And of the MM2Hers who actually do choose to reside in Malaysia, only around 60% buy property, so it is obvious this is a very small number indeed. Surprisingly, the government has never lowered the price at which foreigners who live and work here can buy property. In fact, they’ve only raised it, often simply doubling the previous minimum with no clear reasoning as to how the new figures were reached. Even people with permanent residency get no reduction in the minimum purchase price.
Given the continually growing property overhang in Malaysia, there is certainly a strong case for letting foreigners who live and work here buy property priced under RM1 million. That would help the oversupply, and to ensure such a decision would not be negative for Malaysians (as some fear the possibility of overseas buyers purchasing large numbers of inexpensive units, thus squeezing out locals), foreigners could easily be limited to buying only one property, presumably to be used as their primary residence.
Perhaps the most compelling reason for people to not worry about a deluge of MM2H property buyers, however, is that currently there is a serious backlog in clearing these visa applications. In fact, it seems not a single application submitted in the last nine months has been processed and approved yet!
Feature image credit: Tierra Mallorca on Unsplash.