By Vincent Fong, General Manager, Aubella Kuala Lumpur
In the famous words immortalized by economist John Keynes, “In the long run, we are all dead.” At present, it would seem that the “long run” has been extended, given that life expectancy now stands at an average of 82.14 years* in Singapore. All of us can be rest assured of a longer life thanks to technological advancements in the field of medicine, a greater focus on sports and nutrition, as well as improved accessibility to medical care. Yet, this does come at a price – living longer poses questions of how much is enough to sustain an individual through their old age. Indeed, the proverbial retirement nest egg has gotten bigger, and in some cases, might not even be enough to last the entire post-retirement period.
As governments in developed countries are preparing for the challenges of ageing populations, so too are worried investors. It is in this context that Malaysia started the Malaysia My Second Home (MM2H) programme. According to history, it was during the 1997 economic crisis that the idea came about, as a group of Japanese investors approached Dr Mahathir, then-Prime Minister of Malaysia, to propose that he start a special program to attract Japanese retirees to invest in Malaysia. They fancied the idea so much, they envisioned Langkawi as the next Hawaii!
This immediately struck a chord with Dr Mahathir, giving rise to the launch of the predecessor of MM2H, aptly coined the “Silver Hair” programmme, as it was only for those aged 50 and above.
Fast forward to today and we can see that Malaysia has been consistently voted as the top destination for Japanese long stayers for the past eight years in polls conducted by the Long Stay Foundation of Japan. At the same time, Malaysia has been ranked a top retirement destination in Asia by internationalliving.com, a website dedicated to retirement living.
MM2H in a nutshell
So what is the MM2H programme really all about? Put simply, it is a scheme which encourages foreigners to call Malaysia home, whether it is for retirement or to bring up a family. It is open to all, with no restrictions on race, religion or gender. Upon approval, the MM2H visa is a 10-year social visit pass allowing for multiple entries into Malaysia, renewable every 10 years. It is basically a long-stay programme that allows individuals to live in Malaysia and not worry about their short term visa renewals.
Individuals may choose to join the programme by themselves or together with their spouses, or dependents under 20 years of age. Apart from having the opportunity to enjoy a quality lifestyle, it also promises attractive incentives to entice visitors. These include:
• Parents’ Special Visa
Applicants’ parents over 60 years of age will be eligible to live in Malaysia under a special six-month social visit visa, renewable as long as theirMM2H passes are valid.
Applicants’ children (up to age 18) can receive education opportunities under the study permit scheme in Malaysian public or private schools.
• Purchasing a property
Applicants may purchase any number of residential properties in Malaysia, subject to the minimum rates established by the different states for foreign purchases.
• Purchasing a car
Applicants are granted exemptions on import duty, excise duty and sales tax when they bring in their own cars, or purchase a locally assembled car. In order to qualify for this, their personal cars must be imported into Malaysia within six months from the date of issue of their MM2H visas. Likewise, the purchase of locally assembled cars must be completed within 12 months from the endorsement of their MM2H Visas.
Only income earned within Malaysia is subject to taxation for MM2H individuals. Foreign-sourced income or pensions are not taxable even when said income is remitted to Malaysia.
Malaysia as a retirement paradise for Singaporeans
Based on data by the Department of Statistics, almost one third of the adult citizens in Singapore will above 65 years old by 2030. What would the implication of this phenomenon be? Perhaps the precedence of Japan is a good study. More and more Japanese are heading overseas for investment and retirement planning – some went to Hawaii during the 1990s, some to Australia during the 2000s, and many have migrated to Malaysia, partly contributing towards the demand for high-end housing.
One key reason why Japanese retirees prefer to stay in Malaysia is the medical support they can enjoy in Malaysia. Private healthcare in Malaysia is very similar to the healthcare standards of Singapore, so much so that to some extent, Singapore residents can use Medisave in Malaysia. Cost savings are also an incentive. Four years ago, my father-in-law went for a second opinion on head and neck surgery at the National University of Singapore (NUS), and was given an estimate exceeding $50,000. Across the causeway, the same type of surgery costs under MYR 30,000, which works out to be less than a quarter of the cost in Singapore. Other than retirement, a rising number of expatriates from Japan, Korea and China are choosing Malaysia as their preferred second home, in search of better education for their children.
In planning for a second home in Malaysia, Singaporeans can hope to enjoy a more comfortable standard of living, thanks to the favourable exchange rate. With the strengthening of the Singapore dollar against the ringgit, every dollar is equivalent to three ringgit, resulting in a lot more disposable income for Singaporeans residing in Malaysia.
Planning for a second home in Malaysia
One common scenario I have observed is that many of my friends applying for their second homes start planning for their life in Malaysia at least five to 10 years before their actual relocation. They would most likely invest in real estate, so they tend to make regular trips to Malaysia to have a first hand experience of how life is like in the country.
Before they actually make decisions on their first investment in Malaysia, however, they have certain concerns, a major one being how the potential appreciation of the Sing dollar against the Malaysian ringgit will affect their investment. Of course, many of them understand they can actually enjoy a discount when the price of their property investment is converted into their home currency, especially when the payment of the property is to be spread over three to four years for a property under construction.
Factors influencing second-home purchases
The right type of property will entice prospective Singaporean investors to consider Malaysia as a second-home destination. There are three aspects to this: connectivity, amenities and community. Allow me to explain:
Second-home seekers look for residences that offer easy connectivity between their homes and other amenities. In the context of Malaysia, connectivity is usually measured by the availability of highway connections and access to a rail transport network. However, for most second-home buyers, connectivity starts from the country’s point of entry, either the airport or the border checkpoints.
The door-to-door travelling time to reach their investment property from Singapore is a major factor in deciding where to invest. On top of that, rail transport connectivity, either in the form of express train or LRT / MRT, is greatly preferred. After all, one might not be familiar with all the roads until settling down for good.
As mentioned, the types of amenities second-home buyers prefer fall into three main categories: education, healthcare and F&B. The proximity to an international school or university is a major pull factor, while those who require regular medical treatment will prefer to be near medical centres. On the other hand, the availability of eateries and restaurants of sufficient quality and variety within 15 minutes of the property is an important criterion worth considering.
Nobody likes to live in isolation. Thus, the prospect of a living community that can support our social needs is very important. This is why homes in established neighborhoods in Malaysia with sizable expatriate communities, such as Batu Ferringhi in Penang, Mont Kiara in Kuala Lumpur and Cyberjaya in Selangor have always fetched higher premiums. Still, the aforementioned factors of connectivity and amenities will also influence the creation of new expatriate communities.
Second Home in the long run
The Malaysian government has always examined ways to provide incentives for second-home buyers to invest in Malaysia. Besides allowing them to own a cars exempt from import and excise duty, they have access to various financial services from banks, insurance companies and stock brokers, normally available to local Malaysians only. What’s more, the 10-year residency can be easily extended after it expires, providing certainty for second-home buyers in establishing their home in Malaysia in the long term.
Developers, too, have joined in the fray by creating townships with sufficient amenities specifically for second-home buyers. These revolve around catering to the need for educational institutions, F&B / entertainment venues, and ease of access to transport services, as mentioned earlier. In some cases, these townships also have exclusive expatriate clubs and associations that are set up to provide social support within the gated communities.
Currently, less than 10 percent of Malaysia’s property is purchased by foreigners, but the figure is expected to increase when the momentum of foreign ownership of property in Malaysia builds up.
Looking at the numbers from past years, the number of successful applicants for the MMH2 programme doubled between 2010 and 2013, showcasing tremendous potential for the future.
And as more foreigners come to Malaysia in search of a better life through MMH2, there will always be demand for properties in good communities.
*Source: World Bank 2012
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