A rebranding exercise and new incentives will hopefully help the MM2H programme build upon its success and draw even more high nett worth individuals and professionals to the welcoming state of Penang

Kuala Lumpur may host several expat enclaves and be the nation’s centre of administration. However, with its rich colonial charm, vibrant heritage and never-say-die attitude, Penang definitely deserves its moniker as a paradise for travellers and an active regional hub for business and industry. That is one of the reasons it has been one of the key destinations for participants of the Malaysia My Second Home (MM2H) programme, or MM2Hers.

Making Themselves at Home

MM2Hers, with their high purchasing power, have long been a desirable market for developers in Penang, among others. They have certainly been making themselves at home – according to figures released in March by former Tourism Minister Datuk Seri Azalina Othman Said, with MM2Hers having bought 510 residential properties in Malaysia worth RM4.72 billion since the year 2004. Of this, they bought 326 properties valued at RM303.7 million last year alone, compared to 15 units worth RM4.97 million in 2004.

As of December 2008, there have been 12,566 MM2H applications approved, with China topping the list at 2,231 participants, followed by Bangladesh, the United Kingdom, Japan and Singapore. According to the MM2H Secretariat, MM2Hers’ preferred mode of accommodation was condominiums, followed by bungalows, semi-Ds, apartments and link homes.

Encouraging New Measures

The MM2H programme underwent a rebranding exercise in March to make it more appealing to foreigners for long-stay or retirement, but also as an economic and investment-generating initiative. The aim – to draw high nett worth individuals to set up businesses or form joint ventures with local entrepreneurs.

Among the new and enhanced measures introduced were allowing skilled spouses of MM2H participants to work here, and offering permanent resident status to highly skilled foreign professionals and high nett worth individuals who bring US$2 million (RM7.28 million) for investments or savings into the country. The government’s Foreign Investment Committee is also formulating new guidelines to attract more foreign direct investments.

Boosting Retail Activity

Hopefully, the new measures will draw more MM2Hers to Penang and boost the state’s property market. The commercial market, especially, is still soft due to the economic downturn. According to Henry Butcher Retail’s managing director Tan Hai Hsin, the occupancy rate of retail space in Penang has dropped to 67 per cent, compared with about 70 per cent a year ago, while occupancy rate of office space has remained at 75.5 per cent, more or less the same as in 2008. Penang in May had about 14 million sq ft of retail space, of which 33 per cent is vacant.

Problems faced by shopping malls included lower shopping traffic, reduced customer spending, loss of business for current tenants and inability of landlords to retain tenants. Meanwhile, new shopping centres have opened up and are also still struggling to fill their lots. While rental rates have remained stable so far, Tan warns that some shopping centres may have to give discounts or rebates to some of their tenants.

Higher-value Homes

According to Henry Butcher Malaysia (Penang) Sdn Bhd’s vice-president Shawn Ong, the residential property market is still set to be the dominant sub-sector for the year, making up about 65 per cent of total property volume and half the total transaction value. The National All House Price Index revealed that Penang’s performance is above the national average, but slightly lower than Kuala Lumpur.

An increase in the value of individual transactions was recorded – a possible indication of investors (locals and foreigners) to buy more upmarket property for investment and/or accommodation. Meanwhile, new high-end homes and resorts are still being launched.

Business Enticements for MM2Hers

Aside from the attractive charms of Penang itself, there are plenty of incentives for discerning housebuyers and businesspeople to set up shop, hearth and home here. As a percentage of property value, the cost involved in registering a property in Malaysia is 2.5 per cent, far lower than Australia (4.9 per cent), China (3.2 per cent), India (7.5 per cent), Singapore (2.8 per cent), Taiwan (6.2 per cent) and the UK (4.1 per cent). Malaysia has no capital gains tax or VAT, while corporate tax is 25 per cent, lower than Australia (30 per cent), Brazil (34 per cent), China (28 per cent), India (42.43 per cent), Japan (40.1 per cent), the UK (28 per cent) and the US (39.5 per cent). (All figures from NST Property with information sourced from www.malaysiatrulybusiness.com.)

Pioneer Status companies in Malaysia are exempted from income tax, ranging from 70 to 100 per cent of statutory income for five to 10 years. There is also an Investment Tax Allowance of 60 to 100 per cent on qualifying capital expenditure incurred for a period of five to 10 years. Foreign investors may also sell any investments in Malaysia, including securities not listed on Bursa Malaysia, to a resident or non-resident.