Tag Archives: retirement

2014 Make Malaysia My 2nd Home (MM2H) Statistics

Make Malaysia My 2nd Home (MM2H) is the program started by Malaysia in 2002 to encourage expats to stay in Malaysia by offering a long term (10 year) visa. The MM2H program is a very good idea to aid economic development in my opinion. It brings in foreign currency which is very useful: both from fixed deposits and spending by expats.

The currency help is especially helpful right now. The Malaysian Ringitt has collapsed in the last few months to just 3.57 MYR to the US $ now. It was stable at about 3 a couple years ago and slowly declined to 3.3 over a couple years before the recent collapse. The collapse is due to high government and consumer debt in Malaysia and the recent collapse of oil prices. Malaysia was running up large debts even when oil prices were high and the danger of doing so has come home to roost.

The MM2H program targets retirees and future retires and provides a relatively small but still consistent and useful inflow of hard currency which helps support the Ringitt (the recent collapse would be even worse without this support).

Since the program was started in 2002, 27,000 expats have been approved.

country 2014 total
China 1,294 6,219
Japan 362 3,546
Bangladesh 252 3,007
UK 93 2,169
Iran 23 1,312
Singapore 77 1,109
Taiwan 83 1,043
Pakistan 63 919
Korea 114 911
India 46 774

*data for 2014 is for 11 months, through November 2014.

China participation has exploded to 40% of the total in the last 2 years. From 2002 through 2012 China was granted 18% of MM2H visas.

It appears likely 2014 will finish with the 3rd largest number of MM2H visa granted just behind 2013 and 2012.

North America had 75 in 2014 and 1,017 total. South America has just 24 total. Africa had 31 in 2014 and 318 total while Oceana (which includes Australia and New Zealand) had 52 in 2014 and 743 total. Europe overall had 194 in 2014 and 3,553 total while Asia had 2,500 in 2014 and 21,212 total (which is 79% of all MM2H visas).

Related: Make Malaysia My 2nd Home (MM2H) Statistics (2012)Looking at the Malaysian Economy (2013)Iskandar Housing, Real Estate Investment Considerations

Malaysia State Pension Fund Investments, Including Large Purchases of European Real Estate

A recent articles shares some interesting details on the Malaysian state pension fund. For one thing they say the pension pool is the 6th largest in the world at $160 billion. I find that pretty amazing.

The article also say the fund aims to increase foreign holding to 23% (from 18% currently) within 2 years. As part of that the fund is investing in industrial property in Germany and office buildings in Paris and London and is considering buildings in New York City. 70% of Singapore’s sovereign wealth fund, Temasek, is invested overseas (it stands at $170 billion, just ahead of Malaysia).

The current distribution of the Malaysian portfolio is: 55% bonds, 35% equity, 5% in real estate and 5% unspecified.

Mandatory deposit into the fund of nearly a quarter of Malaysians’ salaries (by the employee and employer) have build up the large investments in the fund.

It is somewhat ironic that Malaysia is simultaneously encouraging others to invest in Malaysia and choosing to invest retirement assets outside Malaysia (due to high valuations and low yields in Malaysia). While it is ironic, I think it also makes sense. There is great potential for land in Malaysia so investors seeking to capitalize of potential could make wise decisions to invest in Malaysia. And it makes sense to diversify investments for Malaysia retirement funds.

Malaysia pension fund to spend 500 million euros on German, French properties

German industrial land is a third of the price of comparable areas in Malaysia, where speculation has driven up prices sharply.

The EPF’s move to diversify its investments and secure higher payouts comes as Malaysia’s government grows concerned its citizens are not saving enough for their retirement, with 70 percent of retirees exhausting their EPF funds within 10 years of leaving the workforce.

I am a bit confused (I don’t have enough details) by the conflict between 25% saving rate and using up retirement funds in 10 years. The most sensible way to reconcile these seemingly odd statement would be to guess that the fund was only “recently” established. If you save 25% of your salary for 40 years you should have a very good retirement income. If you only saved for 10 years that would be a problem. Also if you saved 5% for 30 years and 25% for 5 years before retirement that would be a problem.

Related: Investing in Palm Oil PlantationsSingapore and Iskandar MalaysiaThe Potential of Iskandar is Very High but Investing in Iskandar has RisksHow Much of Current Income to Save for RetirementMalaysian Residence Pass for Skilled ProfessionalsIskandar Housing Real Estate Investment ConsiderationsSaving for Retirement

Best Retirement Options: Ecuador, Panama, Malaysia

The MarketWatch web site (connected to the Wall Street Journal) provides a list of top international retirement destination and places Malaysia in the 3rd spot, after Ecuador and Panama.

The article notes the benefits of Malaysia as

  • Good and reasonably priced health care
  • English as the unofficial “first language” (it is a bit of a stretch to claim this, in my opinion, but you can get by in English).
  • Good weather with beaches, islands and jungles to enjoy.
  • Good food
  • Affordable prices

I would add the MM2H visa and the ability to buy property.

The list is packed with Central and South American options along with 2 in Europe and 2 in Asia. Rounding out the top 10 are: Mexico, Costa Rica, Uruguay, Colombia, Spain, Thailand and Malta.

Related: Retiring Overseas is an Appealing Option for Some RetireesMinimum Housing Prices for Foreigners Investing In Malaysia Rise to RM 1,000,000 (lower for MM2H participants) – Penang Condo MarketHotels and Accommodations for Travelers in Malaysia

Penang Condo Market

See Topic: Penang Condos 2011 forum discussion of this topic for background information.

In general property prices can only support what local jobs support. So is Penang adding lots of jobs that can support costly condos? I don’t know, but am skeptical.

Penang may be a bit of an exception (as a “retirement local”). For retirement locations if you have a future stream of retirees then you can support higher prices than local jobs (this is riskier to rely on as a investor). Retirement locals that are cheaper than where those worked are coming from can seem cheap so those working elsewhere are willing to “overpay.” This could be the situation for Penang.

MM2H buyers don’t seem that can actually affect the market. Speculators are likely a big player. The smart public policy action in this case is to raise down-payment requirements and increase transaction taxes. This won’t stop a bubble from forming but will reduce the size of the bubble and limit the damage when it pops.

I wonder if a significant portion of demand (in addition to direct speculation) is Malaysians working in KL, Singapore, USA… buying a condo today that they don’t plan on living in for years. This can be a form of speculation but is a much more solid foundation for sustaining prices. If you have a high working income, purchasing a condo in Penang could be relatively cheap. If you are buying one, to rent for 10 years and then move back into you are unlikely to be harmed greatly when prices drop. Now some people will do this and see their first condo doubled in value and then buy two more, over-leverage themselves and have a great ride up the bubble and then get clobbered when the bubble bursts.

For the Penang area to sustain a long term boom, Penang needs to develop a sustainable long term pool of buyers. the safest way to do this is with lots of high paying jobs. That can be supplemented with some retirees (Malaysians and MM2Hers). To do either of these the government and developers must pursue strategies that attract these populations. There are other minor factors – you can have people making a lot of money buy a condo for their family or parents… But the only reliable way to sustain increasing property values is adding jobs and creating a pleasant living experience.

In looking around Penang me sense is that rental prices are very good (for renters). The available condos for rent seem to be quite high also. My guess is this is a sign of the large percentage of speculators/investors compared to those buying condos to live in themselves. This is a dangerous sign – when the market has more capacity than people (normally due to building more housing than the job market supports). My familiarity with the market is extremely limited however, my perception could be way off.

On the plus side the prices on a regional and global basis are reasonable. Therefor, those accustom to international prices can buy and feel they have a bargain. And this situation can support rising prices (especially if those buyers plan on retiring there – if they need to have a job there then it doesn’t matter how cheap the prices are if the jobs don’t exist). Buying with the hope that Penang is moving toward a prosperous future is reasonable. That is a bet that the island will add jobs and improve infrastructure to support a livable community that attracts people from all over Malaysia, and beyond. There is a great example of how to do this in nearby Singapore. If Penang take cues from many of Singapore’s wish moves investors could certainly be rewarded in the long term.

One significant risk to investors is the carry cost of their investment if the overcapacity (if there actually is overcapacity) continues over a long period. That will suppress rental rates. As new condos are added it also can reduce the attractiveness of your condo to renters (or future buyers).

Related: Home Values and Rental Rates10 million More Renters In the Next 5 Years (in the USA)Apartment-vacancy Rate is 7.8%, a 23-year High (in USA, Nov 2009)Retiring Overseas is an Appealing Option for Some Retirees