Southeast Asia: The feasibility of Retirement / Second Homes

Southeast Asia: The feasibility of Retirement / Second Homes

Redang Island Malaysia
Redang Island, Malaysia [Photo credits to Lukman Kusuma on Flickr]

A recent survey by CB Richard Ellis(pdf) highlights that Thailand has increasing competition on its hands as the pre-eminent retirement and second home (RSH) location in Southeast Asia. The report also finds that retired people relocating abroad is a fast growing trend. Already more than 5% of UK state pensions are remitted outside the country. The picture in terms of the relative attractions of different countries and the pros and cons of each of them is fast changing.

Clearly some of the advantages are good climate, lower living costs and superior lifestyle. New build properties and relatively cheap labour costs will have obvious attractions to retired people. According to the 2006 Mercer cost of living survey, Kuala Lumpur, Bangkok and Manila were respectively 114th, 127th and 141st on the list of world cities ordered by cost of living. What may not be so obvious is that a lower cost of medical treatments may make the move to this part of the world less of a risk than it would seem and give countries such as Thailand and Malaysia an edge over, say, Australia, as retirement relocation destination.

Furthermore, these countries seem to be entering into a Dutch auction in terms of the amount of local bank account balances they require of foreign residents. Gradually, too, the restrictions on foreign ownership of property are beginning to be relaxed. However, in this connection, the ‘Malaysia, My Second Home‘ regime under which foreigners are normally given permission to purchase properties outright is a lot more relaxed than Thailand’s, where 30 year leases for foreign residents are the norm.

Some difficulties do still exist for second home buyers. These include obtaining local mortgages, restrictions on working, levels of crime (making residence in gated communities advisable in many places) and the limited scope for re-sale. And some important cost considerations may need to be recalculated in years to come, including the cost of long haul flights, cost of living increases in the host countries or exchange rates moving against the currency in which the largest part of your income is paid. UK citizens should remember that increases in UK state pensions are paid to retirees living in some countries but not others.

The scope of increase in retirement relocation is impressive with countries such as Malaysia and the Philippines, which had hardly any expatriate retirees before the new millennium, now having roughly 9,000 and 5,000 respectively. This compares with the 12,000 plus retirement visas issued by the Thai authorities in just January – July period of 2006. Alongside the increasing interest in Southeast Asian retirement on the part of Europeans and North Americans, is a parallel increase in the numbers of people from Japan, Mainland China and Hong Kong who are looking to move south in their retirement. Malaysia, in particular, is attractive to Chinese and, unsurprisingly, there is a trend for long absent Filipinos to return to the Philippines from the US for at least part of each year when they reach retirement.

Clearly, planning to settle permanently will necessitate plenty of homework and books such as ‘Retiring in Thailand‘ need to be consulted. Directgov, the UK government site appears to focus exclusively on retiring to other parts of the European Economic Area (EEA) but Age Concern publish a nine page general ‘points to consider’ document (download pdf here) while the Foreign and Commonwealth Office also publish a slightly longer general guide (download pdf document here). The government of the Philippines has it own long established Retirement Authority with the specific remit of encouraging people to settle there.