Malaysia Budget 2019, was announced last Friday (Nov 2) where one particular area that seems to be focused on by the government - the property sector. Overall, the budget announcement on addressing the property market received mixed reviews from various industry experts and related professional bodies. Whether it is good, bad or ugly, the Budget 2019 themed "A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society" will soon carry some long-term implications on our property market particularly when the policies made are more likely to be "rakyat-centric".
Here is some key analysis on what every prospective first time home buyer, current homeowner or property investor need to expect in 2019 and in the long run.
1. Addressing cost and affordability for B40s and M40s Malaysians from the lower to the middle-income group can now rejoice with the latest Budget 2019. Owning a home is no longer an elusive dream anymore. The government has announced to help those in B40s and M40s category by having a home easier and to reduce monthly financing instalment of borrowers to own a house, a RM1 billion fund will be established by Bank Negara Malaysia. Through participating financial institutions such as AmBank, CIMB, Maybank, RHB and BSN through a concessionary financing rate as low as only 3.5% per annum. Such measures specifically address the cost and affordability of housing for both the B40s and M40s by making it easier to qualify for the financing aid. Young millennials especially should consider such opportunities to own a home.
Coupled with the allocation of RM25 million to Cagamas Berhad to provide mortgage guarantees to enable borrowers to obtain higher financing from financial institutions, inclusive of down payment support, buyers will have lesser financial pressure when it comes to purchasing a home. These measures are expected to give between 7% and 11% cost savings to the house buyers before taking into consideration any promotional discounts which may be offered by the property developers.
In addition, the RM1.5 billion allocation for affordable housing projects under the People's Housing Programme, the Malaysia Civil Servants Housing Programme, PR1MA and Syarikat Perumahan Nasional Bhd would ensure that affordable houses would continue to be made available for those who are eligible especially for the lower income group, pairing with additional financial initiatives from the government.
2. A solution to unsold residential properties: Addressing the current issue of property glut especially the residential properties in Malaysia, the Government has organized a campaign whereby for a limited time of 6 months only, starting 1 January 2019, the stamp duty charges for houses valued between RM300,001 and RM1 million will be waived for first-time buyers.
Although this may be a good resolution to boost property sales, the six months gap period for the exemption would be too short for a buyer to make decisions, and while this is attractive for those who are planning to own a home, this would cause a sudden increase in the number of property sales in the first and second quarter of 2019.
In addition, industry experts such as the secretary-general of National House Buyers Association (HBA), Datuk Chang Kim Loong from, think that "extending the stamp duty exemption for properties costing up to RM 1 million is like extending subsidies to the wrong target group" and it should be given to affordable properties costing RM 300,000 and below only.
3. The innovative 'crowdfunding' platform As part of the initiative to help the first time house buyers, the government will be approving private sector driven property crowdfunding platform which will serve as an alternative source of financing for first time home buyers. These exchanges will be regulated by the Securities Commission under the peer-to-peer financing framework. The first-in-the-world homeownership scheme, Fund My Home developed by EdgeProp Sdn Bhd, allows homebuyers to pay only 20% of the price to own a home, while the balance 80% will be contributed by participating institutions, who share the returns from changes in the future value of the home.
Such a financing framework may seem like a risk to take as it has yet to be applied in other property markets, however, the government remains positive of its outcome. Some property players think that such a plan would help the buyers with "easy credits" and equate it as "legalise money lending" system.
Nevertheless, credits should be given to the government to take such first innovative measures to curb the challenges of the current property market situation.
4. Revision of Real Property Gains Tax While there are winners from this Budget 2019, long-term investors are taking the heat as the Real Property Gains Tax (RPGT) rates will be revised for disposable of properties or shares in a property holding companies after the fifth years. For companies and foreigners, the rate shall be increased from 5% to 10%. For Malaysian individuals, the rate shall be increased from 0% to 5%. However, low-cost, low-medium cost and affordable house prices below RM200,000 will be exempted. Such measures would affect the investors' market, especially even though this would help to create an unbiased tax system in Malaysia.
The bottom-line, Budget 2019 is clearly made to cater the 'rakyat' especially the lower to the middle-income group and addressing the property overhang and affordability issue in Malaysia. Despite its pros and cons, first time home buyers or investors should carefully study the property market, financial capability and all credit financing before purchasing.