Some 3,000 units of People’s Friendly Homes will be built by SPNB.
There is stable economic growth but people are still holding on to their wallet.
Save for rainy days and invest for rainy seasons.
Some 3,000 units of People’s Friendly Homes will be built by SPNB.

THE Malaysian property market has been in a subdued mood for some time and when budget day nears each year, hopes would be raised amongst players in the industry that some measures would be introduced to stimulate the market and nurse it back to its glory days. However the hopes of the property development industry was not met last year where the government’s focus was on affordable homes to be built by several government agencies. In fact, there was a negative element in that the stamp duty was raised for the price bracket of above RM1 million.

The 2018 Budget was tabled by the finance minister on October 27 with the theme “Prosper with inclusive economy, balancing duniawi (worldly) and ukhrawi (other-worldly) excellence to better the lives of the rakyat towards TN50 aspirations”. The following is a snapshot of the sections of the budget which has some relevance and impact on the property industry.

Stable economic growth

In the budget announcement, the government has projected gross domestic product (GDP) growth for 2017 at between 5.2 per cent and 5.7 per cent in 2017 and forecast economic growth for 2018 to be between 5.0 per cent and 5.5 per cent in 2018. The continued growth of the Malaysian economy at rates close to what is projected to be achieved for 2017 spells stability and augurs well for the property market.

Further, the government has projected the country to be near full employment with the inflation rate projected at a benign 2.5 per cent to 3.5 per cent in 2018. Barring any unforeseen circumstances which will have a drastic impact on global economic well-being such as an outbreak of war, the spread of an infectious disease or substantial changes in key commodity prices such as crude oil, we foresee that the property market would be generally be stable although transaction volumes and values could continue to decline amidst sluggish market conditions. Moreover, there are still points of concern for market watchers viz. the current Korean peninsular tensions and the political dynamics and conflicts in the Middle East.

No significant goodies

for the housing sector

Last year’s budget was a big disappointment for property developers and the 2018 Budget did not bring much additional cheers to the property development community although there were some small sweeteners thrown in by the government. Generally the key budget announcements affecting the property development industry were as follows:

Continued focus on affordable homes

The government has allocated a budget of RM2.2 billion for the construction of affordable homes by various government agencies as follows:

• 17,300 units to be built under the People’s Housing Programme;

• 3,000 units of People’s Friendly Homes to be built by SPNB;

• A sum of RM1.5 billion is allocated for the building of 210,000 units of houses over a period of two years by PR1MA priced at RM250,000 and below;

• 25,000 units under the 1Malaysia Civil Servants Housing Programme (PPA1M) is expected to be completed in 2018 with another 128,000 units currently at various stages of construction;

• 600 units of MyBeautiful New Homes (MyBNHomes) scheme for B40 households in Terengganu, Pahang, Melaka, Johor, Sabah and Sarawak as well as Orang Asli settlements;

• To encourage housing developers to provide more affordable homes and 2,000 units will receive assistance with downpayments under MyDeposit programme as well as MyHomes programme;

• A sum of RM200 million is allocated for the maintenance and refurbishment of houses, under the 1Malaysia Maintenance Fund.

Apart from the above, effective from January 1 2018, the Public Sector Home Financing Board (LPPSA) will introduce the following measures to enable public servants to own their own homes:

• LPPSA will be allowed to finance the construction of property on wakaf land;

• The legal fee in connection with the sale and purchase agreement will be allowed to be included as part of the financing by LPPSA;

• LPPSA will allow joint loans for husband and wife or children with a condition that all applicants must be public servants; and,

• LPSSA will allow joint-home financing for husband and wife or children, with a condition that at least one of the applicants is a public servant. The non-public servant is required to secure loans from financial institutions or other agencies but these institutions will have to accept a second mortgage on the property.

In addition, step-up financing programmes, which were previously restricted to buyers of homes built by PR1MA, will be extended to private sector developers of affordable homes. The Real Estate & Housing Developers Association (Rehda) has been lobbying for the step-up financing programme to be opened up to the private sector developers and their efforts have now come to fruition. This financing programme works on the premise that a borrower will advance in his career and will be able to support a higher mortgage repayment as he moves up the corporate ladder. As such the repayment schedule is structured such that the borrower pays a smaller sum in the first five years of the loan tenure and then balloons up after that. This is a positive move as it will enable young people in the early years of their careers to qualify for a higher loan quantum and thus encourage as well as allow more people to enter the housing market.

All these measures by the government and coupled with the proposal to cut personal income tax for for those within the RM20,000 to RM70,000 tax income bands by two per cent, the market for affordable homes may see an increase in demand in 2018 and the years ahead.

Stamp duty exemption

for abandoned housing projects

Stamp duty will be exempted for loan agreements and letters of consent to transfer, for contractors and original owners who rescue abandoned projects, effective from January 1 2018 to December 31 2020. This will provide some relief to the original buyers and rescuing contractors of abandoned projects.

50 per cent tax exemption

on rental income

The budget has proposed a 50 per cent tax exemption on rental income received by resident individuals up to RM2,000 for YA 2018 to 2020. With this tax exemption investors will have an added incentive to invest in completed residential properties in the secondary market particularly in locations which are popular with the middle income group (M40) as well as yuppies in the early phase of their careers who are not ready to own their own homes. Suburbs which are served by the LRT/MRT/monorail will have an added advantage as access to public transportation is still an important consideration to this group although most will own cars.

Abolishment of toll collection

Toll collection on several highways viz. Federal Highway (at Batu Tiga, Shah Alam and Sungai Rasau, Selangor); Bukit Kayu Hitam (Kedah) and Eastern Dispersal Link (Johor) are proposed to be abolished from January 2018. Pending further details from the relevant parties, this will benefit residents of areas which have to utilise these highways and may spur interest to purchase homes or to relocate to these areas and this will also lead to more projects launched in these areas.

Completion of MRT 3 to be expedited

The finance minister has proposed to speed up the completion of MRT 3 to be expedited to 2025 instead of targeted 2027. This will be a boon to areas which are serviced by the MRT line and will stimulate interest for projects located in these areas.

GST exemption for management and maintenance of stratified homes by developers

The exemption of GST for management and maintenance of stratified residential buildings by JMBs and MCs will now be extended housing developers providing such services effective January 1 2018. This will make it fairer to the housing developers who have to provide such services before they are taken over by the JMBs/MCs. -- Henry Butcher Malaysia

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