Impact of Budget 2017 on Malaysian Real Estate Market


Impending property slump & stagnation amid positive reviews of national budget



The recent Budget 2017 was successfully tabled by the Malaysian Prime Minister in Parliament and received mixed reviews. Touted as a ‘people-centric’ budget, it saw a marked increase in national expenditure compared to last year’s budget with a modest allocation of RM260.8 billion. As always, the Government of Malaysia has always been committed to implement an optimal budget for its people through prudent household spending and smart financial management. Amid economic downturns and uncertainties worldwide, coupled with stagnating global oil prices, the national budget has been revised, fine-tuned and streamlined in accordance with international fiscal challenges; coinciding with a gradual reduction in gross national revenue and net income throughout 2016.



The silver lining of GST

Underlying the fiery or contentious issue of a probable GST increment in this year’s budget, many analysts have forecast or predicted that the national economy will plunge towards an inevitable long-term slump. Doom and gloom was not to be, however, as the Goods & Services Tax managed to collect some RM30 billion in fiscal revenue thus far. In an ironic twist of fate, Malaysians can breathe a sigh of relief for another financial year. Subsidies, on the other hand, remain lukewarm as more cuts are expected throughout 2017. At press time, total subsidy allocation is down from RM26.1 billion to just RM10 billion in a single financial year. Nevertheless, other perks and privileges with respect to the real estate sector, including social programmes and entrepreneurial schemes, should somehow offset the general lack of subsidies. Urban youth and millennials should benefit from such government initiatives, in particular the lower-income segment.



Affordable homes dilemma

The recent budget announcement also did not quite specify what practical steps or comprehensive measures required to fortify (prep up) the real estate market, especially with regard to the needs of homebuyers. Focus should be on helping the people purchase affordable homes instead of pampering those who do not quite deserve such financial assistance. Market stability is naturally quintessential in maintaining economic growth and property development. For the most part, the real challenge lies with the outstanding issue of housing loan applications and securing financing for new homes. The welfare of first-time homebuyers has somewhat been relegated to the sidelines in favour of corporate profiteering. Prospective purchasers are increasingly feeling the heat in order to their home loans approved. An increase in stamp duty for designated properties is welcome though, with levies increased from 3% to 4%, effective Jan 1, 2018. However, this could prove to be burdensome for budding homebuyers to purchase a house priced in excess of one million ringgit. In retrospect, benefits and assistance should not only be limited to national-level initiatives and affordable housing projects such as PR1MA and MyHome. Much more could still be done to boost the property sector, since real estate is fundamentally an intrinsic force that drives the economy. Customized financial programmes and smart housing loans should also be extended to all citizens, and not merely to first-time homebuyers.


Demystifying the budget

The theme of this year’s budget being “Accelerating Growth, Fiscal Prudence, and Enhancing Wellbeing of The People”, has certainly got Malaysian folk all riled up it seems. The fact that tightening our own household or ‘family budget’ seems to be more of a priority than trimming corporate expenses, plugging government leakages and battling national corruption. With that said, prudent spending on the part of the rakyat only goes so far as to ensure a balanced national budget, lest countless mega projects continue to run over-budget? To maintain constant economic growth and national development for the sake of the citizens’ wellbeing demands a paradigm shift on the part of policy makers and government agencies. Economic stimulus packages are great but they serve as short-term solutions whose impact on the national economy is tiny or miniscule. However trivial or insignificant some quarters have viewed Budget 2017, the Real Estate, Housing & Developers’ Association of Malaysia (REHDA) has lauded the various measures and numerous incentives announced by the Prime Minister. Such ‘bonuses’ will justifiably invigorate the property sector, and real estate industry as a whole. It is definitely a timely boost for homebuyers and developers respectively. Making affordable housing accessible to all remains a top priority for REHDA by heeding the PM’s clarion call for “One Million Affordable Homes for Malaysians by 2018”.



Government hands a life line

REHDA also praised the Government’s concerted efforts in increasing the public servants’ housing loans eligibility from between RM120k – 600k to between RM200k – 750k. There have also been quite a number projects to promote affordable homeownership among urban dwellers. Under the B40 housing initiative, the Government plans to subsidize RM20,000 for the development of low-cost houses on private land in projects such as ‘MyBeautiful New Home’. The Ministry of Urban Wellbeing, Housing & Local Government (KPKT) have similarly targeted to build some 9,850 units of PPR low-cost homes under the same scheme. There are substantial parcels of government land in the suburbs which have yet to be developed. These land banks can be fully utilized by private corporate especially developers to build low-cost housing projects for the public.


Strategic business partnerships between GLCs and PR1MA have augured well for the people who are unable to afford the current exorbitant pricing of houses. Some 30,000 units of affordable homes are nearing completion and they will invariably benefit the lower-income population. Such collaborations and many others have so far conceived notable affordable housing projects for Malaysians, namely PPR, PR1MA, PPA1M, RUMAWIP, Rumah Selangorku, MyHome, etc. The Government should thereby encourage more developers to build more affordable homes which are in demand especially within urbanities and the urban populace.



Relief for first-time buyers

The Government has also planned to build a total of 10,000 units of houses in urban areas for rental which will assist first-time house buyers in owning their very own dream homes. Having a rental option of up to five years prior to purchasing a house is desirable for most first-time home owners as well. REHDA also applauds the Government’s conscientious effort in encouraging affordable homeownership among first-time house buyers by providing 100% stamp duty exemption for houses below the RM300,000 residential market price. This will drive or spur significant growth of affordable housing within the local real estate industry as well as property sector in general. In addition, since urban dwelling is apparently more costly as compared to city outskirts, REHDA also proposed that the stamp waiver be continued to allow for greater homeownership within cities. A special end-financing scheme for PR1MA Homes under the ‘1Malaysia Housing Project’ will duly provide prospective purchasers with up to 100% home financing. This will assist homebuyers and alleviate the burden of first-time homeowners. REHDA also wishes the Government to incentivize the participation of more private developers to encourage greater homeownership among Malaysians.



Lifestyle tax: Good or evil?

Typical middle-income Malaysians have long been in the spotlight whenever the federal government formulates and implements policies for the rakyat, yet the government still remains quite oblivious to the needs of the lower-income group. In an effort to jumpstart or revitalize the lower-income community, a brand new tax relief has been introduced which essentially relates to lifestyle products, and encompassing some luxury goods. For simplicity’s sake, this rebranded tax code combines several tax cuts all rolled into one, enabling taxpayers to claim their personal due in one single payment or lump sum. It is literally a tax combo of sorts for reading paraphernalia, computer peripherals, and sporting equipment. Beginning of assessment year 2017, lifestyle tax relief will include individuals with monthly incomes exceeding RM3,600. With the upper limit or maximum quota capped at RM2,500, the overall effect on chargeable income is actually negligible. You also pretty much cannot claim for all available categories anyway. The tax relief itself ought to take into account the current cost of items or merchandise purchased. To create a significant or meaningful impact, lifestyle tax needs to distinguish the variety or assortment of lifestyle and entertainment products on the market. Once again, taxpayers are saddled with a dilemma of choice… – HFMmoney-plant