Budget 2018 for the property sector – a win?
HBA agrees that the Government needs to give more incentives to Private Housing Developers to build affordable properties such as alienating land at lower cost, giving fast track approvals and even tax exemptions.
As we have monitored over the year so far, the government has lived up to its promise announced at Budget 2017 by promoting housing projects with lower prices – such as the “Step-up” End Financing Scheme for the PR1MA Programme, RumahSelangorku and the People’s Housing Programme – which were designed to address the issue of affordability.
It also became evident with the mass construction of affordable housing projects, which has benefitted the building industry. However, it was mentioned by many parties that in order to ensure that this isn’t just a short-term solution, the government should look at sustainability by creating wealth for the rakyat.
Earlier in May this year, Perbadanan PR1MA Malaysia chief executive officer Datuk Abdul Mutalib Alias announced a total of 21,672 units with an estimated gross development value of RM2.3bilwill be available throughout 2017.
He also highlighted that so far, PR1MA has completed 8,475 homes and 12 show houses at project sites in Kuala Ketil and Sungai Petani 2 in Kedah, all the way to Bandar Meru Raya in Perak and Cyberjaya in Selangor.
“As of April, 1,426,727 Malaysians have registered with PR1MA, with 166,972 applying for PR1MA housing.PR1MA’s Member of Corporation has approved the construction of 265,033 units, with 139,419 currently under various stages of construction”, he added.
Last Friday, many Malaysians were either glued to their televisions or radios at 3.30pm as Prime Minister NajibRazak announced the much-anticipated Budget 2018. He acknowledge the challenges he must have faced in tabling this budget in view of the slowdown in the global and regional economics and also the steep drop of the Ringgit as well as the impending GE 14.
The National House Buyers Association applauded The PM’s decision to not heed the advice from business groups with vested interest to relax some of the cooling measures announced previously to stem excessive speculation such as lowering the Real Property Gains Tax or re-introducing the Developer Interest Bearing Scheme (“DIBS”) for first time house buyers.
“We are indeed glad that a ‘Status Quo’ (an existing state of affair) was retained thro’ the wisdom of our PM”, the statement read.
The most awaited topic was ‘Affordable Housing’. It was stated in Budget 2018 that more affordable houses are being built to achieve PM’s target of one million affordable homes with an allocated budget of RM2.2 billion.
This includes 17,000 units under the ‘ProjekPerumahan Rakyat’, 3,000 units under the ‘SPNB RumahMesrarakyat’, 210,000 units under PR1MA with price tags of RM250,000 and below, 25,000 units to be completed by next year under PPA1M with another 128,000 units to be completed in future stages, 600 units under the My Beautiful New Home plan for the B40 households at Terengganu, Pahang, Melaka, Johor, Sabah, Sarawak and certain ‘orang asli’ settlements.
“HBA is grateful that the Government has taken the initiative to build more affordable housing. However, HBA cautions that the right implementation to ensure that the said Affordable Housing reaches the right target market. They must build the right product at the right place with the right pricing and the right numbers”, said the National House Buyers Association.
It is also noted that PM plans to extend the “step-up financing scheme” to private developers based on certain criteria to be announced. In a nut-shell, the “step-up financing scheme” which was firstly introduced by PR1MA allows the house buyer to take higher end-financing as the loan instalments will be lower for the first 5-years and then step-up after 5-years.
It is hoped that the borrowers’ income levels would have increased after 5-years and will be able to afford the revised loan instalments.
HBA had previously opined that although such “step-up financing scheme” appears to help the Rakyat to buy their dream homes by relaxing the lending criteria and giving higher end-financing, such “step-up financing scheme” is detrimental in the mid to long term as Housing Developers will be encouraged to increase house prices knowing that the buyers can take higher end-financing. This in turn will also push up prices of completed properties.
HBA also requests the government to give more incentives to Private Housing Developers to build affordable properties such as alienating land at lower cost, giving fast track approvals and even tax exemptions. In addition, HBA has called for the cost of laying the last mile of utilities such as water, electricity, sewage and telecommunications to be borne by the respective utility company in order to lower the cost of properties.
It would be interesting to see the government’s plans for the property sector pan out in the following year especially with the announcement of bringing back after 60 years, the tax exemption on rental income up to 50 per cent for rentals up to RM2,000 per month for Malaysians living in Malaysia. This exemption is expected to begin in 2018 until 2020. The government also announced that they would be revising the Housing Rental Act to further protect tenants as well as homeowners.