Budget 2019 – Key Highlights for the Property Sector

Budget 2019 has been hailed as a leading step towards re-establishing Malaysia as one of the leading markets in Asia. More importantly, it has addressed its citizens’ concern about the rapidly rising cost of living. The government has included measures to make affordable housing accessible, while promoting property sales. The property sector has seen some of the biggest reforms, with provisions being made for all sections of the society. Here is a look at the various schemes and initiatives unveiled as part of the new budget.

Housing Prices to be Reduced

The Real Estate Housing Developers Association (REHDA) has committed to lowering the price of housing by 10%. Under the National Home Ownership Campaign, new projects will be priced 10% lesser than before. Housing units valued at RM300,000 and more will see a price cut of 10%, and affordable housing prices will come down by 6%.

The revised rates will be applicable to property development projects not subjected to price control. Local developers have agreed to bring down the cost of buying homes and other property by saving on Sales and Services Tax (SST). The new budget has exempted SST on construction services and materials.

The plan to reduce cost of new homes and overhang units will largely help low and mid-income families, but its effect is expected to impact all sectors of the society. It will make it easier on young homebuyers, as well as help developers meet lower market demands.

Public-Private Partnerships for Land Acquisition

The government will adopt a Public-Private Partnership (PPP) model to acquire land through open tender. By doing so, it hopes to bring in innovation to the infrastructure sector and lower the percentage of public funds being tied up in capital investment. PPP can also offer alternate financing and management solutions to improve the quality of property development.

Repair and Upgrade of Government Housing

Finance Ministry has included RM400 million in the budget to repair governing housing. The funds will be used to refurbish police, armed forces, and teachers’ quarters. This has been recognised as a positive step improve living conditions of government staff. Congress of Unions of Employees in the Public and Civil Services (CUEPACS) had earlier deemed many civil staff housing as unlivable due to poor maintenance.  

Revised Real Property Gains Tax

In a bid to increase revenue without taxing the lower and middle-income group, the Finance Minister has announced the revised Real Property Gains Tax (RPGT). As per the new guidelines, RPGT will now be increased from 5% to 10% for foreigners and non-PR holders. Malaysians will have to pay 5% tax on property including shares in property-holding companies. The new tax rules are applicable after the 5th year.

Low- and medium-cost housing, as well as affordable housing valued at a maximum of RM200,000 are exempted from RPGT. Analysts believe that by taxing high-value properties, the government can limit speculation on land prices.

RM1.5 Billion Allocated for Affordable Housing

The new budget has allocated RM1.5 billion to develop affordable homes. The funds will be given to programmes such as PR1MA (Skim Perumahan Rakyat 1Malaysia), PPR (Program Perumahan Rakyat), PPAM (Perumahan Penjawat Awam Malaysia), and SPNB (Syarikat Perumahan Nasional Bhd) to address housing woes of those who fall under the B40 and M40 categories.

In addition, a fund of RM1 billion will be set up by Bank Negara Malaysia to offer home financing to the middle and low-income households. Participating banks, which include BSN, CIMB, RHB, Maybank, and AmBank will offer home loans at interest rates as low as 3.5% p.a.     

Crowdfunding Platform for Home Financing

The Finance Ministry has announced plans to adopt Peer-2-Peer funding to help first-time homebuyers finance their purchase. Private-sector driven crowdfunding platforms will enable investors to offer financial assistance to potential buyers in return for a percentage of appreciation in value of the property. The buyer will have sole ownership of the house. By offering assistance for a major portion of the funds, the government hopes to make lending policies more lenient.

To be regulated by the Securities Commission Malaysia (SC), the platform will offer up to 80% of the funds, and the buyer will have to come up with the remaining 20%. For example, if the value of the property is RM225,000, then the buyer will have to put up just RM45,000. The rest, RM180,000, will be procured through the P2P platform.   

Initiatives taken by the government are focused on:

  • Controlling inflation in the property sector.
  • Bringing transparency to property transactions and limiting price speculation.
  • Making it easy for Malaysians to own homes.
  • Develop affordable housing for B40 and M40.
  • Tackling housing woes across the low and middle-income families.

By offering assistance to homebuyers, the government wants to make it easier for Malaysians to buy homes. Acquiring home financing from banks will also become a lot more lenient. Budget 2019 has been recognised as a positive step in bringing down the cost of living, and boosting the property sector.

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