In aiding an embattled economy dealing with the infamous Covid-19 pandemic, the Malaysian Government has announced a few fiscal moves to improve home ownership, especially for the low income group. But, is enough being done?
Featuring: Dato’ Sri Gavin Tee, Datuk Soam Heng Choon, Sr. Michael Geh, Harvindar Singh, Datuk Ar. Ezumi Harzani Ismail, Datuk Chang Kim Loong, Sr. Kit, Au Yong, Kevin Neoh, Edward Chong.
The Budget is a national direction and policy making exercise. Budget 2021 seems to lack vision for 2021 but is just at the moment aiding 2020. We should have a more forward looking Budget to cross to 2021 to recover the market and recuperate businesses for people to survive and get them ready for 2021.
Help needs to be given to the Small and Medium-sized Enterprises (SMEs), tourism and property industries. Other than tourism, these sectors are almost totally neglected. Tourism, retail, SME and property sectors are badly hit but there are no great incentives. There’s nothing much for SMEs which require help as they are important for the inudstry, providing employmnet for the economy to survive. If SMEs which form more than 70% of the job market close down, how can you feed the B40? Without them, whatever is allocated is useless.
Property is the hardware that needs long term stimulus. The property market is a matter of confidence so policy making is key to remain competitive. There should be incentives for tourism and Malaysia My Second Home (MM2H) is long overdue to stimulate the market to make Malaysia competitive against neighbouring countries. The education and medical sectors need to be made competitive to attract foreign students.
REHDA Malaysia views the Budget 2021 as a comprehensive, inclusive and promising Budget for all Malaysians. The Budget is an extension of the various stimulus packages introduced by the Government since early this year, and focuses on the well-being of the rakyat, in particular the most affected group.
REHDA takes note of the measures announced such as the various healthcare incentives, Bantuan Prihatin Rakyat, lower income tax by 1% for those with an annual income of RM50,000 – RM70,000, and the announcement allowing Employees’ Provident Fund (EPF) contributors affected by Covid-19 to withdraw from their Account 1 as well as the reduction in contribution from 11% to 9%. REHDA is grateful for the incentives provided to the housing sector which is set to further uplift the industry and gives more power for potential homebuyers. These incentives are additional measures besides those announced earlier under Penjana in June 2020.
REHDA welcomes the Stamp Duties Exemption on Memorandum of Transfer (MoT) and Loan Agreement (LA) for residential units priced RM500,000 and below from January 1, 2021 to December 31, 2025 move to encourage homeownership amongst the rakyat, which was also REHDA’s Budget Wish List to the Government. Expanded from the earlier RM300,000 priced houses to RM500,000 for a period of five years, REHDA believes that the stamp duty waivers will benefit many Malaysians who find it hard pressed to own a house, particularly those in the B40 and M40 groups.
Stamp Duties Exemption on MoT and LA for “White Knight” Contractors and Original Purchasers of abandoned projects from January 1, 2021 to December 31, 2025 will give peace of mind to purchasers who have been severely affected when the units they bought were abandoned. Similarly, the stamp duty waivers for the White Knights is hoped to encourage more contractors to come in and rescue abandoned units which eventually will realise the dreams of home buyers to have their own homes.
REHDA lauds the announcement for the introduction of the Rent-to-Own (RTO) scheme with selected financial institutions and hopes that this can be extended to more than just the 5,000 units of PR1MA homes. Purchasers in the open market can also benefit from the scheme. REHDA support measures by the Government to provide social housing for the B40 and believes that the various recipients of this allocation namely Program Perumahan Rakyat, Syarikat Perumahan Negara Berhad’s Rumah Mesra Rakyat and Program Perumahan Penjawat Awam Malaysia will provide relief for those in need. REHDA believes the allocation will also benefit the other 200 downstream and upstream sectors.
Budget 2021 a big leap forward for the property and construction market. The over RM15 billion spending into infrastructure, roads and transportation will create new hot spots nationwide. This is vital to reduce the property overhang stock that has been built in less accessible and unattractive locations. The five-year Stamp Duty exemptions on efforts to revive abandoned projects will benefit both White Knight contractors and housebuyer victims.
Allocations to affordable housing building agencies will see a big construction built up to provide homes for the B40. Allocations to assist home renters and buyers are also made available. The opening of KWASA landbanks for development will see brisk Klang Valley-centric property development activity which will offer wide property purchase options to property buyers. The five years Stamp Duty exemption for first-time home purchases for Memorandum of Transfer (MoT) and LAs in both the primary and secondary markets will both stimulate and move the market. Overall, I see a big stimulus push in the housing market. It’s a very good opportunity for first-time homebuyers and B40 Malaysians in both urban and rural locations. The strong emphasis on affordability will bring down the Malaysian House Price Index (HPI) downwards to levels affordable to a majority of Malaysians. It’s the five years of the best time to buy one’s first home.
In the midst of an embattled economy dealing with the infamous Covid-19 pandemic, the Malaysian Government announced various fiscal initiatives to help the rakyat. With regards to the property sector, moves to improve home ownership especially for the low-income group have been proposed. Budget 2021 has proposed a full stamp duty exemption on both instruments of transfer and LA for the purchase of first-time home purchase worth up to RM500,000 to encourage home ownership among the people. The exemption is applicable for the Sale and Purchase Agreement (SPA) on purchases that are completed from Jan 1, 2021 until Dec 31, 2025.
The stamp duty exemption is a great move as eliminating stamp duty will lower upfront cash payments and encourage home ownership among the first-time housebuyers. Furthermore, this enhanced exemption is not limited to the primary market. First-time housebuyers will have wider choices as they can explore listings in the secondary market as well. The proposed full stamp duty waiver complements the Real Property Gains Tax (RPGT) exemption unveiled under the country’s shortterm economic recovery plan (PENJANA) in June 2020 whereby gains arising from the disposal of residential properties by Malaysians (limited to three units per individual) between June 1, 2020 and December 31, 2021 are exempted from RPGT. Collectively, these incentives are expected to spur more activities in the primary and secondary residential markets, further supported by the current low interest rate environment. The Government will also collaborate with selected financial institutions to provide RTO schemes which will be effective until 2022 involving 5,000 units under the 1 Malaysia Peoples’ housing scheme (PR1MA), with a total value of more than RM1 billion reserved for first-time housebuyers. These measures for the property sector in Budget 2021 are commendable efforts to realign the supply and demand of the housing market in Malaysia and are good initiatives and incentives for the B40 and M40 groups and first-time housebuyers.
PAM welcomes the Government allocation in environment rehabilitation and protection, with more than RM500 million allocated for river cleaning, waste management, bio diversity protection and environment monitoring. The additional RM2 billion budgeted for continuing the Green Technology Financing Scheme will also help to contribute in our environment rehabilitation agenda.
The RM100 million allocation for new job creations and the Government-Linked Companies (GLC) grants will also be allocated for upskilling and reskilling of youths and workers to have better opportunities and to be more productive in their jobs and businesses. A special incentive of 60% of the monthly salary provided for employment of local workers who are replacing foreign workers will also help in job creation.
Although we are under a pressing economic situation, it is most welcomed for the Government to proceed with economic corridor programmes including the transport infrastructure projects, highway and rails services. PAM urges the Government to be transparent in project procurements, while giving priority to Malaysian professionals and contractors to be engaged for the projects. The digital transformation scheme would benefit the way businesses are conducted. Digital transformation through technological adoption using Building Information Modelling (BIM) will be a quantum leap to the construction industry.
PAM hopes the budget will be used not just to acquire the software and hardware, but also to develop a structured system that will be able to focus on digital transformation through the creation of leaders in digitalisation. Affordable housing ownership incentives are also hoped to improve the demand for houses. This will stimulate the construction industry and spur other related activities in the supply chain. The allocation under the rural development budget will also help to improve the construction industry with RM2.7 billion allocation for infra-structure development and housing improvement budget in the rural area.
HBA welcomes the announcement that the Government will allocate up to RM1.2 billion to build quality homes for the lower income segment and notes that the Government has announced a full stamp duty exemption up to December 31, 2025 for the MoT and for LA for first-time housebuyers for properties valued up to RM500,000. This is a good proposal as the proposal is restricted only for first-time housebuyers. The Stamp Duty savings of RM9,000 and RM2,250 on the LA (assuming 90% financing) will help first-time housebuyers who wish to buy their first home, whether the units are from housing developers or the secondary market.
HBA also notes that Budget 2021 is proposing a stamp duty exemption on LAs and MoTs where White Knight’ contractors are reviving abandoned projects with the original house buyers of abandoned housing projects be extended for a further five years to December 31, 2025. The exemption will to a certain extend, reduce the burden of the original buyers/ victims.
HBA also welcomes the announcement that the Government will work together with selected financial institutions to implement a RTO Scheme that will run until 2022 which will involve 5,000 selected PR1MA properties valued at up to RM1 billion for first-time housebuyers. HBA supports the Government’s proposal to promote RTO save and except that the threshold should not be extended to cover pricing up to RM500,000. This figure is the housing developers’ qualification of “affordable housing” which is on the high side as compared to the official definition by the Ministry of Housing. The affordable category is RM150,000 to RM300,000 (rural and urban).
HBA is grateful that Budget 2021 announced that Banks will continue to offer a targeted loan moratorium for those affected by Covid-19. Budget 2021 also announced a reduction in the employee contribution for the EPF from 11% to 9%. Budget 2021 announced that the increase in tax reliefs such as medical treatment for serious illness from RM6,000 to RM8,000, tax relief for a full health screening from RM500 to RM1,000, tax relief on expenses for medical treatment, special needs and parental care from RM5,000 to RM8,000 and tax exemption of up to RM1,000 for the vaccination cost for personal, spouse and children. These increase in tax reliefs will be much welcomed by the rakyat battling the rising cost of living including the cost of medical expenses.
Budget 2021 also announced that the personal income tax rate will be lowered by one (1%) percentage point for those earning taxable wages from RM50,001 to RM70,000 which is expected to benefit 1.4 million taxpayers. However, it would be more meaningful if such a reduction in income tax rate will also benefit those who are earning more than RM70,000 as Covid-19 has affected everyone in the country regardless of income levels. The Government should reconsider this qualification to be made across the board to have a holistic impact to all tax payers.
I think it is a good measure that the Government is helping out with exemption of MoT for property priced at less than RM500,000 for first-time homebuyers. The rest is more for low cost and Government servant housing. Generally, while it good to have the above incentives, it is certainly not close to the ideal wish list that market players wish such as the exemption of MoT for more transactions and the exemption of other taxes like RPGT and incentives to purchase and invest to stimulate the property market. I think direct stakeholders like real estate agents might feel somehow less enthusiastic over such budget in relation to the property market.
The suggestion was made to allow withdrawal from EPF Account 1 of up to RM 500 a month for 12 months, which totals up to RM 6,000 a year. At the same time, mandatory contribution rate was also proposed to be reduced by 2%. I hope that reduction in contribution will be an opt-in mechanism, not opt-out. These two combined will increase disposable cashflow in the hands of employees but what we need to do is recognise that the first two suggestions are entirely situation dependent and need-based.
People need to assess whether they really need this “additional income” before they accept these two initiatives. If they plan on taking this money for investment, understand that the opportunity cost is much higher as compared to the cash in hand kept in deposits account, as compared to potential dividends from EPF. There’s also a suggestion to allow withdrawal to be made from EPF Account 2 to purchase life insurance and critical illness insurance. I will encourage people to first do an assessment on the adequacy of coverage, so that they can assess if they are already overcovered before utilising their retirement funds to buy more protection. They should evaluate the adequacy of their retirement fund before doing this. This will allow members to weigh their life priorities between their protection or retirement needs.
We applaud the Government’s priority to protect the lives and livelihood of the rakyat with numerous measures announced in Budget 2021. This includes the promotion of homeownership in particular for first-time buyers.
We welcome the inclusion of full stamp duty exemption on instruments of transfer and LA for first-time homebuyers priced below RM500,000. This exemption is effective for SPAs inked from January 1, 2021 to December 31, 2025. This will provide greater assistance and support to first time Malaysian homebuyers who are ready to buy property.
We also commend the allocation of RM1.2 billion provision for the construction of quality housing for the low-income groups and stamp duty waivers given to rescue contractors/developers and the original purchasers of abandoned housing projects to alleviate the plight of affected buyers of such projects.
The Government’s effort to promote the RTO scheme for PR1MA houses promotes homeownership but we believe that expanding the property selection beyond PR1MA will further boost this agenda. Combined with more comprehensive measures to reduce compliance cost and cross subsidies to reduce the cost of housing for the mass market will better assist Malaysians in realising their aspirations to own their own home and sustainably finance their purchase.