This article first appeared in City & Country, The Edge Malaysia Weekly on October 29, 2018 - November 4, 2018
It has been an exciting year for Malaysia with a new government at the helm following the historic general election on May 9, followed by the subsequent disclosure of the country’s distressing financial position. The property sector foresees challenging economic conditions ahead, and industry players and experts are hoping Budget 2019 will include measures that will make it easier for first-time buyers to own their homes, and ways to reduce business cost and encourage wider use of industrialised building systems. Read on to find out what they hope to see in the budget.
Tan Sri Leong Hoy Kum
Group managing director
Mah Sing Group Bhd
• Address the loan eligibility issue by introducing a higher margin of financing, longer loan tenure, lower interest rates, higher debt service ratio and discounted mortgage reducing term assurance.
• The 100% exemption of property stamp duty should be extended to an individual’s first property priced under RM500,000, taking into account the prices of affordable properties in the country’s main cities.
• Reduce compliance cost and pass on the savings to homebuyers.
• A campaign to encourage home ownership, especially affordable homes, be initiated by the government in collaboration with stakeholders such as banks, lawyers and developers. This would help reduce the unsold stock in the market.
Senior partner, Raine & Horne International Zaki + Partners Sdn Bhd and president, FIABCI Malaysia
• To provide tax exemption, tax breaks and tax holidays for local companies involved in setting up industrialised building systems (IBS) for high-rise developments. This will help bring down the cost of construction.
• No stiff tax penalties on foreigners buying property for their own occupation as they stimulate the local economy by staying here for a longer term. Stiffer taxes will deter international investors and further dampen the property market.
• Allocation of funds to commence work on some components of the Penang Transport Master Plan with elements of people-moving systems in the form of mass or light rapid transit systems (MRT/LRT). This is long overdue and will help to overcome traffic congestion and ease population mobility.
Sulaiman Akhmady Mohd Saheh
Director of research
Rahim & Co International Sdn Bhd
• Measures to boost current property market, both directly and indirectly. Affordable housing to remain at the forefront and we commend the new government on its initiatives in tackling this issue, such as unifying various bodies under one roof and the upcoming National Housing Policy 2.0.
• The formation of a National IBS Corporation, which can focus initially on affordable housing programmes across the country to improve speed of supply, and efficiency of production and cost in construction.
• Tighter control measures on selected products and improving foreign direct investments to help fill the growing void of vacant space, especially in the office and retail sector. Relook into incentives being offered to businesses, including non-financial benefits, immigration processes and business expansion opportunities.
• Set aside a budget to promote incentives for outside business players on a worldwide platform to reposition Malaysia in the eyes of international investors.
• The provision of public transport should not be compromised as it will produce a holistic effect on other sectors, including ease of business dealings and affordable lifestyle living.
VPC Alliance (Malaysia) Sdn Bhd
• Affordable housing: The mid-term review of the 11th Malaysia Plan stated that 200,000 units of affordable housing would be built from 2016 to 2020. We wish that the planning, coordination and implementation to build these homes can be put under a national centralised corporation and urge states, government-linked corporations and private developers to release land to it for joint ventures. It should also get research grants so that it can compile data on income levels, affordability, supply and demand and pricing of affordable homes in different locations.
• Overcome the residential overhang by providing incentives to banks and developers to implement rent-to-own schemes; stop bumiputera quota allocations so that residential units can be released to the public; and allow more funds from EPF Account Two to be withdrawn for house purchase, especially for first-time buyers.
• Full adoption of industrialised building systems (IBS): Currently there are no economies of scale for developers to use IBS. We urge the government to give incentives to manufacturers, suppliers and users of IBS so that the system is adopted. That will also reduce our dependence on foreign workers.
Datuk Ng Thien Phing
Founder and group managing director
SkyWorld Development Sdn Bhd
• Formulate policy to reduce house prices: The government can subsidise developers for their contribution in building infrastructure for utilities such as Tenaga Nasional Bhd, Indah Water Consortium, and Telekom Malaysia. Otherwise, the government can revert back to the practice of requiring utility providers to build the infrastructure. This will help to lower overall house prices.
• Support for CSR initiatives from financial institutions: The government can encourage financial institutions to support affordable housing projects by developers by giving more incentives or being more flexible, such as providing favourable loans or special interest rates.
• Waive some charges: Stamp duty, land premium, lease extension and authority contributions are eventually reflected in the price of a house and borne by the buyer. If the government can give its support to waive, reduce or exempt some of these charges, house prices can be reduced, and that may boost transactions on the market.
Teh Lip Kim
Selangor Dredging Bhd
• Reduction of compliance cost: One is the cost relating to utilities, which developers have to contribute towards. We believe this infrastructure cost should be shared with the service provider, especially since these essential services are a necessity for residents, who will eventually use them and make payment directly to the relevant service provider.
• Easier application process for bumiputera quota release: The process should be more efficient. For instance, a property developer could submit a notice to release [the units] after a stipulated duration [after meeting the requisite conditions] rather than applying for approval, which generally takes a longer time.
• Higher loan financing for first-time buyers: There should be a policy so that first-time property purchasers are given a higher margin of financing, or for a longer term, to encourage new home ownership and a more robust property market
• Foreign ownership: The price threshold for foreigners purchasing properties should be lowered to encourage more foreign direct investment.
Anwar Syahrin Abdul Ajib
Managing director and CEO
UEM Sunrise Bhd
• Emphasise policies that will enable the financial pressure on developers to be lifted.
• Incentivise clearance of inventories, such as stamp duty exemptions for properties up to RM1 million.
• Lower the cap for foreigners purchasing homes to RM750,000 for a limited time frame.
• Corporations be allowed to provide a one-time housing loan of up to 10% for staff for properties up to RM300,000, and interest income on such loans be tax exempted.
• Focus on maintaining a competitive business environment, including incentives for foreign direct investment (FDI) as Malaysia’s FDI may be impacted by global economic growth and other external risks.
Ngan Chee Meng
• As a means to reduce building construction costs and speed up the delivery timeline, the government should consider tax incentives for developers to encourage the use of industrialised building systems. This will speed up delivery and provide better-quality affordable homes.
• Incentivise green initiatives for developers such as additional tax deduction for cost incurred in promoting green developments, like investing in rainwater harvesting mechanism in every house to reduce water consumption, and solar infrastructure for energy cost savings. Additional tax deductions should also be given to developers that maintain public areas such as parks and lakes.
• The government should encourage investment tax allowance for implementation of smart city infrastructure that supports smart city initiatives.
See Kok Loong
Metro Homes Sdn Bhd
• Housing market: Focus on reducing unsold units. The government should stimulate the market by providing incentives such as waiving stamp duty for first-time house buyers and interest-only loans for first five years.
• A standardised mechanism for release of bumiputera units based on construction stages.
• Bumiputera discounts should only be for low and medium-cost houses, such as properties priced below RM150,000.
• Set up an entity similar to Pengurusan Danaharta Nasional Bhd to help the banking sector with non-performing loans.
• The government administration should be lean and efficient, with less bureaucracy.
• The government should draw up policies and provide incentives for such sectors as eco-tourism, the digital economy and exports.
Knight Frank Malaysia Sdn Bhd
• Ease on lending policy from banks, especially for first-time buyers. First-time buyers need to have some sort of support from the banks to make financing easily available because a lot of the banks always look at their set ratios. We believe this can be studied and reevaluated in terms of the buyers’ capacity to repay for the first two to three years after the property is completed. They may move up their value chains in terms of earnings in a few years, so the banks should look at their potential — instead of their current — income.
• Allow implementation of developer interest-bearing scheme to spur the market. In fact, this may allow or encourage more affordable homes to come into the market.
• Foreign ownership should be standardised between states. For example, a cap, such as RM1 million and above, would not mean a thing in Kelantan because the properties there are generally priced much lower. There should be a strategy to study standardised foreign ownership regulations in the housing industry.
Datuk Christopher Boyd
Savills (Malaysia) Sdn Bhd
• Do not introduce inheritance tax: Malaysia has made huge progress in creating a property-ownership society. Owning a house and being able to bequeath it to the next generation is a matter of great pride to many Malaysians. It is a milestone that marks significant progress and achievement in the family, and it often comes as a result of hardship and self-denial. Taxing it would destroy this.
• Avoid artificial controls over the housing market: Attempts to legislate prices are seldom successful. Let house prices find their own level and focus on growing the gross domestic product.
• Take a fresh look at the problems of affordability and oversupply: There are solutions that have yet to be explored, such as government agencies acquiring unsold apartments from developers through a mixture of land and cash.
Real Estate and Housing Developers’ Association (Rehda) Malaysia
Facilitation of loan acquisitions
• Financing for eligible house buyers and innovative financing packages should be made available, especially for first-time buyers.
• Banks should introduce more house buyer-friendly schemes, especially for first-time buyers, for houses priced up to RM500,000.
• Criteria for loan approval should be more accommodative with a higher margin of financing, for example, loans of up to 100%, especially for young graduates and professionals.
• Flexible/accelerated tiered payments. Longer loan tenure; pay less now, more later when salary has increased. Don’t just focus on current income but take into account salary increases, other income and bonuses.
Facilitation of deposit payment
• Employees Provident Fund (EPF): The disbursement of the 10% downpayment from EPF to be channelled directly from the fund to the developers involved without buyers having to pay from their own savings or other sources. The percentage of contribution to be credited into Account II proposed to be increased from 30% to 50%.
• MyDeposit Scheme: The scheme to be continued with a higher allocation to benefit more first-time house buyers in addressing the issue of high entry cost.
Reducing the Cost of Doing Business
• There is an urgent need to review and lower or abolish unnecessary charges or requirements with the objective of reducing the cost of doing business so that the savings can be passed on to house buyers in the form of more affordable housing.
• Private utility companies such as Syabas, Indah Water Konsortium (IWK), Tenaga Nasional Bhd (TNB) and Telekom Malaysia should not impose capital contribution charges on developers as the latter are already required to build infrastructure in their projects, besides providing the utilities with new customers.
• State governments and local authorities should take another look at their requirements and fees that do not add value to developments but unnecessarily create more red tape and additional cost.
Clearing unsold stocks
• The government should revisit the Home Ownership Campaigns (HOC) 1998 and 1999 and the National Housing Campaigns 2001 and 2002, which successfully helped clear a huge amount of unsold stock while ensuring sustained growth of the housing and property market.
• Another HOC is timely, not only to help reduce the property overhang and assist the rakyat to own a home but also to steer the economy through this challenging period. The HOC should include stamp duty waiver/exemption for residential properties (completed and under construction); free/reduced legal fees and loan processing fees; discounted insurance premiums and more relaxed Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA) eligibility requirements and higher margin of financing. The transactions under this campaign must be between developers and purchasers, and only apply to properties below RM500,000.
Datuk Khor Chap Jen
CEO and president
S P Setia Bhd
• The government should consider reducing certain charges to reduce the cost of doing business, and the savings can then be passed on to house buyers. For example, private utility companies should not impose capital contribution charges on developers.
• The government should consider relaxing lending guidelines, especially for first-time buyers. There is strong demand from this group, but tight lending guidelines are deterring them from owning their first home as they are unable to obtain their desired loan margins from financial institutions.
• The government should consider assuming the role of providing affordable housing for the B40 group with some contribution from property developers, so that they can concentrate on free-market housing.
IJM Land Bhd
• There should be some easing of lending criteria and flexible-friendly financing schemes that will make it easier for first-time house buyers to own a place they can call home.
• No new or additional tax burden and additional compliance costs imposed on the property industry as the sector has already been facing challenges for the past few years. Introducing new tax measures will definitely take a toll on, and further dampen, the property market.
Chan Wai Seen
CCO & Associates (KL) Sdn Bhd
• Local governments should stop approving new projects that are similar to unsold properties in the same location. More market research needs to be undertaken to ensure new projects are viable and supported by demand.
• Policies involving foreign investments should first consider market requirements and their potential implications on the local market instead of [being based] purely on political considerations. Any unfavourable policies may negatively affect the local economy and property market.
• The government should provide incentives to encourage owners to refurbish their assets, particularly old commercial buildings in the city centre, which will improve demand for such assets and improve the overall ambience of the area.
KGV International Property Consultants (Johor) Sdn Bhd
• No unnecessary increase in tax: No new or increased taxes and compliance costs for property developers. Any increase will eventually be transferred to buyers and make purchasing a house more difficult.
• Loosen lending policies: Financing for first-time homebuyers should be made available for properties below RM500,000. A higher margin of financing, such as 100% loan, be considered for first-time homebuyers aged 30 and below.
• Cut operating expenses: Business costs are rising and should be reviewed. Reduce unnecessary expenses to cut cost, which will eventually aid the property market.
Malaysian Institute of Estate Agents (MIEA)
• More creative financing to assist first-time homebuyers, such as step-up schemes. Financing should be less stringent. The requirements can be relaxed, especially for first-time house buyers.
• We believe there should be a lower threshold imposed on foreigners purchasing properties in Selangor — from RM2 million to RM1 million. The market beyond RM1 million is smaller for the locals. Hence, it is good to allow foreigners to purchase these categories of properties which has excessive stock.
• Systematic collection of property transaction data: Available authoritative data is often delayed. There should be an initiative to enact relevant legislation to empower lawyers to enter transaction information into the data collection system upon the signing of the sales and purchase agreement. This will allow data to be captured effectively and be readily available for use.
Zerin Properties Sdn Bhd
• The removal of stamp duty, especially for properties priced below RM1 million, because there is a lot of overhang in that segment.
• The government to consider providing cheap loans with interest of around 1% to 2% for affordable housing. There should be a structure that reduces the cost of ownership for affordable homes.
• A fiscal policy should be implemented to encourage foreign direct investment. We would like to see a boost in InvestKL and more incentives. This will likely assist in the take-up of office space in Klang Valley, which has an overhang situation.
• For retail, we believe there should be an investment tax allowance or capital allowance, or tax incentives for companies that re-purpose, refurbish and reposition malls. This is to help malls that are not doing so well. Oftentimes, owners are not paying professionals to boost footfall in their malls, so this initiative would encourage them to improve their circumstances.
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