This article first appeared in City & Country, The Edge Malaysia Weekly on November 2, 2020 - November 8, 2020
The past year has been fraught with uncertainty and disruptions, and the property sector, like much of the economy, has been hit hard. To plan for the year ahead, Malaysians eagerly await some good news in the Budget 2021 announcement scheduled to take place on Nov 6. We ask property developers and consultants what they hope to see in the budget.
Foo Gee Jen
Group managing director, CBRE | WTW
The waiver on stamp duty and Real Property Gains Tax (RPGT) should be extended to all markets after the end of the Home Ownership Campaign (HOC) next year. The existing stamp duty exemption offers savings for homebuyers, a lower barrier to entry for the younger generation and incentivises purchasing activity. RPGT should continue to be neutralised or revised downwards for a longer period as curbing speculation is redundant in the current soft market.
As the moratorium period winds down, income tax relief on interest accrued by home or car loans would be justifiable as these items are basic needs. This will help households transition and spare breadwinners from additional expenditure.
It is widely agreed that a reduction in compliance costs, such as development charges and utility infrastructure provision, is one of the viable solutions to lower house prices. More incentives to promote the industralised building system (IBS) have proved to be capable of enhancing build quality while reducing the reliance on labour.
Datuk Beh Huck Lee
Group managing director, Eupe Corp Bhd
Given the significant challenges Malaysia faces due to Covid-19, the budget is shaping up as one of the most important in recent years. The key priority must be to create new jobs to replace those lost as a result of the pandemic, as well as strategic initiatives to quickly and significantly stimulate business and consumer demand.
Offering businesses tax benefits in the form of capital allowances would mean a major boost for business investment and confidence. For example, a capital allowance of 150% over five years could be deducted against future business income over five years. This would give businesses an immediate incentive to invest and grow, while staggering the cost to the government over a reasonable period of time.
For property development, a reduction in development charges for projects over the next 12 months will help stimulate new projects and construction jobs.
More generally, the budget should consider special incentives for companies that encourage their staff to work from home. This will encourage new investment in information and office technology which, in turn, improves long-term productivity while reducing the business cost of employment.
Datuk Koe Peng Kang
President, International Real Estate Federation (Fiabci) Malaysia
In order for Malaysian businesses to compete effectively and efficiently at the international level, it is important for the government to provide tax incentives for companies to digitalise their businesses. Taking learnings from previous recessions, the country needs to pump-prime the economy by urgently initiating infrastructure projects to pick up the slack in the property industry.
The pandemic has caused a surge in youth unemployment and some jobs may be lost forever. The government should allocate a budget for retraining and reskilling the youth to maximise human capital. Tax incentives are required for companies to provide internship and training.
Edward Chong
Managing director, IJM Land Bhd
Buying a new home is an exciting event and a momentous milestone for many Malaysians. Finances, tighter lending criteria and cost are top concerns and can be a challenge for many first-time homebuyers. We hope the government can provide greater assistance and support to Malaysians — especially first-time homebuyers — by introducing additional incentives to make it easier for buyers to raise the down payment and differential sum, as well as address the loan eligibility issue.
This year is shaping up to be a rough one and 2021 will be another challenging year for the property market. The impact of compliance cost is significant and it can affect property developers’ cost of doing business. We hope the government will consider reducing compliance costs such as development charges and land conversion premiums to improve housing affordability.
Tang Chee Meng
Chief operating officer, Henry Butcher(M) Sdn Bhd
We hope the government will extend the incentives offered under HOC 2020 to buyers of houses on the secondary market and not limit the incentives to those who buy from developers registered under the HOC campaign. The secondary market contributes to more than 80% of total residential property transactions and extending the incentives will provide a big boost to the overall housing market.
In view of the current challenging property market, the government should also consider offering waivers or rebates on statutory contributions that are being levied on developers, so as to bring down the cost of development and consequently enable developers to lower house prices.
We hope Bank Negara Malaysia, the Association of Banks in Malaysia and the Real Estate & Housing Developers’ Association (Rehda) will be able to work out a win-win solution with regard to the loan processing and approval criteria to enable buyers, especially first-time homebuyers, to qualify for maximum loan margins. These buyers have limited savings and are, thus, less capable of coming up with a big sum of money to settle the loan differential sum. They are more reliant on loans to help them own a home.
Datuk Voon Tin Yow
CEO, IOI Properties Group Bhd
A reduction in stamp duty and RPGT will lower the cost of transactions, enabling first-time buyers in the property market and homeowners who are looking to upgrade to invest the difference in their new home.
Like the PTPTN (National Higher Education Fund), which assists students financially to pursue their tertiary education, the same concept can be applied to assist first-time home buyers. Low-interest financing can be offered to bridge the difference between the property price and the bank loan.
More emphasis needs to be given to first-time buyers as they are more vulnerable to economic movements with the least savings. For the scheme to be sustainable, a mechanism has to be in place to ensure purchasers continue to service their obligations, with a profit-sharing arrangement when the property is sold. The proposed percentage of profit-sharing will be based on the proportion of assistance given over the price of the property.
To encourage foreign direct investment (FDI) and the relocation of companies operating in China to Malaysia, we should consider lowering our current corporate tax rate of 24%. Higher FDI would create more jobs, leading to higher consumption and more investments. The FDI would also lead to the take-up of more office and factory space in the country.
YY Lau
Country head, JLL Property Services (Malaysia) Sdn Bhd
The property market is experiencing several difficulties now, including an oversupply in the office sector. Cooperation between the public and private sectors can help tackle this situation and bring about improvement. For example, a think tank consisting of relevant parties — including public- and private-sector entities — can be formed to come up with sustainable solutions.
With many employers, including small and medium enterprises (SMEs), struggling to retain their staff, further help is needed from the government in addition to the wage subsidy previously announced. The benefit of wage and employment retention would help workers and their families, and the spillover effect can help keep the economy going. In addition, with aid from the government, it would be possible for companies to hire more staff and improve the national employment rate.
To further stimulate the economy, the government can consider giving businesses tax relief. Corporate income tax in Malaysia at 24% is among the highest in Southeast Asia, and this poses difficulties in terms of business continuity for many employers. On the personal level, the government can increase the tax relief for individual and lifestyle tax to, say, RM10,000 and RM3,000 respectively from RM9,000 and RM2,500 currently.
Sarkunan Subramaniam
Managing director, Knight Frank Malaysia
One of the top three items on our wish list is to eliminate stamp duty on property purchases to encourage activity in the sluggish market. The current exemption, which applies to only residential properties on the primary market for projects registered under the HOC, should be extended to the secondary market as it would assist the entry of first-time homebuyers by reducing the upfront costs related to home purchases as well as encourage more investor activity. Furthermore, we wish that the RPGT exemption will be extended across all sectors, or at least a revision of the current RPGT rates to spur more market activity.
We hope that Budget 2021 will offer more assistance to SMEs and provide financing support to new start-ups and small businesses that have been struggling in this challenging year. Strengthening the SME sector would help ensure high employment and boost the economy.
Tan Sri Leong Hoy Kum
Founder and group managing director, Mah Sing Group Bhd
We hope to see additional incentives to promote home ownership among first-time home buyers. We hope that the additional incentives will complement the HOC, including reinstating the maximum loan tenure to 45 years, a higher debt service ratio and using one’s gross income rather than net income in the loan application review. We also hope the government can consider implementing the Developer Interest Bearing Scheme (DIBS) for first-time homebuyers as the current interest rate is low enough for such a scheme.
We hope for a review of, and reduction in compliance cost. Apart from land conversion premiums and development charges, the capital outlay for private utility companies is very high. This encompasses the surrender of the land, construction of the infrastructure and contributions to the utility companies such as Tenaga Nasional Bhd, Air Selangor, Telekom Malaysia and Indah Water Konsortium. Thus, we hope compliance costs such as capital outlay for private utility companies can be borne by the respective asset owners so that savings can be passed on to buyers.
We hope the government can consider resuming the Malaysia My Second Home Programme (MM2H) as soon as possible, with more investor-friendly policies for the programme as it has received a lot of interest from foreigners in recent years.
Ho Kong Soon
Group managing director, Matrix Concepts Holdings Bhd
The HOC should be extended for another two years at least, together with the exemption on stamp duty and RPGT, as well as the uplifting of the 70% margin financing limit for the third housing loan onwards.
On matters of housing policies and land matters that fall under the purview of the individual states, the basis for determining land conversion premiums differs significantly — a standardised statutory fee structure across the country can be introduced based on various classifications on locality and value of the developments.
An uplifting of the ownership ratio for housing developments will benefit all. This will translate into cost saving for the developers and buyers. Also, there should be a more concerted effort in the provision of quality affordable homes, such as an Affordable Housing Committee — similar to Singapore’s Housing & Development Board — to act as the country’s universal coordinator.
For SMEs, measures that help preserve their sustainability and stimulate the growth of our economy are urgently needed. Apart from targeted tax relief and allowances, a short-term reduction in the corporate tax rate for all — even as much as 3% — will help businesses remain as a going concern and will help new businesses preserve their cash flow.
Lim Boon Ping
President, Malaysian Institute of Estate Agents (MIEA)
While we are happy to see the government’s efforts to spur the property market through Penjana incentives on stamp duty and RPGT as well as the removal of the 70% cap on the third residential loan, we wish to bring to the government’s attention that the secondary property market has been neglected. In the spirit of the HOC in helping first-time homebuyers purchase a property, they should also be given a chance to consider a home on the secondary market.
Unlike the primary market, there is a lot more certainty in terms of homes on the secondary market when it comes to the living environment and the surroundings. A recent research done by MyProperty Data Sdn Bhd on propertyadvisor.my showed that more than 60% of first-time homebuyers would opt for a property on the secondary market. Be it from the home ownership or market stimulation point of view, the government should extend HOC incentives to cover the secondary property market.
We hope to see the MM2H being reintroduced and MM2H holders being allowed to work full-time in Malaysia. We also hope to see a lower foreign ownership threshold for unsold overhang properties.
Datuk Siders Sittampalam
Managing director, PPC International Sdn Bhd
The vital step should be to implement sustainable policies to revitalise the economy, spur the recovery momentum and bring about more resilience. Budget 2021 should be geared towards a physical expansionary policy to strengthen specific sectors that are in dire need of government assistance and to ensure the K-shaped recovery does not go unchecked. With the property market experiencing a period of stagnation or decline, the budget should not only target the property overhang issue but also stimulate the property sector for the benefit of the wider economy.
To stimulate investor activity, stamp duty on the Memorandum of Transfer for residential properties, including serviced apartments, should be exempted for both primary and secondary sectors irrespective of price. Likewise, RPGT should be exempted for both residential and commercial properties up to RM10 million.
Affordability issues in the residential market have always been a painful matter and this is largely attributed to compliance cost for developers in the primary market. A concerted effort has to be made at the federal and state government level to reduce compliance cost.
Finally, banks have to adopt an attitude of more forbearance on loan defaulters in the residential sector.
Sulaiman Saheh
Director of research, Rahim & Co International Sdn Bhd
To improve consumers’ sentiment and restore their purchasing power, the effective personal income tax payable should be reduced, especially for the M40 (middle 40%) and B40 (bottom 40%) groups. Any positive change in sentiment will hopefully translate into further domestic spending, which will spur the general economy and cascade to the real estate market. Leveraging the strength of the secondary market, several Penjana initiatives can be expanded to incorporate the segment, such as stamp duty exemption for purchases of homes of up to RM1 million on the secondary market, which could lessen the burden of capital outlay, especially for first-time homebuyers or first-time upgraders.
There should be education programmes and awareness campaigns for financial literacy and management should be emphasised, as well as to promote rental options as a means of mainstream accommodation. This would complement the long-term solutions for homeownership, shelter for people and housing affordability.
The reinstatement of a more transparent, systematic and investor-friendly MM2H programme. For the commercial sector, special incentives for foreign multinational corporation (MNC) tenants and special tax deductions for qualified landlords who successfully bring new MNCs to our shores should be given to aid the sector’s recovery.
Michael Geh
Senior partner, Raine & Horne International Zaki + Partners Sdn Bhd
This is a very different year in Malaysia’s economic history. The property market is an important segment of the economy and the Ministry of Finance’s loan moratorium has given relief to all borrowers during the Covid-19 pandemic.
The primary market was given a lot of incentives under the Penjana stimulus package announced on June 5. These initiatives were to spur sales and, in my observation, have been successful. Meanwhile, the secondary market has benefited from the RPGT exemption.
Nowadays, the increasing job losses and business failures are worrying. Thus, we hope the banks will provide assistance on loan repayments to borrowers to avoid foreclosures. This targeted assistance will avoid a drop in property prices and I hope this assistance will prevail to the end of 2021.
Datuk Paul Khong
Managing director, Savills Malaysia
There should be full RPGT exemption for all categories of property for 2021. Based on the current Penjana scheme, the government has extended a full-year exemption for up to three residential properties transacted (until end-2021). So, we hope Budget 2021 will allow the removal of the cap on only three units and extend the exemption in full to all sectors of the property market. This exemption was extremely well received in 2009 as it spurred the property market to a bull run after the 2008 global financial crisis.
An extension of stamp duty exemptions on both ad valorem and loans should be extended to secondary market transactions. Any consideration to extend these exemptions will benefit the mass market. It would reduce the entry cost to owning a property in Malaysia and will serve as a catalyst for the market.
The relaxation of the 70% loan-to-value ratio for the third property purchase onwards should be extended to the secondary market. Market forces, and especially the banks themselves, should be allowed to determine this percentage of borrowings based on the financial health and CV of the purchasers rather than just restricting borrowers across the board.
Datuk Khor Chap Jen
President and CEO, S P Setia Bhd
The Movement Control Order and its variations implemented since March have impacted the revenue streams of many Malaysians in the short and medium term. Hence, we hope the government will consider allowing more flexible lending guidelines to make it easier for people, especially first-time homebuyers, to own a property.
We also hope for a lower price threshold for foreign buyers to own a property in Malaysia as this would increase the demand and help ease the current overhang issue.
In line with the government’s focus on the B40, we would like to propose that the government take over the responsibility to build affordable housing for them with some contributions from property developers. This would enable a more cohesive, consistent and efficient macro implementation and results while developers can concentrate on the free market housing.
James Wong
Managing director, VPC Alliance (Malaysia) Sdn Bhd
For Budget 2021, I wish to see the following: The removal of RPGT for all types of properties after the fifth year, for citizens, non-citizens and companies; to revert back to the 3% rate for stamp duty on property transactions valued at more than RM1 million; and exemption on stamp duty for the purchase of property priced RM500,000 and below for first-time homebuyers in the B40 and M40 groups.
I hope the government will assist developers by reducing compliance costs, as developers normally have to build for utility companies, as well as allow a gradual release of the bumiputera sales quota starting from the end of the first year of construction to completion. I hope government-linked companies will release their land bank to carry out joint ventures with property developers to develop affordable housing. I would also like to see the government allow more funds from EPF Account 2 to be withdrawn to purchase affordable housing, as well as reduce the threshold price for foreigners to purchase residential properties.
Finally, I hope it will boost the construction industry with the revival of the Kuala Lumpur-Singapore high-speed rail, MRT Circle Line and mega projects such as Bandar Malaysia. This will create a multiplier effect to boost the economy.
Previndran Singhe
Managing director and CEO, Zerin Properties
There should be tax incentives for things such as pioneer status for emerging technologies (AI, drones, data analytics and so on) as well as wellness and data centres. There is a regional demand for this, so it would be good if we could capture this market.
The release of all bumiputera units. I know land is a state matter, but the Ministry of Housing and Local Government as a federal body has to start the ball rolling when it comes to this.
And allocation for incubation centres nationwide to spearhead start-ups and new businesses, instead of relying on traditional enterprises.
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