How Budget 2019 Affects The Property Market In Malaysia

The Budget 2019 announcement brought some changes that will affect homebuyers and property investors. If you plan to acquire a property, you will need to know how these changes affect you.
Budget 2019, RPGT, Stamp Duty, Property, Real Estate

The recently announced Budget 2019 brought some changes that will affect homebuyers and property investors. If you plan to acquire a property, you will need to know how these changes affect you.

Budget 2019, RPGT, Stamp Duty, Property, Real Estate

 

First-Time Homeowners

To lessen the burden on new home owners, the budget has provided some incentives.

First-time home buyers with a household income of up to RM5,000 will have access to a mortgage guarantee, thanks to the government allocating RM25 million to Cagamas Bhd who will be the provider of the said guarantees.

Finance Minister Lim Guan Eng said of the move: “This is done to provide a mortgage guarantee to
enable borrowers to obtain higher financing, including deposit fees.”

A stamp duty exemption on sale and purchase agreements, as well as loan agreements of up to RM300,000 until December 2020 is another first-time homebuyer incentive.

For houses priced up to RM500,000, stamp duty exemption will also be applicable to the first RM300,000 during the same two-year period.

These changes will lower the extra costs involved in purchasing a property while also allowing them access to higher-value properties than before.

The government has also allocated RM1.5 billion to programs to help ensure the availability of affordable homes such as:

  • Program Perumahan Rakyat
  • Perumahan Penjawat Awam Malaysia
  • Perumahan Rakyat 1 Malaysia (PR1MA)
  • Syarikat Perumahan Negara Bhd

Learn more about all the affordable housing plans in the market here!

Budget 2019, RPGT, Stamp Duty, Property, Real Estate

 

Crowdfunding Initiatives

The government is opening up the market to the property crowdfunding model, a new development in the country.

It will be an alternative vehicle to home owners as it would allow them to own homes without the high commitment of bank loans.

While the exact mechanics of the endeavour are yet to be ironed out as of the end of 2018, developers have been upbeat on the move as it will provide alternatives to homebuyers.

Theoretically, potential buyers would put up 20% of the property price, with 80% then covered by potential investors, who will benefit from the property’s potential appreciation over a period of time.

In a market that tends to be over-dependent on bank loans, the diversification of financial instruments for home purchasing will make home owning a more attainable dream for some.

 

Higher Costs For Investors

Budget 2019 will mean higher entry and exit costs for investors which makes the market slightly less appealing.

The government has proposed increasing stamp duty from 3% to 4% for the sale of properties priced more than RM1 million.

This makes buying high-end properties a lot more expensive and for investors, making the process of selling real estate a more expensive and potentially tougher affair.

The government has also moved to increase the Real Property Gains Tax (RPGT) on profits from disposal of property as well as shares in property companies in the sixth and following years.

For companies, non-citizens and non-permanent resident (PR) holders, the RPGT will be raised to 10% from the previous 5%.

Citizens and PR holders will now have to pay 5% from the previous zero rate.

RPGT will not be applicable to low-cost and medium cost housing, affordable housing and land priced under RM200,000.

Read more about the latest RPGT rates here (with infographic!)

With construction services as well as building materials being exempt from the Sales and Service Tax, new developments could see price adjustments.

Budget 2019, RPGT, Stamp Duty, Property, Real Estate

 

Tax Refunds

RM35.4 billion in tax refunds on income tax as well as the Goods and Service Tax (GST) will also be paid out in 2019.

GST refunds total RM19.4 billion, with the remaining RM16 billion being income tax refunds.

Finance Minister Lim said the government was committed to making the refunds: “Unlike the debts accruing to 1MDB and other financial scandals, which can be repaid over a longer period of time.

The Government has a moral imperative that these tax refunds must be returned in 2019 to their rightful owners, companies and the people of Malaysia.”

While a considerable expense for the government, the gesture would create more confidence and promote goodwill.

 

Rosy Future For Selangor

Selangor will prove an even more attractive target for investment. Budget 2019 highlighted various developments that will provide more opportunities.

The state will provide a strategic blend of ports, free trade zones, aerospace hubs and airports that could potentially transform the state into a regional logistics hub.

One of the interesting developments will be the conversion of 380 acres in Pulau Indah into a new Free Trade Zone (FTZ) that will support Port Klang’s shipping and logistics activities.

Lim said: “The new FTZ will serve as a natural extension to the Port Klang Free Zone.”

Though the details are yet to be finalised this, and other developments will attract even more investment to the state.

Budget 2019, RPGT, Stamp Duty, Property, Real Estate

 

Sustainable Development

Future trends to look out for are sustainable development initiatives as the government has provided a Sustainable Development Financing Fund of RM1 billion via Bank Pembangunan Malaysia Bhd.

This might start a trend towards more eco-friendly projects and construction methods in the country, thus investors might have to start factoring in sustainability into their investment criteria.

 

Airport Real Estate

The government is setting up an Airport Real Estate Investment Trust (REIT) that could prove attractive to investors.

Malaysia Airports Holdings Bhd (MAHB) will pay out investors in the REIT from the airport fees it collects.

Who benefits most from REIT?

The government plans to collect RM4 billion from selling a 30% stake to private investment but REIT will also prove to be an opportunity for investors to gain access to high-tier infrastructure assets.

With tourism being a mainstay of Malaysia’s economy, this could prove to be a lucrative endeavour and one worth keeping an eye on for investors.

 

Overall Real Estate Prospects

Budget 2019 prioritised first-time homeowners as well as encouraged the development of affordable housing.

This could help increase the level of home ownerships as well as contribute to lessening the current overhang in the real estate sector.


Reducing that overhang will benefit property investors in the long term even if there are no direct incentives in the budget for them.

While the raising of taxes on higher-end properties will make investment more expensive, it will benefit local buyers who will now be able to compete better with foreign money.

Budget 2019 might not be perfect but in the long-term it would help address both the overhang in the real estate sector and encourage home ownership.

 

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