House for rent will rise due to tax exemptions


The government’s decision to award a 50% tax exemption for monthly rental income below RM2,000 would spur investment in the affordable housing segments, according to property experts.

Prime Minister Datuk Seri Mohd Najib Razak when tabling Budget 2018 had proposed the tax exemption, the first of its kind in 60 years. The finance minister had also proposed the extension of the step-up financing to private developers from January 2018 until December 2020.

Approximately RM2.2 billion has been allocated for the residential segment in the latest budget announcement. The tax exemption for rental income is expected to create a huge impact for the property market.

Property consulting firm Khong and Jaafar Sdn Bhd MD Elvin Fernandez said the proposal would encourage more people to purchase houses within the affordable bracket for investment and rental.

He said the market is already moving towards the affordable range, priced at below RM500,000 because the household income is in line with this range of house price.

“More demands from investors are expected to flood the affordable housing segment, which would simultaneously encourage more supplies to enter the market.

“This will help solve the mismatch of supply and demand within this segment, which would also create a balance in home ownership for the country over the long term,” he told The Malaysian Reserve.

He said rental housing which had not been widely promoted prior to Budget 2018, would be a viable alternative to home ownership as rental rates in Malaysia is relatively low compared to other neighbouring countries.

“Consumers can either buy a house, or opt to rent if they are unable to afford owning one, particularly the younger generation,” he said.

Industry experts also believed that the extension of the step-up financing, which was only given to the 1Malaysia People’s Housing (PR1MA) in Budget 2017, would help clear property overhang in the middle housing bracket.

Firdaus and Associates Property Professionals Sdn Bhd MD Firdaus Musa said the extension of step-up financing would serve as an alternative financing package for buyers who failed to obtain enough loan margins.

“They will have a year to own a property with the opportunity, strengthen their financial capabilities, as well as strategise properly to serve their monthly mortgage commitment depending on the loan tenure,” he added.

But, Firdaus warned that private developers may reduce the offerings of their products
to sustain profit margins.

“They might reduce the floor size or any other lifestyle ameni- ties attached to the particular product to avoid increasing the absolute selling price.

“Private developers would also be more selective in their overhangs — prioritising in which properties to dispose of immediately in order to cut their losses,” he added.

The step-up end-financing scheme announced in Budget 2017 for homes under PR1MA was in collaboration with Bank Negara Malaysia, the Employees Provident Fund and four banks — Malayan Banking Bhd, CIMB Bank Bhd, RHB Bank Bhd and AmBank (M) Bhd.