Budget 2019 expected to kick-start housing market, says Knight Frank


THE exemptions and initiatives recently announced during Budget 2019 are expected to spur the growth of the affordable housing market, especially among the first-time homebuyers.

Knight Frank Malaysia MD Sarkunan Subramaniam said the exemptions and initiatives are expected to kick-start the housing market moving into 2019 and beyond.

He said among the initiatives that would be instrumental to the growth are a stamp duty waiver on transfer instrument and loan agreement for residential homes, and a waiver of stamp duty charges for properties.

The other highlight of the budget is a 10% reduction in house prices, particularly for new projects as committed by Real Estate Housing Developers Association (Rehda), which would also see a greater interest in the market.

“On the supply side, new residential home projects that are not subjected to price control following the Sales and Services Tax exemption on construction services and building material costs will see a 10% reduction in prices,” he said.

According to Knight Frank, first-time homebuyers with various earnings along with lower-income group and civil servants are among the beneficiaries of Budget 2019.

The government will also approve the private sectordriven “property crowdfunding” platforms as an alternative source of financing for first-timers.

Sarkunan said such innovative financing will increase the country’s home-ownership rate.

“The property crowdfunding platforms’ availability will make the property more accessible for first-time homebuyers who may not easily qualify for bank loans.

“However, there is concern that this may fuel overly lenient lending policies, potentially leading to the future subprime situation, a lesson drawn from the US where house buyers with inadequate financial capacities were able to secure mortgages,” he said.

Sarkunan said the Securities Commission Malaysia should also ensure that fund managers are stringent in evaluating the profiles of borrowers in the crowdfunding platforms’ ecosystem.

“There is also a need to prevent fund managers who may be tempted to quickly build a portfolio by lending to borrowers with compromised credibility, possibly disrupting the crowdfunding platforms.

“Subsequently, the funds’ portfolios shall be reviewed regularly to ensure that the investors’ investments are secured,” he said.

Additionally, two key announcements that will impact the property sector are the review of rates for Real Property Gains Tax (RPGT) and stamp duty.

Sarkunan said while the review of property taxes will increase the disposal and transfer costs, the impact towards the property market is insignificant.

“For illustration, the stamp duty on the transfer of property valued at RM2 million will be RM54,000 prior to the revised rate and RM64,000 after the revised rate.

“As for the first-time homebuyers purchasing a RM300,000 property, there will be savings of circa RM5,000 on the stamp duty on the instrument of transfer,” he said.

The RPGT rates will be revised for properties’ disposal after the fifth year to 5% for individuals, 10% for companies and 10% for non-citizens or permanent residents.

The stamp duty on the property transfer for items valued over RM1 million will also be increased to 4%.

Meanwhile, he added that the manufacturing sector will be seeing tremendous opportunities from the developments that were proposed in Budget 2019.

“There are great opportunities for Selangor as a strategic blend of ports, free-trade zones (FTZs), aerospace hubs and airports can transform the state into a logistics hub in the region.

“The measures proposed to embrace Industry 4.0 will also allow Malaysia’s manufacturing sector to remain competitive by moving their operations up the value chain,” he said.

According to the budget, the government intends to convert 380 acres (153.78ha) of land in Pulau Indah into an FTZ to support and boost shipping, as well as logistics activities.

Additionally, RM210 million has been announced to assist 500 small and medium-sized enterprises (SMEs) to migrate to Industry 4.0 platforms and the creation of a RM3 billion Industry Digitalisation Transformation Fund with a subsidised interest rate of 2% are among the initiatives.

As for the Goods and Services Tax alongside the income tax, Sarkunan said the phenomenon of the refunds being held back should not be overlooked because the private consumption constitutes a significant portion of the country’s GDP.

“As of 2017, private consumption commands a 53.7% share of GDP. Henceforth, the repatriation of funds from the government back to the companies and people will potentially be a bazooka that will provide the economy with a much-needed boost moving into 2019,” he said.