With the Budget 2020 announced by Finance Minister Lim Guan Eng last Friday, the nation is abuzz with news and discussions about how it will affect Malaysians, as well as Malaysia’s economy. There is plenty to digest from the latest Budget, but we’ve picked out the main (and property-related) highlights to share with you, along with some insightful comments from Asiacap Valuers & Property Consultants registered valuer, estate agent and property manager Kit, Au-Yong.
The Bandar Malaysia project will now proceed and include a People’s Park, with 5,000 units of affordable homes and greater Bumiputera participation. Proceeds from the project will be valued and announced in due course, and will be used to reduce 1MDB’s debts. The government is evaluating the Carey Island development feasibility for next growth phase.
The base year for the Real Property Gains Tax (RPGT) has been revised to Jan 1, 2013 for assets acquired before the date, from Jan 1, 2000 previously. Regarding the RPGT for property over 5 years ownership, Kit says although there is no reprieve of the 5% reduction as many wished for, there is some relief for owners due to the amended date of acquisition market value. Highly likely the acquisition market value will be higher unless with some exceptions, hence providing some significant amount of real property gains and taxes.
Besides that, it was proposed that a new band for taxable income in excess of RM2 million be introduced and taxed at 30%, up 2% from the current 28%. This will affect approximately 2,000 top income earners in the country. Meanwhile, the Green Investment Tax Allowance (GITA) and Green Investment Tax Exemptions (GITE) will be extended to 2023 in line with sustainable development.
To assist those who are unable to pay 10% deposit and to secure the access of home purchase financing, the government will be working with financial institutions to introduce a Rent-To-Own (RTO) scheme. Up to RM10 billion will be provided by the financial institutions, with the governnment supporting via a 30% or RM3 billion guarantee. This RTO scheme is for purchase of first home up to RM500,000 property price. Under the scheme, the applicant will rent the property for up to 5 years and after the first year, and the tenant will have the option to purchase the house based on the price fixed at the time the tenancy agreement is signed.
According to Kit, access to affordable housing will be better with the government to promote easier access to ownership. Under the rent-to-own (RTO) financing scheme that matched stamp duty exemption for property value max of RM500K could rent for 5 years with option to purchase based on pre-determined price. This is a significant savings for purchasers as there are cost of transfers in the form of stamp duty between developer to financial institution, and then from financial institution to purchaser again. We should be seeing more RTO schemes in the market from developers and financial institutions.
The government will also extend the Youth Housing Scheme that is administered by Bank Simpanan Nasional from Jan 1, 2020 to Dec 31, 2021, to assist youths in purchasing their first home. The scheme also offers a 10% loan guarantee through Cagamas to enable borrowers to get full financing and monthly installment assistance of RM200 for the first two years, limited to the first 10,000 home units. Meanwhile, the Public Sector Home Financing Board will offer free personal accident insurance for up to two years to new government housing loan borrowers
To reduce supply overhang of condominiums and apartments amounting to RM8.3 billion in the second quarter of 2019, govt will lower the threshold on high rise property prices in urban areas for foreign ownership from RM1 million to RM600,000 in 2020. However, state governments can still set their own property price limit for foreigners based on the current situation in their respective states
“The lowering of foreigner purchaser’s price from RM1mil to RM600,000 shall have a positive impact to a wider market in terms of addressing urbanized locations such as KL, JB and Penang. It is a good thing that the government only applied this to high rise as currently the overhang situation is only limited to those type of product. Therefore, we shall see a lot more activity of developers promoting local properties to foreigners especially in urbanized area. This is the most welcome measure for developers as it opens up lot of market opportunity for them. I also think there might be some form of control as percentage of foreign ownership within the development scheme as this low entry price is low in view of our weak foreign currency rate,” he said.
- Govt revises Employment Act, including increasing maternity leave from 60 days to 90 days from 2021.
- Minimum wage in urban areas to be raised to RM1,200 a month in 2020.
- Malaysians@Work initiative launched, aimed at creating better employment opportunities for youth and women, reducing over-dependence on low-skilled foreign workers.
- Graduates@Work is designed specifically for the hiring of graduates who have been unemployed for more than a year. Those who have secured work will receive a wage incentive of RM500 per month. Employers who take them on will in turn get up to RM300 per month for each new hire. This incentive scheme will last for two years.
- To boost e-wallet adoption, the government will offer a one-time RM30 digital stimulus to Malaysians aged 18 and above with annual income of less than RM100,000.
- The Cabinet has approved the proposed offer to acquire four highways in the Klang Valley – Shah Alam Expressway (KESAS), Damansara-Puchong Expressway (LDP), Sprint Expressway (SPRINT) and SMART Tunnel (SMART).
In a nutshell, said Kit, there are some forms of good news for the property market especially the lower foreign purchaser price. The second measure of RPGT nearer to current acquisition market price is also a good measure though market wish list is not to have any 5% tax after 5 years, but I suppose this is a good compromise if the wish list is not fulfilled.