Malaysia continues to battle the uncertainties and disruptions resulting from Covid-19. With the accelerated vaccination rate in the country, the economy is set to fully reopen soon. Budget 2022 is expected to be expansionary to support the recovery of the economy, which includes industries that were hit hard by the pandemic. With the federal budget scheduled to be tabled in parliament on Oct 29, we ask property developers and consultants for their wish lists.
CBRE | WTW
Group managing director
Foo Gee Jen
We hope the Real Property Gains Tax (RPGT) rate can be lowered, with properties held for more than five years exempted from RPGT to encourage young families to upgrade their house. Also, houses below RM300,000 should be exempted from stamp duty and a 50% discount should be given to properties that are between RM300,001 and RM700,000. This will encourage more buying activity. To boost homeownership, there should be a special government fund, with a one-off grant of RM10,000 provided to first-time homebuyers.
In terms of foreign ownership, the threshold price should be reduced for purchases of overhang high-rise stratified properties in specific locations. There should not be any flip-flopping when it comes to the policy for the Malaysia My Second Home (MM2H) programme and the screening process for applicants should be improved. It is important to provide clear guidelines for foreign ownership of industrial/commercial properties to promote high-value investments such as warehousing and logistics and data centres.
Moreover, compliance costs should be reduced to allow more players in main infrastructure services, which will encourage competition and lower housing development costs. This is where there should be transparency on how development charges, the Improvement Service Fund and so on are used.
Ngan Chee Meng
While low interest rates make borrowing less expensive for homebuyers, the tightening of borrowing criteria has been exacerbated by the pandemic. To overcome loan eligibility issues such as bridging the differential sum, the government can consider providing first-time homeowners with greater support, such as down payment assistance of up to RM10,000, especially for those in the B40 group. In addition, the government can consider allowing qualified low-income people to claim mortgage interest tax relief based on predetermined qualification criteria.
The government can also help the low-income group through a loan margin guarantee scheme to assist prospective homebuyers secure a bank loan. This scheme should be applicable to individuals who want to own a home but do not have sufficient income to qualify for a loan. In this case, the government could act as their guarantor for the loan margin that is required to meet the minimum loan approval criteria. This will require the government to set clear parameters, a proper mechanism and eligibility criteria/income range to ensure that the scheme is not abused.
IJM Land Bhd
Datuk Edward Chong
As housing is a fundamental need, we hope the government can provide substantial assistance and targeted support to help first-time homebuyers and ease access to housing during this challenging period, such as providing first-time homeowners with housing grants to help them with their down payment. In addition, the government can also ask financial institutions to promote step-up loan repayments for eligible first-time homebuyers, whose income will continue to grow as their careers develop. We also hope that the Home Ownership Campaign (HOC) will be extended beyond Dec 31, 2021, as the lockdown implemented this year has substantially taken more than half of the duration of the previous extension.
The impact of compliance costs, cross-subsidies and the recent sharp rise in the cost of building materials, such as steel, aluminium and glass, has significantly increased the cost of building. To prevent house prices from rising, we hope the government can review compliance costs and cross-subsidy policies so as to improve housing affordability.
For the property market, the biggest challenge has been the pandemic’s impact on construction timelines. We hope the government can extend the coverage and scope of Act 829 or Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 to protect all parties who are unable to fulfil their obligations owing to the effect of the pandemic.
S P Setia Bhd
President and CEO
Datuk Choong Kai Wai
We hope the government will prioritise homeownership as a key national policy and take concrete steps to realise it, among which are to introduce more incentives for first-time homebuyers and extend the HOC, with its current waiver of stamp duties, to help the property market get back on its feet.
Other encouraging nudges to activate the market would be to waive or lower the stamp duties on RPGT for all properties, including those in subsale markets and commercial properties, and to reduce the individual income tax rate for those affected by the lockdowns.
We urge the government to take action to curb the rising cost of construction due to raw materials, among other things; reduce labour costs such as the high permit fees for foreign workers; take steps to facilitate the legalisation of current illegal foreign workers; take over the responsibility of building affordable housing, with property developers relegated to making contributions or giving subsidies for it; reduce compliance costs such as development charges and land conversion premiums; and reduce the company income tax rate for those affected by the lockdowns.
In tandem with the above, S P Setia hopes that banks can take a more positive approach towards loan eligibility and ease the lending guidelines to give aspiring homeowners’ dreams some solid shape and form.
Mah Sing Group Bhd
Founder and group managing director
Tan Sri Leong Hoy Kum
We hope the government can offer additional measures for first-time homebuyers, specifically in home financing, to boost homeownership. This includes reinstating the maximum loan tenure to 40 years; referring to gross income rather than net income for loan applications; a higher debt service ratio; and setting a higher margin of financing, up to 100%, for the first property, to help the M40 and B40 groups, who are affected during the pandemic.
The government should consider implementing the Developer Interest Bearing Scheme for first-time homebuyers, allowing them to have the option of not servicing their loan repayments during the project’s construction period. The HOC should also be extended for another year, as the campaign has proved to be vital in helping homebuyers purchase their homes while reducing property overhang.
Compliance cost remains the most significant factor affecting developers’ cash flow in 2H2020 owing to the SOPs implemented under the new norm, so the government could possibly review and reduce compliance cost, allowing the capital outlay for private utility companies to be borne by the respective asset owners so that the savings can be passed on to buyers.
We also hope the government can review and standardise the minimum threshold for foreigners to RM600,000 across all states, especially in areas with high overhang such as the Klang Valley, Johor and Penang.
Knight Frank Malaysia
The government should give landlords a rebate on electricity costs and assessment for the whole of 2022 to help businesses recover from the pandemic. Landlords must prove that they have accorded a minimum rental rebate to their tenants. This will help tenants reduce their occupancy costs and landlords to keep their tenants and recover some losses from rental waivers. The electricity cost rebate should also be accorded to tenants.
The pandemic accelerated the work-from-home trend, which comes with many benefits, such as reducing business occupation costs and even bringing back the latent workforce, especially parents who had earlier decided to quit work. To encourage this, there should be individual tax rebates on internet connection, purchase of furniture/equipment and creation of workspace at home. For businesses that give such subsidy/provision for staff, they should be allowed to claim this wholly as cost of business rather than as staff benefits, which are limited.
To increase investment, the government should address the RPGT structure by equalising the tax for both foreign entities and locals, and zeroing the RPGT after five years for all. The zeroing of RPGT after five years will help reduce speculation and encourage longer-term investment in our market.
Sime Darby Property Bhd
Group managing director
Datuk Azmir Merican
The cost of running a business in the property industry should be reduced. We hope the Covid-19 Act could be amended to cover the prolonged Movement Control Order and lockdown period in 2021, which has impacted business activities, and provide tax incentives for developers building centralised labour quarters to balance the cost incurred to upgrade existing facilities to fully conform with Act 446 (Workers’ Minimum Standards of Housing and Amenities Act 1990).
It is important to provide a stimulus package for the property market, such as stamp duty/RPGT waiver during the recovery plan period and extend similar benefits to include commercial products such as offices and retail.
We hope the downpayment requirement can be reduced for first-time homebuyers and programmes introduced to assist with loan repayments, such as not needing to service interest or a tax deduction on interest incurred for the loan during the construction period, as well as innovative financing schemes, such as rent-to-own and step-up financing to service buyers’ loans as their income level increases over time.
Also, long-term incentives should be introduced for developers/contractors to employ automation and mechanisation to reduce reliance on foreign labour in construction, as well as a grant/tax break for investments in Industrial Building System factory/manufacturing facilities that promote automation and upskilling of local communities.
We hope the government will continue to improve incentives that will spur house-buying activities. For many years, property development has been an economic engine and it must be given the support to continue to bolster growth. Despite the gradual reopening of economic activities after months of lockdown, it will still take many months for consumer sentiment to be restored to pre-pandemic levels, and the property development sector to see recovery.
We had welcomed the reintroduction of the HOC last year, and we hope that it will continue well until the end of 2022 instead of this year-end. It has been a significant selling point for many house buyers and crucial in helping property developers in clearing inventories, which were planned years in advance.
We would like to see the reinstatement of/further improvements to the previous MM2H programme guidelines. While we understand the government’s objectives, the new and more stringent guidelines appear less appealing, which may hinder new participation and renewal.
We also hope the government will extend the waiver of the 5% (or higher) RPGT for the disposal of residential property that is expected to expire at the end of this year. This will provide financial relief to people offloading their homes in the secondary market as they potentially look for a new replacement house from a property developer.
IOI Properties group bhd
Datuk Voon Tin Yow
Extend the stamp duty exemption on the Memorandum of Transfer (MoT) and loan agreement to cover properties priced above RM500,000, including serviced apartments. This would give first-time homebuyers more viable options in the selection of their first home. In view of the current pandemic, in which working from home has become a common practice, buyers may be looking for bigger or functional spaces in strategic commercial locations that may cost above RM500,000.
Extend the HOC for another year until end-2022. The cost savings in the form of full stamp duty waiver on the MoT and loan agreement for residential home purchases of up to RM1 million, as well as the 10% minimum discount offered by the developer, will encourage residential property transactions.
Provide incentives to encourage property developers to include green and environment-friendly features in their projects, creating more sustainable developments in line with the global agenda and the 12th Malaysia Plan to combat climate change. The provision of grants, subsidies and financing schemes for programmes that are related to environmentally responsible approaches in a variety of business operations will encourage asset owners to minimise their operation’s impact on the environment. These may include retrofitting of existing equipment and structures with green technologies as well as to cover green certification costs.
Nawawi Tie Leung Property Consultants Sdn Bhd
Executive director and regional head of research and consulting
The government should lower the share of operating expenditure (from total expenditure) so that a higher amount can be allocated to development expenditure. In 2021, about 21% of the operating expenditure was allocated to development expenditure. This will help boost the pace of economic recovery and benefit the rakyat.
Given the severity of the hardships faced by the rakyat, the allocation should be increased to at least 25%, and 50% of this amount should focus on job-creation activities. If we look at Singapore, between 2018 and 2021, the allocation for government administration ranged from 2.2% to 4.1%. The share for social development ranged from 31.7% to 44.5%. We can’t ignore the importance of social development for Malaysia to achieve higher economic growth and status.
Also, we hope that the incentives under the HOC will be continued until there is a clear sign of economic recovery in order to support homebuyers and developers. For properties listed under the HOC, full stamp duty exemption should be applicable up to RM1 million while for properties worth more than RM1 million, stamp duty should be capped at only 1%.
Other incentives, such as instruments on securing loan exemptions and the 10% price discount, should be maintained.
Rahim & Co International Sdn Bhd
Director of research
We hope the problem of housing affordability and security of shelters can be systematically addressed to enhance and strengthen the existing homeownership programmes and financial assistance packages, especially for first-time homebuyers in both the primary and secondary market. The HOC should be extended to the secondary market. However, the HOC should not be depended upon as a long-term solution, and hopefully there will be an equally robust medium-term plan to increase the purchasing power of the rakyat, revisiting the agenda of increasing our household disposable income while normalising the cost of living.
We also hope for a more refined and “friendly” policy with regard to foreign interests and purchasers in the country. The implementation of the MM2H programme should be more friendly and not as drastic, especially for existing participants, who have 12 months to comply with the new rules. These are our immediate references to attract more foreigners and foreign investments to our shores. Furthermore, these foreigners are potential homebuyers too. To spur foreign purchases of property, control measures could be refined to capture these interests, without jeopardising the interests of local purchasers.
Finally, there should be a sooner-rather-than-later implementation of a transparent property and housing database system that was announced a while ago, plus an introduction of measures to improve control of future developments to mitigate the risk of overhang and supply-demand mismatches.
Group managing director
Datuk Paul Khong
This year has been challenging, with more than three months of lockdown. We have been struggling with Covid-19 for more than 18 months now, but fortunately, local vaccination rates are creeping up steadily. The local politics was not helpful.
This impact has set into all markets deeply and we now need to give a strong booster shot to the lacklustre property market and maintain the momentum for 2022. We need this to act as a catalyst to spur growth and regenerate the synergy throughout the entire supply chain.
For Budget 2022, we wish for full or even partial exemption again on ad valorem stamp duty and exemption on RPGT to be given for all sectors. This will push demand by lowering the property entry and exit costs.
There should be a relaxation of foreign ownership restrictions to increase interest in the residential, commercial and industrial sectors and to attract investors back. A review of the latest MM2H programme criteria is critical.
We hope Bank Negara Malaysia will consider less stringent loan requirements, to assist in the financing of first-time purchasers and existing or qualified borrowers with a strong track record. This will help increase real demand and enhance the market.
We hope Budget 2022 will be favourable to the overall property sector this time around to create an actual impact.
KGV International Property Consultants (Johor) Sdn Bhd
Interest for housing loans should be deductible on personal income tax for first-time homebuyers, or preferably, for all buyers. This would stimulate the property market as people would be able to buy property and yet save on income tax. If needed, the eligibility for deductible interest can be further refined to limit it to one house purchased for one’s own occupation. Even then, the amount deductible can be capped.
Dispense with the RPGT for property held for more than five years, whether by individuals or corporates, Malaysians or foreigners. Taxing gains after five years is not equitable and is akin to taxing inflation. Anyone holding a property for more than five years cannot be construed as a speculator. Levying RPGT in this case defeats the original intention of the tax.
Incentives and structural policies to stimulate the economy, such as double tax deductions, can be allowed for specific expenses that will give rise to a multiplier effect in the property and employment markets. For example, property owners can be encouraged to spend on energy-saving devices such as solar panels, energy-saving lightings and air conditioners. Renovation of property can be encouraged too as this gives employment to many small-time contractors and building material suppliers. Tax deduction can be incorporated.