WHAT DOES THE PROPERTY MARKET STAND TO GAIN (IF ANYTHING)?
The likely good news is, if you are a farmer, fisherman, factory worker or bottom-tier civil servant, this budget is all about you. If you are a middle-income earner looking to move up the property ladder or even make your first purchase… it’s probably best to not hold your breath.
Economists predict the low-income folk will the most attention from Budget 2018, scheduled to be tabled tomorrow, and that’s because high living costs and stagnant wages impact this group most pronouncedly and therefore it is a top worry among the majority of voters – note that this will be the last budget announcement before the next general elections.
Since the pain of escalating food and service prices hurts the bottom 40% (or ‘B40’) the most, mid- and high-income earners can expect to be relegated down the pecking order, and this goes for any property tidbits you may have been hoping for too.
Promoting homeownership in the low-income group, or the demographic of the country, is expected to be priority in the upcoming national budget.
Research firms such as Affin Hwang Asset Management say that a widespread stimulus to lift the property sector out of its current slump is unlikely, and this could be because the elevated household debt level.
In addition, there is a general concern in the government that any stimulus measure across the board may help to fuel speculative activities which in turn push up property prices further.
Aside from the continuation of affordable housing policies, for instance PR1MA (1Malaysia People’s Housing Programme) and PPA1M (1Malaysia Civil Servants Housing Programme), market analysts expect there will be aid for the B40 segment with some positive trinkets for first-time homebuyers such as lower stamp duty and higher withdrawal amount from the Employees Provident Fund to service mortgages.
Affin Hwang Asset Management also expects that the government to consider allowing a higher debt-servicing ratio from 60% currently for first-time homebuyers.
Kenanga Research expects the government to step up efforts to increase the supply of affordable houses, especially in major urban areas.
It also said developers have now tweaked their product launches, resulting in a higher proportion of residential launches in the price range between RM250,000 and RM500,000.
Referencing a study by Bank Negara Malaysia in 2014, Kenanga Research pointed out that the median household income of RM4,585 shows that the threshold for house prices to be considered affordable is about RM248,000 nationwide.
However, with about half of households earning less than RM5,000, and a majority of properties priced at RM400,000-RM500,000, many units are still beyond the means of close to half of Malaysian households, particularly in major urban centres.
In Kenanga Research’s Malaysia 2018 Budget Preview (dated Oct 20), it stated: “There may also be measures to bridge the affordable housing gap which includes rental support, rent-to-own, as well as savings and partial ownership programmes.”
Despite this, many market watchers believe that middle-income earners will not be completely left behind in Budget 2018. They predict that the government could announce a reduction in the personal income tax or increased rebates for medical expenses.
The lowering of personal tax, they say, will help increase the disposable income of wage-earners and households, and lift consumer purchasing power.
There could also be a spillover effect on the property market from Prime Minister Datuk Seri Najib Tun Razak announcement that Budget 2018 will hold good news for the Malaysian entrepreneurial sector.
Last week, he said the government wished to prove its commitment in supporting the sector, especially in its drive to transform “village entrepreneurs to global players”. This could take the shape of various tax incentives for business start-ups as well as tech-centric commercial locations promoting smart facilities and solutions.
The prime minister said the government has already allocated RM1.04 billion to implement various entrepreneurship development programmes under the Ministry of Rural and Regional Development. Of the amount, RM520.1 million was allocated for entrepreneurship development programmes under Majlis Amanah Rakyat (Mara), while the balance of RM521.12 million was given out to other agencies under the ministry to implement their programmes.
Najib, who is also Finance Minister, reminded that Budget 2017 introduced no less than 10 initiatives to strengthen the entrepreneurial sector.
The government, he said, hopes to raise awareness about the evolution of the economic landscape that is riding on the wave of the fourth industrial revolution, banking on the latest technologies and knowledge-based industries.
In order to achieve this agenda, Najib said the government has introduced the Digital Free Trade Zone, the first digital economic hub outside China which is scheduled for launch on Nov 3.
“Through the initiative, the Kuala Lumpur City Centre will be developed in Bandar Malaysia as the world’s greatest e-commerce hub, with 1,500 eligible small and medium enterprises set to be listed on the Alibaba.com e-commerce platform,” he said.
Overall, the economy grew at a steadier pace this year, after a two-year slump. Economists say that this was powered by a pick-up in consumer spending, a rebound in private investments, and a strong surge in exports.
Real GDP (gross domestic product) growth expanded strongly by 5.7% year-on-year in the first half of 2017. However, the general sentiment is that consumers are not feeling the effects of this positive news.
Cost-of-living issues, fuelled by the sentiment that goods are becoming more and more unaffordable, are putting a damper on confidence. And this is despite the fact that the consumer price index (which measures the rate of inflation), came down to 3.7% in August from the 5.1% registered in March.
Whether myth or perception, the average Malaysian household is simply not convinced that the prices of goods and services have moderated, which puts considerable pressure on the upcoming budget to strike a positive and reassuring tone.