PEPS WEIGHS IN ON THE GOOD, THE BAD AND THE UGLY…
For those who are not in the know, “PEPS” is the very succinct abbreviation of the elaborately-named Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia (or, in Bahasa Malaysia, Persatuan Penilai, Pengurus Harta, Ejen Harta & Perunding Harta Swasta Malaysia).
The long name, of course, serves the inclusive nature of the association, which includes a broad spectrum of industry professionals that are active in the property market. Therefore, their perspective on the recently announced budget is worth noting – particularly because it poses a query about whether it continues to serve our once-held 2020 goal of being a fully developed nation.
For the most part, PEPS believes announcements made on new infrastructure projects, Digital Malaysia and the four Economic Development Zones will continue to spur strong economic growth.
Also good news, says the association, is the fact that the government will build some 500,000 affordable homes. Initially, there was concern that many such units would be uniquely targeted at the lowest income Malaysians and would leave middle income earners struggling.
In PEPS assessment, the ongoing mismatch between house prices and income levels for the middle 40% of the population has been an urgent issue impacting the recovery of the market. This is also caused by the lack of state land released at cheaper pricing (to accommodate affordable units), high infrastructure costs and high compliance costs.
“The Budget saw RM2.2 billion allocated for housing, of which RM1.5 billion is allocated for PRIMA housing to build 210,000 units priced at RM250,000 and below per unit over a period of two years. This is a very laudable move by the Government to address the affordable housing issues in terms of financial capacity to buy and also to assist in increasing the supply of affordable homes,” PEPS said in a press statement.
It explained that the step-up financing scheme provided to PRIMA will now be extended to private developers too, which is welcome news.
Not so welcome, however, are the seeming limitations to the expansion of the Industrialised Building System (IBS) of construction, which the association has championed as a means to reduce building construction costs and to speed up the construction period. PEPS has recommended that the Government to provide incentives to both builders of pre-fabricated housing components and also to developers who adopt the IBS Building System, but there is yet to be headway in this direction.
This budget’s allocation of RM2.5 billion for IBS is only applicable for the improvement and maintenance of dilapidated school buildings.
It is a relatively small step towards the implementation of IBS as a norm, and PEPS hopes IBS incentives and grants will be given to any builder and housing developers who adopt the system.
On Healthcare Tourism, PEPS commended the Government for providing incentives to private hospitals by attracting health tourists and to promote Malaysia into a “Fertility, IVF and Cardiology Treatment Hub in Asia”.
Also plus points are the upgrading of the various airports, the incentives for investment of new four- to five- star hotels and the introduction of the E-Visa regional hub to ease the entry of expatriates, foreign students and Malaysia My Second Home participants.
Worthy of mention is an indication that the government is beginning to promote a stronger (and alternative) rental market to drive the property economy. PEPS noted that the 50% tax exemption for rental incomes of up to RM2,000 per month could encourage a push to rent rather than sale among homeowners, while at the same time keep rental costs down for potential tenants.
However, the tax exemption seems to be a short-term strategy for now as it is only applicable until 2020. As such, the measure seems more likely targeted at those who would risk stretching their affordability levels to own a home and suffer further down the line with payment defaults.
This brings us to the final point, which is essentially the state of the market as it stands. Non-performing loans are up. Furthermore, the property industry continues to be plagued by oversupply, overbuilding, high costs and mismatch between supply and demand and issues on end financing.
“It is noted that the 2018 Budget did not come with any measures or incentives to arrest the problems stated above and to tackle the revival of the property market. There were also no incentives to assist first time buyers to buy their first home,” PEPS stated.
This is a sobering indication that the 2020 goal may be fading on the horizon. While modern infrastructure and amenities serve to define a developed nation, it is not an accurate reflection as the general socio-economic wellbeing and wealth per capita of the nation.
And on that front, perhaps currently beyond our control, we are waning.
Although not expressly stated, PEPS indicates that the many hurdles we presently face require a reassessment of whether the 2020 goal remains a realistic one.
Realistically, we are in survival mode… 2020 can wait.