SOLUTIONS IN SIGHT FOR HOME SEEKERS WHO HAVE LONG BEEN WAITING IN THE WINGS
BY Zoe Phoon
Finance Minister Lim Guan Eng tabled the Pakatan Harapan government’s inaugural budget in Parliament on Nov 2.
This is the first federal spending plan by a new administration after 61 years following the BN government’s defeat in the May 9 general election.
Prime Minister Tun Dr Mahathir Mohamad and Lim recently spoke about the need to devise new taxes to handle the humongous debt pile left by the previous government. Meanwhile, it doesn’t help that external uncertainties are unpredictable.
It’s against such as a backdrop that the budget was prepared barely six months after Pakatan took over Putrajaya.
Lim tabled a total budget of RM314.55 billion (excluding contingency fund of RM2 billion), up 10.25% compared to Budget 2018 by the BN government.
Of the amount, RM259.85 billion (up 10.93%) goes to operating expenditure and RM54.70 billion (up 18.91%) to development expenditure.
The projected deficit for 2019 is 3.4%.
So whither the property sector? According to the Housing and Local Government Ministry, one issue is the property overhang worth RM22.5 billion in unsold houses nationwide, 73% comprising affordable units priced at RM250,000 and below.
This is due to buyers having problems obtaining loans from banks and financial institutions.
An industry professional said we have to look at housing from more perspectives than just house prices – such as affordability and salary being equitable with house prices.
How would Budget 2019 help those who want to own their own home, or help boost the weak property market?
Some excerpts from the finance minister’s speech:
Peer-to-peer lending scheme for first-time homebuyers
First timers will be given a leg-up the property ladder. Lim said the private sector is allowed to engage in a new peer-to-peer lending scheme which enables first timers to use the “property crowdfunding” model. The Securities Commission (SC) will regulate the scheme.
For example, one can buy a home worth RM250,000 by paying only RM50,000 while the balance is financed by investors via the peer-to-peer scheme which is expected to launch in Q1 2019 after SC’s approval.
Rehda to reduce prices in certain cases
The Real Estate and Housing Developers’ Association Malaysia (Rehda) agrees to reduce house prices by as much as 10% for units not subject to price control for new projects.
RM1.5 billion to further govt’s affordable home schemes
The allocation is to build and complete affordable homes under the People’s Housing Programme, Civil Servants Housing Project, PR1MA, and Syarikat Perumahan Nasional Bhd.
Loan tenure extended for public sector
Financing under the Public Sector Home Financing Board will be extended from 30 years to 35 years for first-time financing and 25 years to 30 years for second financing.
RM400 million to improve govt quarters
This allocation is to improve living quarters of civil servants such as police and military personnel, and teachers.
RM1 billion fund to facilitate homeownership for B40, M40
The government plans to increase ability of the B40 and M40 households to own homes, and to reduce transportation cost (more on this at the bottom page).
Bank Negara Malaysia will set up a RM1 billion fund to facilitate those earning below RM2,300 monthly to own homes priced at RM150,000 and below.
The fund will be made available, for two years or until it is depleted, through AmBank, CIMB Bank, Maybank, RHB Bank and BSN at an interest rate as low as 3.5%.
RM25 million for Cagamas to help first timers
The government has allocated RM25 million to Cagamas Bhd to prepare a mortgage guarantee to ensure that first-time homebuyers with household income of up to RM5,000 monthly get higher financing including for their deposit.
This is expected to lower the cost by between 7% and 11% for buyers apart from discounts given by developers.
Stamp duty exemption
This is for the first RM300,000 on the property transfer letter and loan agreement for first-time buyers of homes priced at a maximum of RM500,000 for two years until December 2020.
The government also proposes stamp duty exemption on the property transfer letter for first house purchase for property priced between RM300,001 and RM1 million for six months starting from Jan 1, 2019.
This will be part of the National House Ownership Campaign which developers have agreed to give 10% discount on houses under existing projects.
Infrastructure including funds for RAs
RM20 million for residents associations (RAs) to carry out community, security and neighbourhood activities. RM100 million to upgrade roads, RM160 million for water supply projects and RM35 million for basic infrastructure.
Broadband connectivity outside urban centres
The government targets 30Mbps broadband connectivity outside urban centres within five years under the National Fiber Optic and Connectivity Plan. This is part of its commitment towards digitalisation of Malaysia’s economy.
Meanwhile, the government has streamlined the tax on property sales.
For disposal of property after the fifth year, the Real Property Gains Tax (RPGT) will be revised as follows:
 For companies and foreigners who are not permanent residents, the rate will be increased from 5% to 10%.
 For Malaysian individuals, the rate will go up from 0% up to 5%. Exceptions to be made for low-cost homes below RM200,000.
 Stamp duty on transfer of property valued over RM1 million will be increased by 1 percentage point from 3% to 4%.
World’s first airport REIT
The government has proposed to establish an airport real estate investment trust (REIT) to monetise government assets. A 30% equity sale in the REIT is expected to raise RM4 billion.
RM100 monthly passes for unlimited trips
To reduce transportation cost for B40 and M40 households, public transport users can buy RM100 monthly passes for unlimited trips on the RapidKL rail or bus service starting January 2019. Scheme to be expanded to other bus companies in stages.
Freeze on all intra-city toll rate hikes
This involves a RM700 million allocation. The government will also abolish tolls for motorcycles on the First and Second Penang Bridge linking Penang Island to the mainland, and on the Second Link in Johor. Estimated annual allocation of RM20 million beginning Jan 1, 2019.
Here is a summary of other key highlights from the budget that will have a wide-ranging impact on the overall economy…
Budget 2019: Other highlights
- Govt real debt and liability as at June 2018 were RM1,065 billion, RM350 billion higher than the previous administration’s figure
- Govt expects GDP to grow 4.9% in 2019 despite uncertainties in global economy
- Govt noticed previous administration secretly paid RM7 billion of 1MDB debt as at April 30, 2018
- Govt may need to pay as much as RM43.9 billion to settle 1MDB debts
- Govt to table Fiscal Responsibility Act by 2021 to avoid uncontrolled spending
- As at Oct 15, international reserves amounted to US$102.8 billion or RM426 billion, enough to cover 7.4 months of retained imports. Inflation rate stayed low at 1.2%.
- Fiscal deficit in 2018 to reach 3.7%. Increase due to expenditure commitment by previous administration.
- Pakatan administration committed to implement fiscal consolidation steps to reduce deficit to 3.4% of GDP in 2019, 3% by 2020 and 2.8% in 2021
- Govt to set up Debt Management Office to review and check govt debts and liabilities
- For 2019, federal govt’s official debt as percentage of GDP to reach 51.8% while total liability expected to lower to 73.5%
- Govt will continue LRT3 project with savings of 47% from initial estimated cost of RMN31.6 billion to RM16.6 billion
- Govt will be able to save RM15 billion based on the announcement
- MRT2 will also contribute to savings of 22.4% from initial estimated cost of RM39.3 billion to RM30.5 billion
- RM5.2 billion Klang Valley Double Tracking project will be re-tendered via open tender and is expected to provide substantial cost savings
- Under GST, 545 goods were zero-rated while under SST, almost 10 times more items were exempted from SST
- Based on Ministry of Domestic Trade and Consumer Affairs’ preliminary studies, 70% or 291 of the 417 products and services inspected saw prices drop in September 2018
- Govt to introduce a credit system for sales tax deduction from January 2019 to avoid double taxation and to lower business costs
- Effective Jan 1, 2019, govt will tax imported services to ensure local service providers such as architects, graphic designers and software developers can compete competitively
- Online services imported by users will be required to register with Customs Department from Jan 1, 2020. These include software, music, video or any digital advertising
- Govt to launch Special Voluntary Disclosure Programme to give taxpayers a chance to voluntarily declare any unreported income
- After successfully reintroducing SST, Customs Dept to beef enforcement on smuggling of cigarettes
- Govt to impose levy for all passengers travelling to Asean countries via air routes starting June 1, 2019. RM20 for travellers to Asean and RM40 to other countries.
- Govt hopes to get back at least RM1 billion from efforts to combat smuggling and fraudulent activities previously not coverable
- Casino licence to increase from RM120 million to RM150 million annually and casino duty to be raised to 35% on gross income
- In 2019, federal govt expects to collect revenue of RM261.8 billion including special dividend of RM30 billion from Petronas
- Govt will subsidise RON 95 petrol for those with cars of 1,500cc and under and those with motorcycles with 125cc and under
- Govt will allocate RM10 million to work with NGOs and social enterprises to help underprivileged communities
- Minimum wage to increase to RM1,100 nationwide starting Jan 1, 2019
- Govt will continue with and improve the financial aid (Bantuan Sara Hidup) to B40 group by providing more targeted assistance
- Estimated that 4.1 million households will continue to get financial aid from govt with total allocation of RM5 billion
- Monthly electricity subsidy to be given to the poor and hardcore poor registered with e-Kasih programme. Subsidy rate to rise to RM40 monthly and will benefit 185,000 accounts. RM80 million allocation will be provided.
- B40 National Health Protection Fund for four major critical illnesses
- To encourage hiring of those above 60 years old, govt proposes their mandatory EPF contribution be reduced from 6% to 4%
- Soda tax
- Govt has earmarked 380 acres of land in Pulau Indah as a free trade zone to support shipping and logistics activities in Port Klang
- Khazanah Nasional will develop 80 acres of land in Subang as a world-class aerospace hub. It will work with Mara to produce high-skilled manpower to meet industry needs.
- Govt to make Pulau Pangkor duty-free island and to further expand Langkawi’s status as a duty-free island. Federal govt to get 50% share of tourism tax proceeds in these states.
- Govt to provide RM2 billion to Green Technology Financing Scheme to encourage investment in green tech industry
- Govt allocated RM286.8 million for Malaysian Anti-Corruption Commission’s operating expenses, up 18% from before.