Property - Budget 2017 observations and opinions

THERE is always two ways (or more some say) to look at things. Since the recent announcement of next year's budget, many have aired their opinions. The general consensus is that there is nothing much to shout about.

Although reports across media platforms quoted industry professionals who viewed the financial budget as "muted, relatively neutral in impact, not enough to excite the market, measures insufficient to stimulate the property market" and so forth – this writer is one who sees the glass as half full. With that, we run through Budget 2017 and changes to expect in 2017 where property is concerned, along with views of various industry authorities.

Pertaining property

1) Through the National Blue Ocean Strategy (NBOS), the government will provide vacant land at strategic locations to government-linked companies (GLCs) and Perumahan Rakyat 1Malaysia (PR1MA). This will go towards building more than 30,000 houses, and sold from RM150k to RM300k, below the market price of RM250k to RM400k. 

2) The government has plans to build 10,000 houses in urban areas. These will be offered to youth who meet "eligibility requirements", including graduates entering the labour market and who hold permanent jobs. Rental is up to a maximum of five years at a lower than market rate.

3) Under the People's Friendly Home (PMR) scheme, 5,000 house units will be built of which the government will subsidise up to RM20k per unit.

4) Stamp duty exemption to be increased to 100% on instruments of transfer, compared to 50%. Exemption limited to houses valued up to RM300,000, and for first-home buyers only, valid from Jan 1, 2017 to Dec 31, 2018.

5) The rate of stamp duty on instruments of transfer of real estate worth more than RM1 million will be increased from 3% to 4% effective Jan 1, 2018. This is said to affect sales for high-end properties and probably spur demand to buy ahead in 2017.

6) A new, "step-up" end-financing scheme for the PR1MA programme will help reduce loan rejection rates. The new application is said to begin on Jan 1, 2017 and will collaborate with the government, Bank Negara Malaysia, Employees Provident Fund and four local banks, namely AmBank, Maybank, CIMB and RHB. Financing will be easier, more accessible, providing loans of up to 90% to 100%.

7) A grant amounting up to RM10k will be re-introduced to registered Residents Associations. This can be used for purchase of security control equipment, cleaning and maintenance of the neighbourhood. 

8) Higher housing loans for civil servants – between RM200k and RM750k from the previous range between RM120k and RM600k. 

9) The government expects to complete the construction of 30,000 units of 1Malaysia Civil Servants Housing (PPA1M), to be sold from RM90k to RM300k, or 20% below market price.

10) A RM200 million allocation will go towards MyBeautiful New Home scheme, introduced for the B40 (bottom 40% of households earning monthly income of RM3.9k and below). The programme will begin with the construction of 5,000 house units (priced between RM40k and RM50k each). Under this scheme, the government will finance RM20k while owners can service the balance of the instalments. Houses to be built on the owners' land; land permitted by the landowner; or land awarded by state governments.
 
11) The Urban Wellbeing, Housing and Local Government Ministry will be allocated RM134 million to build another 9,850 houses under the People's Housing Programme (PPR).

12) Under the People's Housing Programme (PPR), 11,250 houses are already being built. These will be sold between RM35k and RM42k, which works out to be below construction costs.9) The government expects to complete the construction of 30,000 units of 1Malaysia Civil Servants Housing (PPA1M), to be sold from RM90k to RM300k, or 20% below market price.

10) A RM200 million allocation will go towards MyBeautiful New Home scheme, introduced for the B40 (bottom 40% of households earning monthly income of RM3.9k and below). The programme will begin with the construction of 5,000 house units (priced between RM40k and RM50k each). Under this scheme, the government will finance RM20k while owners can service the balance of the instalments. Houses to be built on the owners' land; land permitted by the landowner; or land awarded by state governments.
 
11) The Urban Wellbeing, Housing and Local Government Ministry will be allocated RM134 million to build another 9,850 houses under the People's Housing Programme (PPR).

12) Under the People's Housing Programme (PPR), 11,250 houses are already being built. These will be sold between RM35k and RM42k, which works out to be below construction costs.

Impact and expectations

On items 1, 2 and 3, JLL country head YY Lau said that these schemes will surely help alleviate the shortage of affordable homes and allow middle-income earning Malaysians to own a house. "It will increase property ownership, spending of the rakyat on housing products. Construction companies and developers will likely benefit from this and development projects will spur domestic investment activity which in turn will contribute to the GDP supported by private and public investments."

Her view on the "step-up" financing scheme is that it will improve loan approvals. "Stamp duty exemption is also likely to help spark property investments in 2017, hence, contribute to stronger construction and economic activity next year." On the increase in stamp duty (as in item 5), Lau says that this is likely to have an adverse effect on investors when introduced in 2018, "similar to the impact of GST on retail".

"In the shorter term, I expect more transactions above RM1 million may be completed before the implementation date. Otherwise, developers may resort to selling slightly below the RM1 million threshold to avoid the tax after 2018."

While Lau expects the constructin of the Pan Borneo Highway to help hike tourism and economic activities between Sabah, Sarawak and Brunei, she doesn't deny that the proposed East Coast Rail Line has been drawing attention. Business economists expect economies to improve especially in areas where the 600km rail track will run across, connecting the Klang Valley to towns like Kuantan, Kuala Trengganu and Kota Baru, ending in Tumpat in Kelantan near the Thai border.

Views and opinions

While Lau feels that the budget for 2016 was pro-poor, benefitting simple folk living in rural areas, as well as women, students, civil service employees through handouts and providing low-cost housing and housing programmes to encourage home ownership, it also provided for railway lines and trains to help boost connectivity, growth, domestic demand and the economy. "The 2016 budget was crafted to help raise GDP to 5% in 2017 as opposed to the unexpected growth of 4% to 4.5% in 2016." On the recent budget announcement, Lau felt that the government has continued to restrain spending, "budgeting for a 3% fiscal deficit". Her overall view – "It accelerates growth, ensures fiscal prudence and enhances the well-being of the rakyat."

Sharing his view, IJM Corporation Berhad CEO and managing director Datuk Soam Heng Choon said: "We applaud the government's effort to provide more affordable housing projects catering to both the B40 and M40 group. The step-up financing proposal for PR1MA homes will further encourage higher eligibility for loans to enable ownership. First-time home buyers will further benefit from the 100% stamp duty exemption for the first RM300,000 for purchase of property RM500,000 and below."

REA Group's international COO Arthur Charlaftis however commended the government in taking measures to assist first-time home buyers via the "step-up" end-financing scheme and increasing the number of affordable houses. "Budget 2017 has certainly made it easier for first-time home buyers to own a home. Even though the Developer Interest Bearing Scheme was not reintroduced and no new measures were crafted to curb escalating house prices, the government has introduced other measures to make it easier for first-time home buyers to get into the property market," he said.