What's for real estate in Budget 2022?

On 29th October 2021, the Finance Minister, Tengku Datuk Seri Zafrul?Tengku Abdul Aziz read the much waited the year 2022 Budget for Malaysia.???There was some good news for the property sector.

1.??Real Gains Property Tax

This was one of my wishes for the budget and it came true!?This tax was introduced in 2019 to control the property market.??However, due to Covid-19, it was waived until 31st December 2021. ?In the new budget, Malaysians, Permanent Residents, and corporations of Malaysia need not pay this tax anymore.

What it means:

If I bought a property in 2015, for RM 500K and sold it now for RM 600K, I gain RM 90K (after deductions) from the sale.??Previously, I have to pay 5% tax which will amount to RM 4,500.??The Budget 2022 announcement means you do not have to pay the RM 4,500 tax.?This will help the secondary market.?Currently, it is the buyers’ market.?This waiver will help the sellers to gain more and better negotiations can be achieved.????Property guru reported that the sub-sale market dominates 83.7% of total transactions in Klang valley and 80.8% in Penang. That means it will help to spur the economy but it may attract more investors than home buyers.

?2.??House Ownership

RM 1.5 billion is allocated for housing programs in the Budget 2022.?RM 1.5 billion includes building new houses and apartments, maintenance of buildings, etc. which the government decides to do.

What it means:

In 2017, Bank Negara Malaysia conducted a study and concluded that there is a gap between the properties which are available for sale and the demand from buyers.?The properties available were above RM 250K but the demand was more from the lower group.?Thus, there was a gap. The new initiative will mean that:

a)???B40 group will be able to afford to buy properties.

b) Low-cost residential properties which are not maintained have become an eyesore.?The allocation will help to reduce or eliminate such eyesores!

c)???Any other programs introduced under this allocation.

Earning RM 4,850 or below, the B40 group will find it challenging to pay for a housing loan for RM 250K house.?Banks will consider loan applications if the salary is at least RM 3,500. Thus, it will be more applicable for the M40 group who are not included in this scheme.?I do hope that this scheme will be extended to the M40 group to stimulate the economy significantly.?

Furthermore, the pandemic has caused an impact and the categories need to be reviewed and re-categorized.?Is M40 still M40 or has it dropped to B40? ?T20 is still T20 or is there a new category T10 created by the pandemic millionaires? ?The government needs to study the pandemic impact before the implementation of this scheme.

The classification is as below for your reference:

Source: Household Income and Basic Survey Amenities Report 2019, DOSM.

3.??Housing Credit Guarantee Scheme

Currently, banks do not provide housing loans if you do not have a fixed monthly income or is able to show continuous income.?This scheme is for those with non-fixed income like the gig-workers who are working online, small cottage industry owners or are providing freelance services.?This group of people was not able to buy houses but it will not be the case anymore.

What it means:

Those who are working as freelancers, contract workers, etc. will be able to buy a house.?More and more businesses are going online and employers prefer to engage contract workers whose contracts can be terminated when the business is down.?The new norm will be working from home and employing contract workers or freelancers.??That will create more people with less stable incomes.?Budget 2022 provides an opportunity for this group of workers.?They can continue to do such jobs and use the scheme to buy a house.??Fantastic and it will help to stimulate the economy whilst helping people to own a home.

4.??Tax reliefs for landlords

Special tax relief when landlords give tenants of at least 30% of rental discount. This is valid until 30th June 2022.

What it means:

If you have rented out a house for RM 1000 but reduced it to RM 700.?You can claim tax relief for the amount reduced.??The impact may not be significant for residential properties.?However, it will help businesses that were forced to stop operations during the pandemic.?It will help the recovery.

Conclusion:

The budget did address some of the concerns for the property market but my opinion is it is not enough.?The property market is a billion-dollar business.?It has a direct impact on the economy and stimulating it will stimulate the economy.?Malaysia needs this urgently.?I do hope that the decision-makers will do the necessary after taking into consideration what was not addressed in the budget.

Most property industry players are looking forward to an upwards trend for properties and the price increase is imminent.?Investors who understand this are also in a panic mode now to quickly complete the transactions before the price increase hits!?Homebuyers are still mulling and wondering whether it is a good time.

Are you planning to buy a property? Wait no more.?It’s time to act fast.?Get in touch with me for the best deal in properties +6016-4128316.

Signing off,

KR Rathiga

Your property consultant

15th November 2021