As a result, many of our wish list to stem excessive speculation in the property sector that has caused the unbridled escalation of property prices was not granted. Nevertheless, we are grateful that our PM did not heed the advice from business groups with vested interest to relax some of the cooling measures announced previously to stem excessive speculation such as lowering the Real Property Gains Tax (RPGT) or re-introducing the Developer Interest Bearing Scheme (DIBS). We are indeed glad that a ‘status quo’ (an existing state of affair) had remained.
The positive take on Budget 2016 in relation to property, in particular affordable properties are as follows:
(a) The government will build more PR1MA homes, SPNB, PPA1M houses and also PPR homes (Affordable Homes by the Government)
(b) A sum of RM200 million will be allocated for First Home Deposit Financing Scheme to assist first time home owners to pay deposits when purchasing affordable housing.
DEVELOPERS’ INTEREST BEARING SCHEME (DIBS)
HBA is glad that the Government has continued to heed our call to ban the gimmick of DIBS or any permutation that entails interest capitalisation.
Developers being entrepreneurs have to be responsible and bear the risks that come with their investment. They should not be allowed to enjoy profits at the expense of house-buyers bearing the risks on their behalf. Thus, when developers claim that DIBS is good because they “assist new purchasers”, they should be asked to use the ‘Built Then Sell’ (BTS) 10:90 concept instead if they are sincere in not wanting to shift the risks to the house-buyers. Developers, being profit driven, merely want to sell their products by whatever means, even recommending DIBS for ‘first time house buyers’ on the guise of ‘assisting them’. We are glad that the developers’ trade organization did not succeed to convince the Government to be their sales agent. Do not allow ‘First Time House Buyers’ to be sucked in.
Following the existing cooling measures announced in Budget 2014 i.e banning the DIBS, tightening of the loan-to-value ratio (LTV) and increasing the RPGT, the housing market is now more stable to a certain extend.
A BIG THANK YOU to the honest civil service staff in the Ministry of Finance, EPU of the PM’s office and Bank Negara for standing up to politicians and parties with self interest who have been clamouring behind the scene to attempt to reinstate this deceptive packaged DIBS that have been the blunt of escalating house prices.
1. Affordable Homes by the Government
Thumbs up to the Government for taking the initiative to build more affordable housing. However, HBA cautions the right implementation to ensure that it reaches the right target market.
The affordable housing must be built at the right place and priced reasonably (between RM150,000 to RM300,00 and not more than RM400,000 for prime locations) and only for first timers and not to be made available for second time house buyers which PR1MA allows albeit with conditions.
PR1MA must also ensure that all the allocated land is used to build affordable housing and not to partner with those private developers where only 40% of the lands (from what we understand from the market) is for affordable homes whilst the balance used for lifestyle properties to build commercial and high-end properties.
HBA further opines that the best agent of delivery for private affordable Housing is private developers. The Government can boost the delivery of affordable housing by giving incentives and rebates to private developer to build affordable Housing such as:
(a) Lower corporate tax rates
(b) Lower land conversion premiums
(c) Fast track release of unsold Bumiputera Units
2. First Home Deposit Scheme – 10%
Whilst the above scheme is laudable as it aims to assist first timers to own their property, HBA urges some caution as providing the initial deposit of 10% down-payment may send a wrong message.
HBA has always caution against so-called “Zero Entry Cost” properties whereby the buyer does not need to make any down payment as it encourages unnecessary speculation. House buyers are advised to rent instead of owning if they cannot raise the initial down payment / commitment fee for an affordable housing unit.
Do not think that just because it is within the affordable housing category, one is eligible for a 100% loan (in this case 90% margin). Buyers must understand that it means taking out a backbreaking loan of 30 years and ‘slaving’ for the bank. They must understand their obligation to repay the monthly loan without fail and to regularly pay the maintenance and sinking fund as well as utility charges. If buyers could not afford to commit with their own funds (ie down payment), he or she is strongly advised to rent instead. From the onset, buyers must know their legal obligations and moral responsibilities. There is a vast difference between buying and renting. If they don’t keep up with the monthly instalments to the bank, the bank will foreclose the property and the family gets evicted. It is only then that many realise that buying a house can be a nightmare. They will instead be house poorer.
Since it has already been announced, HBA urges the Government to impose a restriction that such properties under this scheme cannot be sold for the first 10 years and must be owner occupied.
On the hindsight, this will be very helpful to “First Time House Buyers” who lack the cash to make the required 10% down payment. It is definitely better than what it currently being practiced by errant developers in that the developer increases the selling price by 10% and then offer a rebate of 10% so that the house buyer does not need to make any physical down payment. However such a ‘scheme’ artificially increases the selling price and also adds pressure to prices of existing completed properties.
ABANDONED housing projects in the country continue to be a dampener to the hopes of many house buyers and their families from realizing their dream of being owners of their own homes.
Its continued presence remains a thorn in the housing industry that does not bode well for the victims nor the reputation of the Housing Ministry as the regulatory body and approving authority.
Besides causing a dilapidated environment, abandoned projects also cause unnecessary hardships to the victims as they need to continue with their monthly bank installments for their housing loans, and in many cases unless the projects are successfully revived, there will be no end in sight as to how long they have to bear their ordeal. There is no solution for abandoned housing projects save and except to seek out the intervention of the Government, using tax payers money and ‘white knights’ to rescue those abandoned projects.
The Government, through the then Minister of Housing, Dato Wira Chor Chee Hueng had in February 2012 reiterated that the BTS 10:90 system will be made mandatory by 2015. This was also recorded in the Parliament Hansard in 2013 in the Dewan Rakyat. Under the BTS 10:90 system, house buyers only need to fork out the initial down-payment of 10% when booking a house and do not need to make any further payment until the vacant possession of the property is delivered whereupon the balance 90% will be paid. This is a more orderly concept to rein in errant housing developers. The BTS 10:90 is a far safer mode of home delivery system and the Government should compel the housing industry to adopt the system as we believe it will drastically if not totally eliminate cases of housing projects being abandoned.
Early this year, the current Housing Minister, Dato’ Abdul Rahman Dahlan, made a ‘U-Turn’ to shun the mandatory imposition of the BTS 10:90 system and that he will propose to the Government to allow BTS 10:90 to co-exist with the ‘Sell-Then-Build’ concept and that the developers were allowed to choose. This is akin to allowing the housing developers a free rein again.
This has drawn the flak and adverse criticism of the house buying public and consumer associations especially the victims of abandonment and those of unlicensed developers and whether the Government will hold true to their slogan: “Janji DiTepati” (Promises Fullfiled).
The Government saw it fit to approve it in February 2012 with the announcement of the mandatory imposition of BTS 10:90 concept come year 2015. Is the Government taking a retrogressive step? There has been no announcement in BUDGET 2016 on the BTS 10:90 concept.