Samuel Tan dish out his thoughts on the property incentives drawn up under the recently tabled Budget 2022 and shares several recommendations on matters relating to the RPGT, HOC 2021 and affordable housing schemes in Malaysia.
Apart from the Real Property Gains Tax (RPGT) abolishment for the sale of properties held from Year 6 onwards, there was hardly any good news for the Malaysian property market this year. The RPGT discount is a long-waited measure as many see it as an unjust way to penalize genuine or long term property owners on inflation.
RPGT exemption is great, but tax reduction should be extended to other RPGT tiers
Previously in 2019, the Malaysian government introduced a “perpetual” RPGT of 5% – where property owners who dispose of their property after 5 years of ownership have to pay a 5% property tax on the profits made from the sale. The National Home Buyers Association (HBA) have also called out that the RPGT was being used as a pure taxation instrument instead of its real purpose of being a tax to curb speculation. The 5% RPGT rate is reported to be a revenue earner for the Government’s coffers and is a measure to help settle the RM1 trillion debt left behind by the previous administration under Najib Razak.
With this abolishment, we hope property owners will be motivated to upgrade to their desired house without any tax penalty. It would be better if the RPGT rate is reduced accordingly for transactions less than 5 years after purchase as well to inject some vibrancy into the property market. Currently, property owners who sell off their homes in the fourth and fifth years have to pay a 20% and 15% RPGT, respectively. Find out how to calculate RPGT rates in Malaysia.
Why no extension of HOC 2021?
Most property stakeholders were expecting an announcement on the extension of the HOC 2021 until at least June 2022. This is disappointing to many aspiring house buyers who had hopes of taking advantage of the stamp duty exemptions under the HOC, now that the pandemic is better controlled and Malaysia have moved into the endemic phase. It has to be remembered that house purchases are very much driven by sentiment and many buyers will hold off big-ticket item purchases when the economic situation is uncertain.
Even NAPIC was hopeful of an extension of the HOC 2021 to the subsale housing market. Ari Adam, NAPIC’s Deputy Director of Inventory said that the stamp duty and tax exemptions under HOC will give both property developers and individual sellers an equal chance in offloading their units in the residential market segment.
It is hoped during the Budget debate, that some HOC extension will be announced. Currently, the HOC 2021 is slated to end by 31 December and is open to all Malaysian purchasers, with no limit to the number of purchases.
More transparency on affordable housing schemes needed
It is good to note the government’s conscientious efforts to make loans available to the selective segments of the society including farmers and gig workers or freelancers. Provisions for low-cost housing like Rumah Mesra is a welcome move to ensure homeownership among the B40 as well. Nevertheless, the effectiveness of the RM1.5 billion allocated for affordable housing depends on many other factors such as location and quality of such affordable housing. In other words, implementation is the key. It is time to take stock of the effectiveness of such a policy by looking at the occupancy rate of existing and planned affordable housing.
HBA has also pointed out that an affordable housing database is a long time coming – there is a lack of transparency over the progress and effectiveness of the various government housing schemes launched in the past few years. Who is keeping tabs on the monies allocated for housing schemes launched under Budget 2017, Budget 2018 and so on?
Proper implementation necessary for Housing Loan Guarantee Scheme
The RM2 billion allocation for housing credit guarantees for those without a steady income, i.e gig economy workers and micro-entrepreneurs is a great move towards assisting self-employed Malaysians with securing their own house. Currently, it is challenging for those who do not have a fixed income in getting their home loan application approved. However, the details of this scheme have to be thought out well, such as the percentage of the loan guarantee and property price range allowed.
Proper checks and balances must be put in place to ensure these housing loan applicants are able to service their loan in the long run – the actual implementation is the key to ensuring the success of this guarantee.
On a side note, I am hopeful that the RPGT exemption will spur some upgrading and restructuring of property ownership in Johor. Johor’s property market recovery will depend vastly on the opening of international borders, which will support the local economic growth. According to iProperty.com.my’s H1 2021 Portal Demand Analytics, the Johor subsale residential property demand finally turned positive at +36.5% in H1 2021 compared to -22.8% in H1 2020. The demand growth comes mainly from a domestic audience at a time when foreign demand has yet to return. Interest from Singaporeans remains down by -25% due to strict border controls between Malaysia and Singapore.
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