THE National House Buyers’ Association (HBA) acknowledges the challenges faced by our honourable finance minister in tabling Perikatan Nasional’s Budget 2021 yesterday in view of the Covid-19 pandemic, which has affected economies worldwide.
Our comments and response to the Budget on matters relating to the property sector are as follows:
HBA welcomes the announcement that the government will allocate up to RM1.2 billion to build comfortable and quality homes for the low-income segment. This is a noble aspiration by the PN administration to ensure that all rakyat, including those in the low-income group, have access to comfortable and quality housing.
HBA notes that the government has announced a full stamp duty exemption up to December 31, 2025 for the memorandum of transfer (MoT) and loan agreements (LAs) for first-time house buyers, for properties valued up to RM500,000. This is a good proposal, as it is restricted to only first time buyers, and the stamp duty savings of RM9,000 and RM2,250 on the LAs (assuming 90% financing) will certainly help buyers of homes, whether from housing developers or the secondary market.
HBA also notes that Budget 2021 proposes a stamp duty exemption on LAs and MoT for “white knight” contractors reviving abandoned projects, with the original house buyers of abandoned housing projects, to be extended further five years to December 31, 2025. HBA supports this proposal as the affected buyers/victims have suffered a lot from the abandonment through no fault of their own, but for the lax and lack monitoring, supervision and enforcement on the part of the Housing and Local Government Ministry. The exemption will, to a certain extend, reduce the burden on these victims.
Rent-to-own scheme
HBA also welcomes the announcement that the government will work together with selected financial institutions to implement a rent-to-own scheme for first-time buyers that will run until 2022 and involve 5,000 PR1MA properties valued at up to RM1 billion. HBA has been urging the government for years to implement the scheme, especially for the M40 and B40 groups.
We supports the government’s proposal to promote the scheme, except that the threshold should not be extended to cover pricing up to RM500,000. This figure is developers’ qualification of “affordable housing” and is on the high side compared with the definition set out by the Housing Ministry.
The official definition of “affordable housing” must meet these three criteria:
1) Price – Properties are priced between RM150,000 and RM300,000 ( between rural and urban);
2) Built-up area – Must be conducive to “family living”, with a built-up area of 900 sq ft (excluding balcony) and at least three bedrooms; and,
3) Location – Must be located in areas served by good public transport links, such as buses, LRT, MRT, KTM, etc, and have good public amenities, including government schools, public hospitals and hypermarkets.
There was not much “further incentive”, and this is because the government previously announced incentives in its Penjana economic recovery plan in June, namely:
1) A waiver of stamp duty for residential units priced between RM300,000 and RM2.5 million, but capped at RM1 million;
2) Zero-rating the real property gains tax, applicable between June 1 this year and December 31 next year. Individuals get to enjoy this for three residential properties; and,
3) Relaxation of the loan-to-value ratio for the third house and more.
General economy
HBA is grateful that banks will continue to offer a targeted loan moratorium to those affected by Covid-19. Such a moratorium is much welcomed by those hit hard by the pandemic, as they will not need to worry about their loan obligations as they try to get back on their feet.
Budget 2021 also announced a reduction in the employee contribution to the Employees Provident Fund (EPF) from 11% to 9%. This move is expected to increase the disposable income of the rakyat, and it is hoped that it will indirectly help to stimulate the local economy.
Although HBA supports moves to increase the disposable income of the rakyat, we hope that employees will have the option to maintain the contribution rate at 11% if they so wish, as the dividends from EPF are still much higher than the current fixed deposit rates offered by banks. EPF contributors must be mindful that the monies in the fund should always be intended for use after retirement.
Budget 2021 allows contributors to withdraw from their EPF Account 1 RM500 a month for 12 months, or RM6,000 in total.
HBA’s advice is that contributors withdraw these funds only as a last resort, and only to spend this money on the most important necessities. Assuming that contributors do not withdraw the amount, the RM6,000 would have increased to RM22,800 after 25 years, based on the assumed dividend rate of 5.5%.
The Budget also announced an increase in tax relief, such as for treatment of serious illnesses (from RM6,000 to RM8,000), full health screening (from RM500 to RM1,000), expenses for medical treatment, special needs and parental care (from RM5,000 to RM8,000), and a tax exemption of up to RM1,000 for personal, spousal and children’s vaccination costs. This is all much welcomed by the rakyat as we battle the rising cost of living, including the cost of medical expenses.
Budget 2021 announced that the personal income tax rate will be lowered by one percentage point for those earning taxable wages of RM50,001 to RM70,000. This is expected to benefit 1.4 million taxpayers. However, it would be more meaningful if such a reduction also benefits those earning more than RM70,000, as Covid-19 has affected everyone in the country, regardless of income levels.
We hope the government will reconsider this qualification. It should be made across the board to have an impact on all taxpayers. – The Vibes, November 7, 2020
Datuk Chang Kim Loong is honorary secretary-general of the National House Buyers’ Association
