Budget 2017 & the Property Market

Updated 24 Jan 2017, 12:09 PM – By Loanstreet


The Budget 2017 announcement which was so highly anticipated has come and passed us by. The hopes that the budget would answer some of the property market concerns were partially fulfilled with another affordable home scheme announced, a couple of property related decisions made and a reasonable allocation of the budget delegated to support house ownership. So let’s take a look at the more salient announcements that will affect the market and first time home buyers.

MyBeautiful New Home (B40)

Otherwise known as B40, the MyBeautiful New Home initiative is another affordable home effort by the government to provide housing to the less fortunate. This scheme caters to the lower 40% of the income bracket, hence its acronym B40.

RM200 million has been set aside for the development of these homes, with the cost of each home targeted at between RM40,000 and RM50,000. The ceiling income for each household to be eligible for these homes stand at RM3,900.Use our home loan calculator tool to check your eligibility. 

B40 will be in addition to the other 8 already existing affordable home initiatives available.

100% Stamp Duty Exemption for Properties Below RM300,000

On top of adding another affordable home scheme to the available ones, the government has also declared that properties which cost RM300,000 and below will be 100% exempted from Stamp Duty charges.

While those of the middle income bracket see this as a worthless effort, this initiative is indeed welcomed by the lower income bracket buying a home from any one of the affordable home schemes, as it will help them to lower their initial payout when purchasing their first home.

Curbing Rising Property Costs

In another attempt to cool the property market down and prevent the prices from escalating further, it was announced in Budget 2017 that the stamp duty for transfer of real estate will increase from the current 3% to 4% for properties worth over RM1 million. This move will be made effective from 1st January 2018.

The above announcements made during the Budget 2017 announcement are in effect the essence of what will directly affect the market most in the coming year. There have however been other measures carried out after that announcement which will definitely affect the market in the long run; on top of rumours which if made effective will further push the property market into a frenzy.

Curbing Property Flippers

In a quiet move after the Budget 2017 announcement, the government announced that anyone who sells more than 3 properties within the space of 2 years will be charged heavy business taxes. This is another cooling measure to prevent property flippers from inflating the property prices unnaturally.

And in an unprecedented move, the government is now backtracking to seek out all those who have sold more than 3 properties in the space of 2 years between the timeframe of 2011 to 2014. It is rumoured that a batch of buyers have already been affected, with one of them having to pay a backdated tax of RM100,000.

RPGT to Remain High

Looking back into history, the current RPGT rates have been the highest in Malaysian history since the year 1995 as can be seen here. There was much anticipation with the Budget 2017 announcement that the rates would decrease, but they are here to remain for at least another year.

However before the budget announcement, there were news that there was some possibility of an increased RPGT. An increased RPGT could have severely affected the market, but fortunately that did not happen.

Lower OPR Rates Coming Soon?

In lieu of the last OPR rate cut of 0.5% in July 2016 from 3.25% to 2.75%, analysts are anticipating another rate cut. The last one saw the market scrambling around for a week with the Malaysian Ringgit growing stronger for a few days, hence Malaysians are now waiting with bated breath for the next announcement from Bank Negara.

The rate cut announcement is anticipated in their last meeting of the year in November 2016. The expected rate reduction is expected to be of at least 0.25%.

What this will mean for those who currently own properties is a lower monthly repayment, which will mean more spending money.

Forecasted Increase in Property Prices with Cross Subsidising

While affordable properties are good for the lower income bracket, this may however translate to higher housing prices for those of the higher income bracket.

Take for example the new B40 affordable home initiative which the houses will sell for between RM40,000 to RM50,000. If the house is to be built on the owner’s land itself, the government will subsidise RM20,000 for the B40 property built on the owner’s land. This will mean that the cost to build the property will be higher than the selling price.

When it comes to coercing private developers into building more affordable homes, this would then translate to the normally priced properties absorbing the additional cost of building the affordable homes.

For example, an 800 sf condominium unit with 3 bedrooms and 2 bathrooms in a decent location sells for RM300,000, but in actuality costs RM340,000 to build. The additional RM40,000 will then be channeled to the normal priced homes, hence increasing the cost of purchasing them.

Looking forward to the year 2017, the property market is expected to remain flattish for the time being while the market consolidates. In the meantime, the lower income bracket will benefit the most in terms of first time home buyers, from all the current measures in place.