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Budget 2019: 11 Highlights That WILL Affect the Property Market!

BY Caitlyn Ng

Updated 21 Nov 2019

The tabling of the highly-anticipated Budget 2019 was nothing short of a Korean drama: there was plenty of laughter and cheering crowds, accompanied by the ever present boos and critiques. Our Finance Minister Lim Guan Eng was of course the star of the show, and despite all the talk of doom and gloom, the Budget 2019 isn't so bad

Now we’re about to take a closer look at what some of the new measures announced in the Budget 2019 will spell for the future of our property market. Without further ado, let’s begin!

What's covered in this article?

1) Revised Real Property Gains Tax (RPGT) rates

The RPGT will be revised for disposal of properties or shares in property-holding companies after the fifth year as follows:
  • For companies, non-PR holders, and foreigners, the rate shall be increased from 5% to 10%.
  • For Malaysian individuals and those with a PR, the rate shall be increased from 0% to 5%.
However, low cost, low-medium cost, and affordable housing properties with a price tag below RM200,000 will be exempted.

RPGT is a form of tax that is imposed on the profit you earn by selling off your property (and in this case, shares in property-holding companies are included as well). The general theory is that an increase in RPGT usually won’t hurt genuine buyers since it’ll only serve to discourage property flippers.

Note: To use the RPGT calculator, click here

Nevertheless, there might be delays in new property launches since property developers will no doubt worry about a slowdown in the market. In addition, sub-sale properties may see an increase in prices as the sellers will transfer the (additional) costs to the buyers. And if that’s not enough…

2) Prepare for an increase in stamp duty for properties above RM1mil

There’ll be an increase of stamp duty – from 3% to 4% – charged on the transfer of property valued at more than RM1mil.

Stamp duty is basically the tax that’s imposed on a variety of legal documents involved (for example: your home loan agreement) with selling your property. So, again, expect to see an increase in sub-sale property prices as the sellers pass on these costs to the buyers. But hey, luckily this only affects the higher-end side of the property market, right? Let's take a look at how things will look like for the other side of the spectrum…

3) Stamp duty exemption for residential properties below RM500,000

Note: To use the stamp duty calculator, click here

For first-time homebuyers who are purchasing residential properties that are priced up to RM500,000, you don't need to worry so much! The Government will exempt stamp duty of up to RM300,000 on the Sales & Purchase Agreement (SPA) as well as loan agreements for a period of two years until December 2020.

Now we all know how difficult it is to find an affordable property in a suitable location with the right amenities and facilities. But, with this new measure put in place, first-time homebuyers (especially those with a family or looking to start one) will be able to expand their search area for a suitable property. That's not all, keep reading for another new update that can help with your search... 

4) Affordable housing programmes to continue

The construction and completion of affordable homes will continue with an allocation of nearly RM1.5bil for programmes such as PPR (Program Perumahan Rakyat), PPAM (Perumahan Penjawat Awam Malaysia), PR1MA (Skim Perumahan Rakyat 1Malaysia) and SPNB (Syarikat Perumahan Nasional Bhd). This is great news for the low-to-mid-range income earners as there will be more affordable homes in the market!

It really shows that our new government is taking the issue of affordable housing seriously, and is willing to tackle this problem with renewed efforts. Still, all these new measures can't help you if you don't know how to secure a home loan for your new home! But don't fret, we're here to help you. You can start by using our quick and free home loan calculator to see how much financing you can be eligible for! 

However, it's not always easy to get your home loan application approved by the bank, which is why our government has decided that it's time to come to the rescue...

5) The government will provide a funding for the lower-income homebuyers

If you're one of the Malaysians who are currently earning less than RM2,300 monthly, the government has a surprise for you! The Budget 2019 includes a funding of RM1bil that will be established by Bank Negara Malaysia (BNM) to help you purchase your very own affordable home of up to RM150,000.

This fund will be made available from the 1st of January 2019 at participating banks, namely CIMB, Maybank, RHB and BSN through a reduced financing rate as low as only 3.5% per annum.

This move will significantly reduce the monthly instalments that borrowers would need to shoulder once they purchase a property, and make it that much easier for them to qualify for the required financing. The RM1bil fund is available for two years, or until the allocation has been used up.

For those earning above that mark, worry not, for you’lll have…

6) Home loan guarantees to enable borrowers obtain higher financing from banks

For first-time homebuyers with a household income of RM5,000 or less, the government will allocate RM25mil to Cagamas Berhad to provide home loan guarantees. This move will allow borrowers to obtain higher financing from banks, including down payment support. Here's a little introduction on who Cagamas Berhad is and how they can help you:

Who is Cagamas Berhad and what do they do: Cagamas Berhad issues corporate bonds and sukuk (also known as ‘Islamic bonds’ that are issued and traded following strictly to the principles of Shariah, which is no riba or interest). They then use the funds to purchase housing loans and also issue financing at a reasonable cost to hopeful homebuyers.

These measures are expected to give between 7% and 11% cost savings to hopeful homebuyers, before taking into consideration any promotional discounts which may be offered by the property developers.


7) Reduction in price of properties

It’s not what you’re thinking about unfortunately; Malaysia won’t be seeing a sudden drop in property prices any time soon. However, there’s still something to look forward to!

The Government has secured an agreement from REHDA (Real Estate Housing Developers Association) that there’ll be a 10% reduction in the prices of properties that aren't subjected to price control in new projects.

With the earlier announcement that construction and building materials are to be exempted from SST, hopefully we’ll be able to see more affordably priced properties available in the market from the property developers. As for the existing properties....

8) Stamp duty charges waived for excess properties

There’s an existing excess of residential properties in the market worth a WHOPPING RM22bil as of 31 March 2018. It’s an increase of 65% compared to RM13.3bil last year. No prizes for guessing why.

To address this oversupply, the Government will (for a limited time only) waive all stamp duty charges for first time purchases of homes valued between RM300,001 and RM1 million. This offer is only valid for six months, starting 1 January 2019.

This’ll be part of a National Home Ownership Campaign, where in return, developers will offer a minimum price discount of 10% for these residential properties.

9) Peer-to-peer financing frameworks now in Malaysia

The government is showing a willingness to explore new, technology-enabled and innovative mechanisms to solve current housing woes. They’ve taken the decision to approve ‘Property Crowdfunding’ platforms.

If you've never heard of them before, property crowdfunding platforms are alternative home financing for first-time homebuyers which are owned by private entities. These exchange platforms will be regulated by the Securities Commission under the peer-to-peer financing framework.

For example, if a potential buyer wants to get a property, he’ll only have to pay for 20% of the price of the property. The remaining 80% will be provided via potential investors who are willing to fund the purchase. What they’ll get in return is the potential appreciation in value of the property over a particular period of time.

In simpler terms, Ah Chong will be able to own and stay in a RM250,000 property by paying only RM50,000 of his own money without having to apply for a home loan. Ali who might only be interested in investing in a new property for its capital appreciation will fund the balance of the RM200,000 via the peer-to-peer Property Crowdfunding exchange.

This financial innovation will be the first in the world, and if successful, will transform the affordability of homes for first-time homebuyers in the country. The first exchange is expected to go live in the first quarter of 2019, after all necessary approvals are obtained from the Securities Commission.

10) World’s first ever airport REITs to be made available 

If you’ve ever wanted to own a piece of an airport runway, here’s your chance to do so! The government intends to set up the world’s first “Airport Real Estate Investment Trust (REIT)”. The private investing institutions who invest in the Airport REITs will be able to receive their dividends from the user fees collected by Malaysia Airports Holdings Bhd (MAHB).

A REIT is a form of investment in real estate, whether it’s residential or commercial. Those who decide to buy REITS (especially first-time investors) will find that it’s a good way to start building their portfolio as it allows you to own a wide mix of properties, without the burden of huge loan repayments every month.

The government hopes to be able to collect RM4bil from selling a 30% stake of the REITs to private investing institutions, while investors will gain a very valuable opportunity to invest in top quality infrastructure assets. This REIT move will only be carried out after both the new Regulated Asset Base and user fees structure have been negotiated and finalised.

11) Homestay operators get financial assistance to expand their business

The government will also make RM500mil worth of loans available via the SME Tourism Fund. This will be carried out with the SME Bank at a 2% interest subsidy. It’s targeted at the small and medium enterprises such as homestay operators to help them expand their business.

This move spells good news for those who have already been operating homestays and especially those who have been having a hard time renting their property out (due to the market slowdown). Why not try getting into the homestay business, now that the government is providing financial assistance to encourage tourism-related activities? 

Besides, if you manage your homestay business properly, it could even turn into a lucrative business like how this one RMAF (Royal Malaysian Air Force) pilot found out by turning his units into homestays and is able to earn about RM15,000 a month!

Overall, those who are in the lower and middle income group (especially first-time homebuyers) stand to benefit the most with the Budget 2019. Progressive and innovative ideas also signal the new Government's openness to keep up with the rest of the world. Now all we have to do is wait and see how the implementation of these highlights would REALLY affect the property market!
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About the Author

Caitlyn Ng


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