Laying Foundation Towards Shared Prosperity

container terminal?Wharf, transport

Knight Frank Malaysia applauds the Government’s approach in making Malaysia a preferred investment destination. The recently unveiled National Budget 2020, themed “Driving Growth and Equitable Outcomes Towards Shared Prosperity” focuses on driving the country’s economic growth by spurring more investments.

Infrastructure and Connectivity

The Government intends to make Port Klang a regional maritime centre and cargo logistics hub combining manufacturing, distribution, cargo consolidation, bunkering as well as ship repair. In the National Budget 2020, the Federal Government announced a RM50 million allocation for the repair and maintenance of roads leading to Port Klang.

Allan Sim, Executive Director of Capital Markets, Knight Frank Malaysia welcomes such initiative and accentuates the importance of infrastructure and connectivity in stimulating the logistics and manufacturing industry. Allan Sim comments, “On-going mega projects such as the East Coast Rail Link (ECRL), connecting Port Klang on the Straits of Melaka to Kota Bahru on the South China Sea, would be a boon for the logistics sector as freight and shipping time will be reduced significantly. Time efficiency plays a big role in logistics and supply chain management, as such key infrastructure investments will continue to draw the attention of investors.”

Manufacturing & Industrial Sector – Embracing Smart Technologies 

Proactive steps have also been announced to further accelerate the adoption of smart technologies among manufacturers and industrial players in the country. Besides the allocation of RM550 million to provide smart automation matching grants to 1,000 manufacturing and 1,000 services companies to automate their business processes, the government has also extended the year of assessment for the Accelerated Capital Allowance and automation equipment capital allowance for the manufacturing sector on the first RM2 million and RM4 million incurred on qualifying capital expenditure to 2023.

Allan Sim says, “These measures will further spur investments in the manufacturing industry and potentially improve Malaysia’s economy moving into 2020, in line with the recently unveiled Shared Prosperity Vision 2030 (SPV 2030).”

Office Market 

Teh Young Khean, Executive Director of Corporate Services, Knight Frank Malaysia, says, “Up to RM1 billion a year worth of customised packaged investment incentives have been pledged to encourage inbound investment from Fortune 500 companies and “global Unicorns” in the high technology, manufacturing, creative and new economic sectors over the next five years. By generating more economic activities and creating more job opportunities, this measure will drive higher demand for commercial real estate as more companies set up new businesses / expand existing businesses. This augurs well for the current tenant-led office market.”

Stimulate the Housing Market – Lowering Threshold for Foreigners & Real Property Gain Tax (RPGT)

On the housing front, the Government continues to address the overhang situation in the nation. Sarkunan SubramaniamManaging Director of Knight Frank Malaysia, says, “Now that we have more clarity on the RM600,000 threshold where it only applies to existing unsold units of condominiums and apartments in urban areas, this may be an effective remedy for the overhang situation, especially for units within the RM600,000 to RM700,000 price range.

“However, the property overhang is attributed to various factors such as mismatch of products, location, expected yield rather than pricing alone. Some units have remained unsold due to other factors such less favourable location in terms of accessibilities, distance and lack of amenities as well as product type.

“In addition, land is a state issue, therefore the decision by the Housing and Local Government Minister to allow state government to set their own thresholds for foreign property purchasers could be a right move.”

The Government has also pledged to enhance the Real Property Gain Tax (RPGT) treatment by revising the base year for asset acquisition to 1 January 2013 as compared to the previous base year of 1 January 2000. Potentially reducing tax liabilities upon capital gains.

Sarkunan Subramaniam comments, “Shifting the base year for asset acquisition is likely to spur more activity in the secondary market. The revision of the base year may reduce taxable gain, thus translating into lower tax burden for sellers. From 2000 to 2010, the national house price index was higher by 40.7% and for the subsequent period up to 2013, it increased by another 40%.

The current RPGT for individual Malaysians is 5%, and 10% for foreigners if the property is sold after the fifth year. The initial intention of imposing the RPGT for disposal of a property from the sixth year onwards, effective 1 January 2019, was to curb speculative purchase.”

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