By Leong Hoy Kum, Mah Sing’s Founder and Group Managing Director,
The outbreak of the Covid-19 has certainly placed the world on edge – changing our daily routines and lives. The immediate term outlook including the property sector is affected by challenging market condition brought by the pandemic and the tight lending environment. However, the mid to long term outlook remains positive supported by strong fundamental demand for property due to the young demography.
We laud the government’s commitment in taking a proactive approach in introducing various well-rounded Economic Stimulus packages to regenerate Malaysia’s economy, which includes the recently introduced Kita Prihatin economic stimulus package, signalling the government’s continuous efforts to bolster Malaysia’s economy amid the prolonged impact of the pandemic. This is essential for Malaysia to recover and move forward from the pandemic.
The property industry has a multiplier effect on more than 140 industries and is very much reliant on domestic consumption. Hence, stimulating the property sector should therefore have a larger impact on the wider economy. In efforts to spur more activities in the industry, we hope that the Government will consider the following:
Additional incentives to promote home ownership for first time home buyers
We hope the government could introduce additional incentives to complement the existing Home Ownership Campaign to promote home ownership particularly for first time homebuyers. This includes reinstating maximum loan tenure to 45 years from current 35 years; higher debt service ratio; and using gross income rather than net income in loan applications review.
We also hope the government can consider implementing Developer Interest Bearing Scheme for first time homebuyers as the current interest rate is low enough for such scheme. It would also allow first time homebuyers to not service their loan interest and rentals at the same time during construction period. Additionally, we are hopeful for the government to continue working with financial institutions to relax lending requirements to boost home ownership, especially for first time homebuyers.
Reduce compliance cost
Compliance cost remains one of the most significant factors affecting developers’ cash flow. According to Real Estate and Housing Developers’ Association Malaysia, it takes up an average of approximately 20 percent of the total cost. In line with the Government’s continuous effort to lower the housing prices to benefit the market, we hope that the Government could review and reduce the compliance cost. Apart from land conversion premiums and development charges, the capital outlay for private utilities companies is very high.
This encompasses surrender of the land, construction of the infrastructure, and contributions to the utilities companies such as TNB, Syabas, Telekom and IWK and thus, we hope that compliance costs such as capital outlay for private utilities companies can be borne by respective asset owners so that savings can be passed on to buyers.
Resume Malaysia My Second Home Programme (MM2H)
We understand that the Malaysia My Second Home Programme (MM2H) has been temporarily halted as the programme is currently under a comprehensive review, in an effort to improve it. We hope that government can consider resuming the programme as soon as possible with more investor-friendly policies for the MM2H programme as it has received a lot of interest from foreigners in recent years due to our tropical weather, cleaner air, good education system, attractive properties and mix of Asian values and Western infrastructure. By doing so, it will encourage more investment in Malaysia which could indirectly help the recovery of the property market as well.
Reduce minimum threshold for foreign property ownership to RM500,000 to stimulate the property market
We also would like to propose for the reduction in the minimum threshold for foreign property ownership to RM500,000 in all states especially the key regions with high overhang i.e. Klang Valley, Johor, and Penang. This step would help to improve the overhang situation and continue to stimulate the property market.