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Best Time For Home Ownership Yet?

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The year 2016 has much in store for prospective homeowners after a challenging year last year, which saw many events that had impacted the real estate industry negatively. The implementation of Goods and Services Tax, dramatic fall of the Ringgit and oil price, the rise of living cost and the increase in unemployment rate affects the affordability sentiment in the property sector. To add insult to injury, the financial institutions are also practicing stricter policy in lending.

Investors who saw savings in interest payments via the Developer Interest Bearing Scheme (DIBS) are now feeling the pinch as they start paying installments for their purchases against the backdrop of a low rental yield environment. It is no surprise that many have concluded that 2016 will not be as attractive and rewarding for the real estate investors as the property prices have maintained relatively stable, leaving very little room for speculation.

 There is a silver lining in the industry, especially for homebuyers. It is a good time for genuine home buyers, especially those middle-income earners aged between 25 and 45, to shop for their long awaited home nest while cautious investors put on hold investments till the economy recovers. Thus, affordable housing will be the major focus in property market this year in conjunction with the Government’s initiatives to help first home owners.

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Recognizing the issue of home ownership in Malaysia, the Government has introduced several affordable housing schemes through programmes and organizations such as People Housing Program (PPR) and Perumahan Penjawat Awam 1Malaysia (PPA1M) by National Housing Department (JPN), 1Malaysia People Housing Programme (PR1MA) by PR1MA Corporation Malaysia, Aspirasi SPNB (previously Affordable Housing) and Rumah Idaman Syarikat Perumahan Negara Berhad (SPNB) by SPNB and Housing Assistance Program (PBR) by Ministry of Rural and Regional Development. The latest stroke of Government’s commitment is shown in the recently recalibrated budget 2016 where new housing projects priced up to RM300,000 will be limited to first-time homebuyers only. The Government too will organize the Integrated House Ownership Expo Roadshows that offer more than 100,000 housing units.

 Further raising the bar of housing developer and home buyer protection, the amendments to the Housing Development (Control and Licensing) Act 1966 (“HDA”) have come into force June last year. The current homebuyer protection regime is the best in Malaysia’s history to-date where its provisions include statutory termination of the sale and purchase agreement upon any cease work and abandonment of the residential property development for at least 6 months continuously. To further avoid the occurrence of abandonment, the entry point for any developer is now set higher by stipulating a variable housing development deposit calculated based on the gross development cost. There is more control in bridging finances by a developer with less payment during construction period until the delivery of keys to the homebuyers. Housing development market is now a game for serious industry players and restricts the participation of self-fancied housing developers.

 Not to forget, these housing developers have to be more competitive with the participation of PR1MA, JPN and SPNB to each grab a bite of this affordable housing cake. With the direct competition from government agencies, the standard of affordable housing will hopefully get better and cost effective.

 Additionally, the tightening of homebuyer protection increases the confidence of the financial institutions in providing security loans to facilitate the purchase. This certainly is good news to prospective homebuyers.

 Other encouraging policies include withdrawal of Employment Provident Fund (EPF) to fund the deposit or and/or loan installments of the property and the Rent-to-Own Scheme for those who are unable to secure a loan facility just yet.

 The current tax regime is also favorable for first time homebuyer where – the purchase of any residential property with the purchase price below RM500,000 is entitled to 50% stamp duty exemption for the instrument of transfer documents and loan agreements. This tax relief is applicable until the end of 2016.

 The property market may not regain its historic glory in the past 10 years and buyers may be more cautious now. Nonetheless, it is perhaps timely to take a leaf out of from Warren Buffet’s book to “Be fearful when others are greedy, and greedy when others are fearful.”

 Furthermore, with lesser competition from investors and more stable prices, it is a good year for genuine home buyers to shop for a home. The slowdown in 2015 also indicates that there are hungry developers that are going to package attractive offers for the homebuyers to boost sales. The lunar year of the fire monkey is the best time for purchasing your first home with the best legal protection possible.

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