Views On Budget 2018

Kuala Lumpur, 27th October 2017 – The Budget 2018 came against the backdrop of better- than-expected GDP growth in first-half of 2017 and the country’s continuous pursuit of mega project developments especially in the public transport system. Laid out as the last Budget in the lead-up to the 14th General Election, the government presented a positive Budget which aims at empowering the Rakyat, driving economic growth and promoting sustainable socio- economic developments simultaneously. As a real estate consultant, CBRE | WTW are pleased to share our views on Budget 2018:

• On the back of the stronger 2017 economy, the pace of infrastructure developments is maintained, including MRT 2 and MRT 3. Work on the East Coast Rail is expected to commence by January 2018.
• 50% tax exemption is introduced to rental income up to RM2,000 per month, this will be valid from 2018 to 2020 and applicable to Malaysians only. On one hand, the tax exemption will spur investments as the T20 income investors perceive better rental yields from residential property investments. As monthly rentals of RM2,000 are applicable to properties up to RM1million, this is timely to stimulate renewed demand for such residential properties especially in the Klang Valley. On the other hand, the M40 income group would have more rental options as more rental properties enter the market.
• New legislation of Akta Sewaan Rumah Kediaman to protect tenants and landlords is welcome. CBRE | WTW recommends that the government could take an extra step to set-up a centralized depository whereby tenant profiles and credit history are kept. This will improve the protection for landlords who are currently at risk of tenants defaulting in rent and utility charges.
• The Government is encouraging the 2-step housing loan scheme to be extended to private developers which should ease credit availability and therefore improve sales rates. This will benefit home buyers as they would only need to serve reduced loan repayment for the first 5 years of their purchase. Home ownership hence, may be boosted as buyers’ upfront financial commitment is lower and they have longer time period to build-up their financial capacity. However, more details may be required before such a scheme can be implemented with private developers.

  CBRE | WTW also viewed positively that the government did not reintroduce DIBS and maintained the current RPGT rates thereby continuing to curb speculative activities.

• 2000 units of houses have been allocated for MyDeposit programme and MyHome scheme combined. Under the MyDeposit programme, first time home buyers are entitled to apply for funding from KPKT to cover the 10% or RM30,000 of down-payment for home purchase, whichever is lower. This again, will improve buyers’ purchasing ability and house affordability.
• Incentive in the form of RM30,000 per sold unit of affordable housing under MyHome scheme will encourage private developers to join in the provision of affordable housing.
•   GST exemption on property management of stratified properties is extended to private developers starting 1st January 2018. This will benefit the M40, many of whom occupy stratified properties.
• The credit facility by Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA) will soon cover legal fees incurred for loan agreements. Meanwhile, the introduction of Joint-loan mechanism with immediate family members with condition that one of recipient is serving in the public sector, will lower the barrier / increase the loan amount eligibility of civil servants, there making affordable a higher range of houses .
• Acknowledging the contribution of tourism to the economy, 2020 will be declared another “Visit Malaysia Year”, in conjunction with three summit meetings: APEC, WCIT and CHOGM. Airports in Penang, Langkawi, Kota Baru and Sandakan are all planned to be upgraded.
• The e-Visa system will be extended to all countries. Pulau Pangkor will be a tax free island, promoting its attraction as a health and wellness centre. All of the above will encourage increased visitors and a target of 28 million tourists has been set for 2018. Hotel occupancy rates and room rates should remain firm while retail expenditure at shopping malls should receive a boost from tourist spending.
•   Personal income tax for all tax payers will be cut by 2% from the RM20,000 – RM70,000 tax band which will increase disposable income of consumers and improve retail turnover.
• The proposed Digital Free Trade Zone in KLIA will see greater interest in the e-commerce sector, logistics and related industries converging in the area. More industries are likely to relocate to Sepang / KLIA to take advantage of the benefits of the DFTZ.