Malaysia Budget 2017 – Key Highlights

 

Accelerating Growth, Ensuring Fiscal Prudence, Enhancing Well-being of the Rakyat

Proposed Changes

Enhance First Home Buyer’s Affordability 

Through the National Blue Ocean Strategy (NBOS), the government will provide vacant lands at strategic locations to GLCs and Perumahan Rakyat 1Malaysia (PR1MA) to build more than 30,000 houses. The selling price will be between RM150,000 to RM300,000.

10,000 houses in urban areas will be built for rental to eligible youth with permanent jobs including young graduates entering the labour market. They may rent up to a maximum of five years, at a lower than market rate.

To build 5,000 units of People’s Friendly Home (PMR) with the Government subsidising up to RM20,000 per unit.

“Step-up” End Financing Scheme for the PR1MA Programme

Through this special scheme, financing will be easier and more accessible to the buyers with a total loan up to 90% to 100% with loan rejection rate reduced drastically.

Stamp duty exemption be increased to 100% on instruments of transfer and housing loan instruments, compared to 50% at present. This is only limited to houses with the value up to RM300,000 for first home buyers between 1 January 2017 and 31 December 2018.

Upgrade Public Transportation in Rural Areas

Implementation of the new East Coast Rail Line project connecting Klang Valley to the East Coast, in phases. The 600km rail will connect townships such as Port Klang, ITT Gombak, Bentong, Mentakab, Kuantan, Kemaman, Kerteh, Kuala Terengganu, Kota Bahru and ends in Tumpat, with an estimated cost of RM55 billion.

Increase the trip frequency of ETS for the Johor Bahru – Padang Besar, involving procurement of nine train sets till 2019, with an overall allocation of RM1.1 billion.

Accelerating the implementation of Pan Borneo Highway in Sabah and Sarawak.

Increase in Stamp Duty

The rate of stamp duty on instruments of transfer of real estate worth more than RM1 million, will be increased from 3% to 4% effective 1 January 2018.

Impact

Enhance First Home Buyer’s Affordability

This would help to alleviate the shortage of affordable homes and allow the middle-income citizens to own a house.

It will increase property ownership and spending of the rakyat on related housing products.

Construction companies and some developers are likely to be the beneficiary of these budget announcements.

We expect these projects to spur domestic investment activity which will contribute to the GDP supported by both private and public investment.

“Step-up” End Financing Scheme for the PR1MA Programme

This will help the rakyat who faces difficulty obtaining loans as the current approval rates by the banking industry currently stands around 40% only.

The stamp duty exemption is likely to spur property investments to take place in 2017.

This will help to contribute to stronger construction and economic activities in 2017.

Upgrade Public Transportation in Rural Areas

The East Coast Rail line will support the industrial areas in Pahang, Terengganu and Kelantan.

The additional trains between Padang Besar and Johor Bahru will help to ease the increased demand for travelling along the west coast of the Peninsular.

RM100 million allocated to restore the East Coast railway  line along Gua Musang – Tumpat that was destroyed during flood.

The Pan Borneo Highway will help to increase tourism and economic activities between the states of Sabah, Sarawak and Brunei.

Increase in Stamp Duty

The introduction of higher stamp duty is likely to have an adverse effect on investors when introduced in 2018 similar to the impact of GST on retail.

In the shorter term, it is likely that more transactions above RM1 million may be done before the implementation date.

Developers may resort to selling slightly below the RM1 million threshold to avoid the tax after 2018.

“The 2016 Budget is pro-poor targeting the rural poor, fishermen, women, students as well as those in the civil service like the army, the navy, air force and the Police. The budget for handouts like BR1M were raised, low-cost housing was made available for both home buyers and tenants. Infrastructure spending was given priority in the form of a railway line for the East Coast as well as an additional nine sets of train from Padang Besar to Johor Bahru.

The spending is expected to help boost domestic demand and stimulate growth, thereby raising GDP to 5% in 2017 as opposed to an expected growth of 4% to 4.5% in 2016. The Government continued to restrain spending and has budgeted for a 3% fiscal deficit,” says YY Lau, Country Head, JLL Malaysia.