Budget 2019 for Property Investors

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We’ve recently broken down the changes to impact the property industry brought forth by the upcoming Budget 2019. The new Pakatan Harapan Government seems to be very focused on assisting the B40 group in the country. This is a good thing. There are still many opportunities to be had for those outside this group and by improving the lives of the nation as a whole will only be more beneficial to everyone in the long run.

Though what does all this mean for property investors?

Let’s take a look at the changes and the possible implications.

RPGT Increase

Firstly, let’s tackle the elephant in the room – The increase in RPGT.

Prior to Malaysia’s Budget 2019, it was possible to avoid your property sale profits getting smashed by RPGT by simply holding on to the property for at least 5 years before selling it off. This meant that only ‘property flippers’ were affected by this policy. The new ruling however changes this.

Property sale profits will now be slashed by 5% regardless of whether you keep it for 5, 10 or even 20 years.

This means that if you experience gains from your property sale of RM100,000, you will have to pay the government a relatively small sum of just RM5000. It’s not all that bad until you make considerably larger gains on your property sale – a profit of RM500,000 would see you having to cough up RM25,000.

Hence, property investors who make huge gains on their property transaction processes will be the biggest loser from this added taxation.

Another thing to remember is that the Malaysian Budget is a yearly change and that means that even though the new RPGT is fixed at 5% indefinitely, it will also be subject to review each and every year depending on how the property market is going.

Stamp Duty Increase

Of the 2 increments in property taxes (RPGT and Stamp Duty) described in the Malaysian Budget 2019, increasing the Stamp Duty price for properties over a million ringgit is probably the more painful of the two.

A 1% increase in Stamp Duty for a RM1,000,000 property will work out to another RM5,000 if they still keep the tiered tax system that they have in place.

Based on a RM1,500,000 Property:

Stamp duty Fee 1% : For First RM100,000 = RM1000
Stamp duty Fee 2% : RM100,001 To RM500,000 = RM8000
Stamp duty Fee 3% : RM500,001 to RM1 million = RM15,000
Stamp duty Fee 4%: RM1 million to RM1.5 million = RM20,000

Total: RM44,000

Compared to this being pre-budget:

Stamp duty Fee 1% : For First RM100,000 = RM1000
Stamp duty Fee 2% : RM100,001 To RM500,000 = RM8000
Stamp duty Fee 3% : RM500,001 to RM1.5 million = RM30,000

Total: RM39,000

I am not sure if this will be the structure moving forward but as you can see, it is also not a very extreme measure. Property buyers will definitely feel a slight burn here, but I am certain that average purchasers buying property over a million ringgit will be able to bear these costs without too much concern.

Those who will feel the brunt of the burn are those buying luxury properties above RM3 million ringgit.

10% Reduction in Housing Prices & SST Exemption by REHDA

REHDA has said that they will reduce new housing development prices by 10%. It has been mentioned in various news sources that they will be able to achieve this by working with developers to bring down the prices due to the SST exemption given to many building materials.

This will be only for new developments that have not begun construction yet. The reduction in price has only been made possible through the reduction in the cost of building materials.

Whether or not developers will be on board or if they will simply mark up their prices before reducing them is not known.

As these will be prices on future developments which are normally already priced at future prices, there will really be no way to say for sure if the prices (once they are made known to the public) for these projects have been actually reduced.

FundMyHome Crowdfunding Scheme

The new FundMyHome scheme has been touted as the solution for those who are having a difficult time keeping up with property loan repayments, thereby giving them the option of simply coming up with 20% of the value of the home and have the remaining 80% paid off by investors.

Something about this scheme right off the bat doesn’t seem to make much sense.

Property investors find it difficult to come up with even 10% for a sub-sale down payment and am always looking for delicious rebates from developers to help build their property portfolio instead of coughing up such a large chunk of cash.

If they had that much capital to spare, they wouldn’t have any problem paying off their monthly installments.

A Thriving Property Market in 2019

Pakatan Harapan has come up with some clever ways to breathe new life into the property market next year by keeping first time home buyers interested in the market with some very attractive deals, while ensuring investors contribute to the financing of these initiatives.

They have structured their policies in a way to discourage flipping of sub-sale properties and encourage property buyers to look to absorb the balance properties from the current oversupply instead.

It’s very interesting to see how things will play out and if the market will truly be receptive of their new policies and attempts to solve the property oversupply issue. As to what exactly the impact will be in the market, my guess is as good as yours, but I have a inkling feeling that it will make for a very exciting and vibrant property market in the coming years.




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