Should I buy and/or sell my property now or wait for budget 2020 to come to effect?
Budget 2020 Verdict:
First time home buyers – Buy now.
Sellers – Wait for next year to sell (Lesser RPGT for properties bought before 2013).
If you’ve missed out on the Budget 2020 updates, fear not, we’ve put together a quick summary of what these updates mean for your property / real estate asset.
1. Youth Housing Scheme extended to December 2021.
– Offers a 10% loan guarantee through Cagamas to enable borrowers of full financing and RM200 monthly instalment assistance for the first two years limited to 10,000 home units.
3. Rent To Own (RTO) housing scheme will be introduced to help homebuyers who can’t afford the initial 10% downpayment if your property is RM500k and below.
4. RM600k threshold for foreigners to purchase high-rise properties located in cities.
5. HOC still valid until End December 2019. RM13.44bil under the Home Ownership Campaign have been successfully sold, exceeding the RM3bil initial sales target.
6. Government’s proposal to enhance Real Property Gain Tax (RPGT) treatment by revising the base year for asset acquisition at January 1, 2013 for assets acquired before January 1, 2013 as compared to the previous base year of January 1, 2000.
Diving deeper into each topic, here’s our take on the Budget 2020:
1. Youth Housing Scheme
The youth housing scheme (introduced by Najib’s administration back in 2015) under BSN supported by both Cagamas Berhad (National Mortgage Corporation of Malaysia) and EPF (KWSP) is extended till end December 2021.
We are in the opinion that since the scheme that was launched back in 2015 had promising uptake from the rakyat (people) and thus the new government is continuing the offer for homeownership through this channel.
Cagamas offers a 10% loan guarantee through Cagamas to enable borrowers of full financing and RM200 monthly instalment assistance for the first two years limited to 10,000 home units.
Who is eligible for this scheme? According to BSN’s website:
Married youths between age 25 to 40 years with household income not exceeding RM 10,000 per month. Through this scheme, BSN will provide financing / loan up to RM500,000 with a financing tenure up to 35 years or at the age of 65, whichever is earlier to the eligible borrower. This scheme is limited to 20,000 buyers only on the ‘first come first served’ basis.
BSN will also provide financing / loan amount of 100% of the purchase price and an additional 5% of purchase price to finance takaful / insurance (MRTT / MRTA). The cost of financing documents / loans including legal costs is borne by the buyer.
The Government will also give 50% of stamp duty exemption on the instrument of transfer agreements and loan agreements. The Government is also to aid monthly instalments of RM200 per month for a period of 2 years from the date of first disbursement to the developer / vendor.
Information abstracted from Mybsn.my in Oct 2019. More info on how to get started with your application or detailed questions can be reffered to BSN’s Youth Scheme FAQ page here
2. Rent to Own (RTO)
This RTO scheme is open to the purchasers who find it difficult to afford the 10% downpayment of their first home (up to RM500,000 value). To cough out the RM50k deposit, the government is introducing a RM10 billion fund be provided by financial institutions with the government’s support through a guarantee provision of 30% or RM3 billion.
Under this scheme, the purchaser will rent a house for a period of up to FIVE (5) years and after the first year, he or she will be given the option to purchase the residential property at the price upon the signature of the rental agreement (so this means that you’ll be locking in to pay yesterday’s price, next year).
To add on, the government will provide a full exemption on the stamp duty on the MOT (transfer instruments) between developers and financial institutions, as well as between financial institutions and the prospective buyers.
3. RM600,000 – reduced minimum purchasing limit for foreign buyers…
In the 2nd quarter of 2019, the estimated value of the property over-supply is at RM83 billion (Malaysia). Our Finance minister, Lim Guan Eng suggested that the property value purchasing limit for foreigners be further reduced from RM1 mil to RM600,000 for apartments and condo in the city areas only.
This could mean a further reduction not just for Kuala Lumpur properties but we could possibly see Petaling Jaya that currently has a minimum value of RM2 million for foreign property ownership being affected by the reduction too.
Netizens are in the belief that though it may help solve the overhang problems for the developers, it could set a chain of events for Malaysian purchasers to be on the losing end. A property overhang status is usually a sign that developers are not building the rightly priced + sized properties for the local market to absorb, but the lower-priced foreign ownership cap may encourage developers to continue building “higher end” products that the locals do not need for the sake to keep their higher margins.
4. HOC Campaign 2019-2020?
We’ve not heard anything much about the continuation on this into Budget 2020 since Housing and Local Government Minister Zuraida Kamaruddin said in June that would be extended to 31 December 2019.
So far, a total of 21,000 homes worth RM13.44 billion were successfully sold under this campaign which exceeded the initial sales target of RM3 billion.
Did HOC 2019 benefited the public?
First time home purchasers who could afford the higher range of properties between RM500k – RM1mil took the best advantage to save on these 3 items;
i) 10% off the property cost
ii) Property Title – Full Stamp Duty Exemptions
iii) Loan Stamp Duty Exemptions.
You could still benefit from HOC 2019 till mid December 2019. It would roughly takes 2 weeks to close your real estate deal and submit the documents.
5. REVISION to Real Property Gain Tax (RPGT) Tax base year for asset acquisition before January 1, 2013.
Sellers who have held their properties long before 2013 can rejoice as your property base year will be calculated its capital gains from 2013 market price instead of the previous year 2000 as announced in the Budget 2020.
Let’s take an example:
- You bought a Semi-D in 2002 for RM600,000.
- In 2013, the value appreciated to RM1,200,000 but you decided to hold on to it.
- In 2020, you decide to sell the house for RM1,700,000.
Because the base year has been adjusted to 2013, your chargeable gain would only be on the RM500,000 (instead of the supposed RM1.1 mil as profit).
That is the difference between your Disposal Price and the property value in 2013.
We hope this has been a comprehensive put together of the latest Budget 2020 announcement. If you have some thoughts, if we missed out on anything important that should be included, or even on what to write next, drop us a comment below.