Musings about the Budget 2019

With the much-expected Budget 2019 announcement last Friday, its effects will be felt on the property market, directly or indirectly in the months to come. Let me share my thoughts on some of the items that were announced in last week’s budget.

RPGT

I believe this is one of the most eye-catching part of the announcement. Individual Malaysian citizens and permanent residents have to pay 5% RPGT, even after the five years holding period. The rate is at 10% for companies and foreigners. Properties below RM200,000 are exempted.

I do feel that it is unfair to long-term property homeowners who had bought properties five, 10 or even 30 years ago. The amount of RPGT incurred could be substantial due to the appreciation in price after all these years. Secondly, the main intention of RPGT is to curb property speculation, not to increase government coffer (the government already has stamp duty for that purpose).

By no means does these group of buyers fall into the speculator category. My view is that long-term investors will be adding this to the selling price, if the market and location of the property permits; or simply to put this property off the market until the next budget announcement, thus adopting the wait and see attitude.

Title transfer and loan stamp duty waiver

While we do applaud the government initiative to encourage first time home ownership, there is a limitation to the number of units entitled to this scheme. Also, it is only limited to those unsold units. If the priority is to encourage house ownership, then, in my opinion, first time home buyers should be free to decide where he or she wants to buy and still be entitled to this waiver.

P2P lending platform / FundMyHome

Many of us are scratching all over our heads trying to figure out the mechanism and its real implications. The 20:80 crowdfunding involves homebuyers and investors. It intends to provide an alternative option for first time home buyers to obtain an equity in a house, which could be for their use or as an investment. While the mainframe work of this platform has already been established, some of the fine prints and executions are yet to be determined.

No more government land sales through direct negotiations

The government has made it clear that there will be only one way for future land deals, which is through open tender. Basically, all interested parties (developers) will be informed and invited to the bidding process.

It is a simple rule; highest bidder wins all. By virtue, land cost constitutes a significant portion of the total project development cost. With the expected higher land cost from now on, wouldn’t it be more challenging for developers to take the heed of the 10% price reduction pressure?

Declaration of undeclared income

Yes, you have until 31 March 2019 to declare your previously undeclared income and pay the 10% penalty. The penalty percentage will increase after this date.

This provides a window of opportunity for those of us who “forgot” to declare our income. I believe that the Pakatan Harapan government is taking a leaf from Indonesian President Jokovi’s previous amnesty policy announced in 2015 to encourage the repatriation of funds back to the nation, with a certain percentage of penalty.

This has successfully brought back USD336bil, which is equivalent to 40% of the nation’s GDP.

Ultimately, the aim is to encourage the flow of money back to the economy, thus making people feel “safer” to purchase bigger ticket items such as property.

The theme “sacrifice” that played up before the tabling of the budget has spooked many investors. Additional tax measures such as Capital Gain Tax and Inheritance Tax are among the talk of the town before the budget.

Luckily, I believed that many would agree with me that it didn’t materialise. I love the quote from a coach who said: “The nation has announced its budget 2019, why not put some action plan to your own 2019 budget and make it count.”

Happy investing folks!

Source: StarProperty