Budget 2022: How Does It Impact the Malaysian Real Estate Market

The federal government would cease to impose the real property gains tax (RPGT) when Malaysians, permanent residents and also companies dispose of their real property assets from the sixth year onwards. In other words, RPGT will not apply to properties sold after the sixth year. The removal of the RPGT augurs well for the property sector as it could stimulate transactions in the secondary market and encourage home purchases in the primary market. It was initially introduced to curb property speculation but was finally abolished in lieu of the current lacklustre or lukewarm market conditions. This will certainly invigorate the sub-sales or secondary market which contributes more than 80% of all residential property transactions nationwide. The tax exemption shall spur, drive and encourage more families to upgrade their existing smaller homes into bigger ones.

The introduction of the Housing Loan Guarantee Scheme is a positive move that targets the M40 group as they represent a key segment of the population particularly in the purchase of new properties within the primary and secondary markets. This will invariably reduce the prevalent property overhang specifically in the residential sector. The RM2 billion allocation for the Housing Credit Guarantee Scheme also enables more people to own a home as well as invest in properties.

As part of the government’s social obligation and the aim or goal to improve living conditions of lower-income groups especially the B40, an allocation of RM1.5 billion for the Rumah Mesra Rakyat and public housing upgrading programmes has been earmarked and approved. This allocation for low-cost housing will also help the underprivileged within the lower-income segment achieve their dream of owning a home as well as drive the national homeownership cause forward.

Landlords who provide rental discounts to businesses will be granted tax relief of at least 30% until June 2022 which includes repair-works and other renovation expenditure costing of up to RM300,000. In addition to landlords complying with the new SOP requirements, this could lead to increased spending power as well as stark reduction in the financial burden and also hardships of individuals and businesses.

The government is presently in the midst of exploring and expanding numerous green initiatives in the hope of reducing the overall costs borne by property developers. By bringing down property prices, substantial cost savings can be conveyed or passed on to house buyers which literally translates to more affordable homes. This is accomplished through lower labour expenditure, compliance costs & corporate income tax, greater tax relief or incentives for projects that are environmental, social and corporate governance (ESG)-friendly as well as implementing cost-effective construction or building methodologies such as Industrialized Building System (IBS).

Conscientious efforts have been undertaken to make affordable homes available to all segments or strata of society. Provisions for low-cost housing such as Rumah Mesra Rakyat and housing credit guarantee scheme is a welcoming move to encourage nationwide homeownership. For the residential sector, the removal of the RPGT on disposal of residential properties from the sixth year of ownership may increase residential transaction activities in the market and reduce the burden of property owners. It is widely seen as a positive step towards reinvigorating the property industry. Allocations for infrastructure developments in bridging the gap between urban and suburban areas are also expected to create a positive impact in the property market. Malaysian property remains robust and buoyant amid an uncertain market condition even though the budget itself did not quite live up to all its expectations or even meet or fulfil the hopes and aspirations of the real estate fraternity. Henceforth, in order to provide the stimulus necessary to revitalise the property market, more proactive measures are required to revitalize and sustain the growth and momentum of real estate in Malaysia.