Firing up the market

Good thing: A Home Ownership Campaign session in action in the Klang Valley. A total of 73,503 residential units valued at RM47.38bil had been sold since it was reintroduced last year.

ALL eyes will be on the tabling of Budget 2022 next Friday, with stakeholders from the local property market hoping for incentives that can spur the segment further.

That’s not a surprising sentiment, considering that the country has endured one of the worst recessions in history following a near two-year struggle with the Covid-19 pandemic.

At the Real Estate and Housing Developers’ Association’s (Rehda) briefing on its “First Half 2021 Property Industry Survey” earlier this week, president Datuk Soam Heng Choon said he is hopeful that the Home Ownership Campaign (HOC) will get extended into 2022.

“The HOC ends on Dec 31. However, we lost four months this year as a result of the lockdown and hope that it will get extended,” he says.

To address the overhang situation in the country, the government kicked off the HOC in January 2019. The campaign, which was intended for six months, was extended for a year. It proved successful, having generated sales totalling RM23.2bil in 2019, surpassing the government’s initial target of RM17bil.

The government reintroduced the HOC in June last year under the Penjana initiative to boost the property market after it was adversely affected by the Covid-19 pandemic.

According to Rehda deputy president Datuk N. K. Tong, as at Sept 30, 2021, a total of 73,503 residential units valued at RM47.38bil (after discounts) had been sold since the HOC was reintroduced last year. Discounts worth more than RM9bil were given to buyers during the period.

According to Rehda statistics, Selangor dominated sales during the HOC with 30,888 units valued at RM21.1bil sold.

This was followed by Kuala Lumpur, which recorded RM11.6bil in sales with 17,468 units sold.

Johor was third highest with 8,723 units valued at RM5.4bil sold, followed by Penang which recorded RM4.5bil in sales with 6,784 units sold.

Kenanga Research in a recent report says property sales by developers, buoyed by the HOC, have been good.

“Despite the unexpected full movement control order imposed in June, we note that all developers under our coverage are still in line to meet their internal sales target set out at the start of the year, with the exception of Malaysian Resources Corp Bhd.

“EcoWorld Development Group Bhd and Sunway Bhd had already surpassed their initial sales guidance.”

Nevertheless, Kenanga Research says the real test will be when the HOC ends at the end of this year.

“Unless the HOC gets extended again, stamp duties (on memorandum of transfer and loan agreements) which are currently waived will kick in,” it said.

The research house adds that for properties valued at RM300,000 to RM1mil, the duties would add on an additional cost of 2.1% to 2.9% (or RM6,350 to RM28,500) in cash.

“Taking a cue from the car sales trend that came off substantially post the goods and services tax holiday from June 2018 to August 2018, we believe most home buyers would likely seize the opportunity to purchase properties by year-end and property sales would likely come off next year.”

The overhang situation in the country is something that the local property market has been grappling with for years.

Numerous incentives and policies have been announced under previous budgets to help curb the situation. However, the situation has yet to be abated.

According to the National Property Information Centre (Napic), a total of 31,112 overhang units worth RM20.09bil were recorded in the first half of 2021.

This was an increase of 5.2% and 6.2% in volume and value, respectively, against the preceding half.

The serviced apartment sub-sector, meanwhile, recorded 24,064 overhang units with a value of RM20.41bil in the first six months of this year, indicating a marginal increase of 1.9% in volume.

However, value declined by 10.2% compared to the preceding half.

Additionally, the unsold, under construction recorded 42,358 units, an increase of 20.1%.

According to Rehda’s latest property market survey, which comprised 180 participants from all over Peninsular Malaysia, 82% of respondents reported having less than 30% of unsold residential units in the first half of 2021.

Of this, 43% comprised units priced between RM250,001 and RM700,000.

Meanwhile, 58% of the respondents reported that they had unsold completed residential units over the last one-to-three years, with end-financing loan rejection, unreleased bumiputra units and mismatched pricing cited as the top three reasons.

Respondents experiencing end-financing issues stood at 88%, mainly because of ineligibility due to buyers’ income.

Additionally, Soam is also hopeful that Budget 2022 will include policies such as a reduction or waiver in the real property gains tax, as well as reduction in compliance costs.

“The compliance cost has been piling up over the years and developers are hoping for a review of this,” he says.

Following a virtual meeting with Rehda, RHB Investment Bank in a recent report said the association had made several proposals to the government that could help the property market recover.

“These include the Home Ownership Assistance Programme (HOAP), the extension of the current real property gains tax waiver, the removal of the loan-to-value ratio and the review of the threshold for foreigners buying properties.

“While the HOAP is similar to the previous developers’ interest-bearing scheme, Rehda is advocating greater transparency and this scheme should only be available for properties priced below RM500,000.”

Additionally, the research house says that Rehda had brought up the suggestion made by some consultants, whereby a 2% transactional tax (1% buyer and 1% seller) can be considered by the government in order to raise tax revenue.

“While Rehda thinks that this would be detrimental to the sector recovery, we also agree that the timing may be inappropriate, as many sectors are still trying to recover or survive due to the impact of the pandemic.

“Hence, policies to discourage buying and selling would be unwelcome at this point.”

RHB Investment Bank adds that industry players are also lobbying for the extension of the HOC. “If some of these proposals are accepted, we think it will help to expedite the recovery in the housing market and boost affordability for first-time home buyers.”

Meanwhile, TA Securities in a recent report says it anticipates the upcoming Budget 2022 to be primarily helpful to low-to-middle-income earners, as well as to first-time home owners.

“We are also hopeful for more measures to ease the burden on property owners by extending the real property gains tax exemptions, along with lower rates.

“We also anticipate friendlier measures for property developers and foreign buyers to spur market activities. We do not anticipate any new dramatic tightening policies, as this would derail the recovery of the property sector,” it says.

On what to expect in the upcoming budget, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz revealed at the Invest Malaysia 2021 Virtual Series 1 earlier this month that Budget 2022 will focus on speeding up recovery, strengthening economic resilience and catalysing reform.

“Like Budget 2021, we have mapped our budget initiatives towards sustainable development goals and we will continue to do so in Budget 2022,” he said.

Tengku Zafrul also said support for businesses would remain steadfast, be it via affordable financing schemes, better access to credit or grants, so as to support operations while pivoting them towards increased automation and digitalisation.

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