Press Release by Knight Frank Malaysia:
Budget 2020: A bold move to address property overhang
12 October 2019, Malaysia – The leading residential property segment remains a focus for both public and private sectors as well as homebuyers and investors. In the much-anticipated National Budget 2020, Knight Frank sees the shift in focus from homebuyers to developers in addressing the current residential property overhang.
Foreign Buyers to buy from RM600,000
To reduce the overhang of condominiums and serviced apartments amounting to RM8.3 billion, the Government announced the lowering of foreign buyer threshold for high rise property in urban areas from RM1 million to RM600,000.
Generally, Malaysia has higher distribution of unsold completed high-rise residential properties priced above RM600,000 at 53% as compared to those priced below RM600,000 (47%).
Sarkunan Subramaniam, Managing Director of Knight Frank Malaysia comments, “It may be an immediate remedy for the overhang situation. However, there are no rules that foreigner must buy from developer, like in Australia. Such rules could be implemented to avoid creating stiff competition with foreigners buying in the same field of secondary market properties.
“However, the property overhang is attributed to various factors such as mismatch of products and location rather than pricing alone. Some units remain unsold due to less favourable location in terms of accessibilities, distance and lack of amenities as well as product type.”
Home Ownership Campaign (HOC) & Rent-To-Own (RTO)
The Home Ownership Campaign (HOC) which was unveiled as an initiative under the National Housing Policy 2.0 to deal with the property overhang and to boost the lagging housing sector sees developers providing at least a 10% discount for qualified properties that will be matched with stamp duty exemptions. As many as 21,000 property units valued at RM13.44 billion have been successfully sold under the HOC, surpassing REHDA’s six-month initial sales target of RM3 billion.
The extension of the HOC till 31st December 2019 has been well received by both homebuyers and developers although its extension beyond 2019 remains uncertain.
Meanwhile, the Rent-to-Own (RTO) scheme which was also unveiled in the National Housing Policy 2.0 in January 2019, offers buyers the option to rent their homes for five years and apply for end-financing to purchase it in the sixth year based on the price fixed at the time the tenancy agreement is signed.
Sarkunan says, “The Home Ownership Campaign (HOC) and Rent-to-Own scheme (RTO) are very good initiatives introduced by the Government. Besides addressing the overhang issue of condominiums and serviced apartments, both HOC and RTO help to increase home ownership among Malaysians, in particular the lower income group.
Sarkunan applauds the great initiative by the Government to continue with the RTO scheme, he comments, “However there is concern that the property price sold may include the expected capital gain which may
lead to higher property price as compared to the current market value. This scheme has to be regulated and shall be fairly practised by both the public and private sectors.”
“The RTO scheme will complement the HOC which focuses on potential young buyers, to ensure that they are financially sound before making a big-ticket purchase. We look forward to more initiatives to maintain the momentum in the housing market recovery.”
— end of press release —
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