First-time house buyers to gain

HBA is happy that more affordable homes are to be built under Budget 2015 and DIBS ban stays.

THE National House Buyers Association (HBA) wishes to thank the Prime Minister for the measures announced in Budget 2015 to build more affordable homes for the rakyat.

HBA is grateful that the Prime Minister rejected calls from the Real Estate and Housing Developers’ Association Malaysia and other groups with vested interest to reintroduce Developer Interest Bearing Scheme (DIBS) for first-time house buyers.

DIBS

The HBA is glad the Government has continued to heed our call to ban DIBS or any permutation that entails interest capitalisation.

Developers, being entrepreneurs, have to be responsible and bear the risks that come with their investment. They should not be allowed to enjoy profits at the expense of house-buyers who bear the risks on their behalf. Thus, when developers claim that DIBS is good because they “assist new purchasers”, they should be asked to use the Built Then Sell (BTS) 10:90 concept instead if they are sincere in not wanting to shift the risks to the house-buyers. Developers, being profit driven, merely want to sell their products, by whatever means. They even recommended DIBS for first-time house buyers on the guise of “assisting them”. We are glad the developers did not succeed in this endeavour.

The prohibition of DIBS in Budget 2014 has been effective in curbing the unbridled escalation of house prices. DIBS must continue to be prohibited and outlawed. Do not allow first-time house buyers to be sucked in.

Budget 2015

Among some of the measures announced is the Youth Housing Scheme, which is a smart partnership among the Government, Bank Simpanan Nasional, Employees Provident Fund and Cagamas.

The scheme offers a funding limit for a first home not exceeding RM500,000 for married couples aged between 25 and 40 years with household income not exceeding RM10,000. The maximum loan period is 35 years.

Under the scheme, the Government will provide monthly financial assistance of RM200 to borrowers for the first two years to reduce the burden of monthly instalments. The Government will also give 50% stamp duty exemption on the instrument of transfer agreements and loan agreements.

It will also provide a 10% loan guarantee to enable borrowers to obtain full financing including cost of insurance. Borrowers can also withdraw from Employees Provident Fund (EPF) Account 2 to top up their monthly instalment and other related costs.

Hence, HBA urges young people to grab this opportunity which is offered on a “first-come first-served basis” for 20,000 units only.

While the scheme is laudable as it aims to assist married youths to own their own property, HBA urges some caution as providing a monthly cash subsidy of RM200 may send a wrong message. The said family may start to spend beyond their means during the first two years and may end up in financial difficulty when the government stops giving the cash subsidy after two years. In addition, HBA has always cautioned against so-called “Zero Entry Cost” properties whereby the buyer does not need to make any down payment as it may encourage and promote irresponsible house buyers. House buyers must understand the intricacies of taking responsibility as an owner. They must pay their dues – quit rent, assessment rate, maintenance charge, sinking fund, insurance premium and budget monthly expenses. It is very important that they pay monthly instalments to the bank. It is not surprising to hear of lower and middle income homeowners losing their homes for not being able to keep up with payments.

HBA also urges the Government to impose a restriction that properties under the Youth Scheme cannot be sold for the first 10 years, similar to properties under the 1Malaysia Housing Programme (PR1MA).

Additionally, the scheme must be for “first-time house buyers” and must be owner-occupied.
Additional measures are:

1. PR1MA to build 80,000 affordable houses and eligibility raised from monthly household income of RM8,000 to RM10,000;
2. National Housing Department to build 26,000 units under the People’s Housing Programme with an allocation of RM644mil; and
3. Syarikat Perumahan Negara Bhd (SPNB) to build 12,000 units of Rumah Mesra Rakyat and 5,000 units of Rumah Idaman Rakyat. SPNB will also build 20,000 units of Rumah Aspirasi Rakyat on privately-owned land.

HBA is grateful that the Government has taken the initiative to build more affordable houses. However, HBA cautions on the right implementation to ensure the said affordable housing reaches the target market.

Government agencies must be mindful – and keep reminding themselves – of the following adage: “Build the right number at the right location for the right population at the right price and with the right type.”
The affordable housing must be built at the right place and priced reasonably (between RM150,000 and RM300,000 and not more than RM400,000 for prime locations) and only for first-time house buyers and not to be made available for second-time house buyers which PR1MA is allowing with certain conditions.
Don’t ever build where there is no population, just for the sake of building and meeting key performance indicators (KPIs).
PR1MA must also ensure that all the allocated land are used to build affordable housing and not to partner with private developers whereby only 40% of the land (from what we understand from the market) are for affordable properties with the balance used for lifestyle properties to build commercial and high-end properties.

HBA further opines that the best agent of delivery for private affordable housing, notwithstanding PR1MA and SPNB, are private developers. The Government can boost the delivery of affordable housing by giving incentives and rebates to private developers building affordable housies such as:

• Lower corporate tax rates;
• Lower land conversion premiums;
• Fast-track release of unsold bumiputra units; and
• Lower compliance costs.

To enable more people to own their first home and reduce the cost of buying a house, the Government has agreed to extend the 50% stamp duty exemption on instruments of transfer and loan agreements and increase the purchase limit from RM400,000 to RM500,000. The exemption will be given until Dec 31, 2016.

HBA agrees with measures to assist the lower and middle-income group to acquire their own properties and to prevent any abuse of these measures, the assistance should only be given to first time house buyers.
The Government also agrees to improve Skim Rumah Pertamaku under the purview of Cagamas by raising the ceiling price to RM500,000 in line with the stamp duty exemption. In addition, the age of borrowers to qualify for the scheme will be increased from 35 to 40 years.

HBA agrees with the these measures and further recommends that there be no age cap as there are many older low and middle-income groups who have yet to own their first property.

Conclusion
The curbs announced and implemented under Budget 2014, i.e. increase in Real Property Gains Tax (exit costs), the loan-to-value and prohibition of DIBS have achieved its objectives in partially deterring speculators and “bogus” house buyers. It has also bought some sense of orderliness to the housing arena.

We have appealed to the Government to adopt more measures in Budget 2015, especially the increase in stamp duties (entry costs).
The current stamp duty regime can be maintained for the first two properties held, one being for own stay and one for long-term investment. However, stamp duty must be increased for the third and subsequent properties. Our recommendation for stamp duty is as follows:

• First two properties, based on current scale rate;
• Third property – flat 5% of value of property;
• Fourth property – Flat 7.5% of value of property; and
• Fifth property – Flat 7.5% of value of property.

HBA’s proposal will not penalise the majority of the rakyat who can only afford to buy two properties.

HBA is prepared to wait and see the performance of the property market as to whether “speculators and bogus” house buyers will remain to “play” the market. We are sure that our Prime Minister and his advisors are fully aware of the situation and could always expeditiously implement this proposal in Budget 2016 if “speculators and bogus” house buyers were to plague the housing market.
>> Chang Kim Loong is the honorary secretary-general of the National House Buyers Association, www.hba.org.my, a non-profit, non-governmental organisation manned purely by volunteers.

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