AS I shook his hand last Tuesday morning in the seminar room at the Bangi Resort Hotel, I told Datuk Chang Kim Loong, secretary-general of the National House Buyers Association (HBA) and a dear old friend, that we must sit down and talk about the 2020 Budget’s impact on the housing sector. He replied “Yes, we must”.
We were amongst several speakers at a seminar on Strata Law organised by PERTAMA (Pertubuhan Profesion Tanah Malaysia) upon invitation by its president, Prof Dr Ismail Omar.
During the coffee break, I asked Chang if in tabling the recent Budget at the Dewan Rakyat, the finance minister was sending the right signal to the Malaysian public who are still facing the problem of affordable housing.
Does he agree that some of these measures announced by the minister seem to be pro-developers?
Chang said that the lowering of the threshold for foreign buyers (from RM1 million to RM600,000) “will open the floodgates” to Singaporean buyers, who will now find these unsold newly-built homes in Johor Baru as indeed “very cheap” to them, as they will cost less than S$200,000.
The government’s rationale for lowering the threshold was to encourage foreign buyers to take up the unsold strata properties amounting to RM8.3 billion in the second quarter of 2019.
“You cannot blame our Johor Baru people if they think that the government is selling the country to Singapore,” he added.
Chang is worried that the move will encourage developers to ignore building affordable homes and instead focus on building higher-priced units for sale to foreigners. He said the property overhang of these high-priced units was a “self-inflicted problem” by the developers and that they should solve it on their own and not expect the government to bail them out.
When I asked him for his thoughts on the RTO (Rent to Own scheme), Chang said, “Why raise the ceiling price to RM500,000?
“Why indeed?”, I echoed. The RTO scheme should be focused on helping the Malaysian public to purchase affordable homes, which should not exceed the sale price of RM300,000. According to a recent study by Khazanah Research, the overall housing market is “severly unaffordable”.
It should be remembered that the RTO scheme was introduced by the previous government intially to help solve the problem faced by PR1MA house purchasers who could not get end financing to complete their purchase. Under the RTO scheme, these house purchasers will initally “rent” their new homes from the developer for a stipulated period.
Both parties will be subjected to their respective obligations under a formal lease agreement. At the end of that five-year period, the “tenants/lessees” will then be able to exercise their option to purchase their rented/leased properties at a fixed price which hopefully has been “locked in” at the time when the rental/lease agreement is signed, and not when the option to purchase is exercised.
This RTO initiative involving PR1MA purchasers was later followed up by Maybank with its HouzKEY intiative in collaboration with a few reputable developers.
As expected, the lowering of the RM1 million threshold to RM600,000 was warmly welcomed by leading developer Mah Sing Berhad.
According to its managing director, Tan Sri Leong Hoy Kum, the move will have a positive impact in reducing the overhang of properties in the country. He hopes the respective state governments will respond to this move positively and revise their ceiling price accordingly.
Real Estate and Housing Developers Association (Rehda) president Datuk Soam Heng Choon said the lowering of the threshold price is a positive move for the industry although it is limited to a one-year period (2020) and applicable only in urban areas. He is well aware that in the end, this is still a matter “where states have the final say”.
SP Setia Bhd president and chief executive officer Datuk Khor Chap Jen welcomes the raising of the ceiling price under the RTO scheme to RM500,000. He said the move will give first-time home-buyers “more options to choose from”.
I am surprised to discover that on Oct 13, Housing and Local Government Minister Zuraida Kamaruddin informed journalists in Tanjung Piai, Johor, that the move to reduce the threshold for foreign property purchasers did not come from her ministry but from the Finance Ministry.
She explained that the policy on the threshold price used to be under the Economic Planning Unit, but the announcement was made by the Finance Ministry.
Meanwhile, Finance Minister Lim Guan Eng had clarified that the reduced price threshold for foreigners is only for existing unsold condominium units and will not cover new projects.
The writer, a former federal counsel at the Attorney-General’s Chambers, is deputy chairman of Kuala Lumpur Foundation to Criminalise War