The Budget In 2016 – Part 1

WITH regards to the recently announced Budget 2016, here are views and comments from the National House Buyers Association (HBA) president Chang Kim Loong.

“On behalf of HBA, we acknowledge the challenges faced by our Prime Minister in tabling the Budget 2016 in view of the economic slowdown across the global regions, along with the steep drop of the ringgit,” said Chang.

Below are HBA’s views on Budget 2016.

The budget’s new/additional positive take in relation to property include:

» Increase in construction of affordable homes under the PR1MA, SPNB, PPA1M and PPR schemes; and
» the “First Home Deposit Scheme”, which will receive RM200,000 to assist first-time home owners make their deposit when purchasing affordable housing.

Other areas surrounding the property sector which have been retained and have the people’s interest at heart include:

The Developers’ Interest Bearing Scheme (DIBS)

The government will continue to prohibit any permutation that entails interest capitalisation, including the DIBS.

“Developers, being entrepreneurs, should bear the risks that come with investment and not be allowed to enjoy profits at the expense of house-buyers bearing the risks on their behalf,” expressed Chang.

For developers who feel DIBS should be allowed, claiming it “assists new purchasers”, Chang recommends these developers use the Build-Then-Sell (BTS) 10:90 concept if they are sincere in not wanting to shift the risks to house buyers.


Affordable homes by the government

The prime minister announced that more affordable homes will be built by government-linked developers and agencies.

However, HBA had its reservations expressing that the right implementation plans need to be heeded in order for affordable housing to reach and benefit the right target market. “The right product must be built at the right place with the right numbers,” voiced HBA members.

Its recommendation: reasonable prices between RM150,000 to RM300,000, not exceeding RM400,000 and ONLY for first-time house buyers and not second-time house buyers which PR1MA allows with certain conditions.

HBA also felt that PR1MA should ensure all allocated land be used for affordable housing instead of partnering with private developers where some are said to apportion only 40% of the land area to build affordable houses, the rest used for lifestyle properties, commercial and high-end developments.

HBA also opined that the government should boost the delivery of affordable housing by giving incentives and rebates to private developers such as lowering corporate tax rates of these developers; reducing land conversion premiums; and applying fast track release of unsold bumiputra units.


First Home Deposit Scheme – 10%

Though claimed a laudable scheme that assists first-time home owners to come up with a 10% deposit, HBA advises some caution be taken as it may send the wrong message. “HBA has always felt that Zero Cost Entry properties where buyers do not need to make any down payment will encourage speculation. House buyers should rent if they cannot raise the initial down payment or meet the commitment fee for an affordable house.”

The association also raised concerns stating that the government’s obligation should be focused on providing housing for households earning less than RM10,000 a month.

“Buyers should bear in mind the back-breaking loan spanning 30 years and not blindly jump to sign a 100% loan agreement (in this case 90% margin). Remember your obligation to repay the monthly mortgage, besides the maintenance, sinking fund, utility charges and so forth.”

HBA also reinforced its voice on the 10% First Home Deposit Scheme. It advised the people: “Think thrice before buying a house if you can’t even come up with the 10% down payment. Rent if you can’t afford.”

HBA also urges the government to include a clause for houses purchased under this scheme. “Such properties under this scheme should be restricted from sale within the first 10 years, similar to PR1MA properties. It should also be only available to first-time house buyers and should be owner occupied.”

Due to the recent announcement on Budget 2016, part two of the article on Kedah’s green transformation plan has been postponed.

Resources: The Sun