Players concerned over speed, efficiency and transparency

To hold back Malaysia from slipping into a recession, the Government has unveiled an unprecedented RM60bil stimulus package, dubbed the mini budget, on Tuesday. But just how effective the measures will be in arresting a decline in consumption and giving a boost to the economy is largely dependent on the speed, efficiency and transparency in the implementation and disbursement of the allocated funds to the targeted industry groups and population.

The sooner the funds are disbursed to the critical sectors, the higher the chance of them being put to good use to retard the fast deteriorating economic and business environment.

Going by the massive debilitating impact of the US-led global financial crisis to the economies of countries around the world, Malaysians and the business people will likely remain concerned over the extent of the impact to the country’s economy in the medium term.

They are not about to lift their guard and start spending just yet as many uncertainties, including potential job cuts and business failures, are still looming and posing a real threat to a demand-led recovery.

As such, the latest measures are not expected to result in a quick recovery in consumption and the economy but it will take time before the funds are trickled down to the people.

Property industry players lamented that the proposed tax relief on interest payment for property buyers will not have a significant impact on property sales as most established developers have already introduced end-financing schemes which fully absorb interest cost during the construction period.

Under the latest measure, the Government has proposed a tax deduction of up to RM10,000 per year be given on housing loan interest for house purchased from developer or third party.

The incentive will be given for three consecutive years from the first year the housing loan interest is paid but is only applicable to resident Malaysian citizens and limited to one residential property with sale and purchase agreement signed between March 10, 2009 and Dec 31, 2010.

Given that the interest saving will only be realised in arrears upon filing of annual tax returns, it is less impactful compared with what the developers are already offering under their 5/95 or 10/90 house financing programmes where house buyers only need to come out with minimal down-payments of either 5% or 10% of the property price, while the full interest payment over the construction period will be borne by the developers.

The tax incentive may at best cushion the impact of falling sales rather than boost it.

To maximise the benefit of fully utilising the tax relief amount of RM10,000, a buyer has to sign up for a house priced at more than RM385,000, while buyers in the low-end segment of property priced at less than RM100,000 will not stand to benefit due to their non taxable income bracket.

Developers were in fact hoping for government grants for first-time house buyers of affordable housing priced at less than RM300,000; further relaxation of Foreign Investment Committee rules, particularly for commercial properties; and a waiver or reduction in stamp duties for homes priced above RM250,000.

Meanwhile, expectations of corporate and individual tax cuts also did not materialise.

With interest rate currently at record low, housing affordability has in fact improved but the main concern of house buyers is the uncertainty of the economic environment as well as their job security.

For a recovery in the property sector, we have to let the dynamics of the market to come into play where supply and prices have to fall to a level from where the next market upturn will take place.

Temporary measures to boost property demand especially high-end and speculative type will only prolong the problem as supply of property currently outstrips demand.

It looks like more effective measures are needed to address the many challenges facing the property sector which has seen a severe contraction in sales since the crunch of the global financial crisis reached the country’s shores in the third quarter last year.

Policy measures should focus on reviving the underlying economy in order to have any effect on the people’s confidence and market sentiments.

Besides allowing housebuyers who have been retrenched to defer the repayment of housing loans for a year, hopefully the government will do more to improve the housing affordability of the low to middle income group to stem the risk of rising non-performing housing loans and massive housing foreclosures from happening.

Deputy news editor Angie Ng believes that property, being a tangible asset, remains one of the most viable investment instruments around during the good and bad times.

By The Star (by Angie Ng)