Will the Government’s effort to help first-time home buyers realise their property dream be continued this upcoming Budget 2017? Some key incentives may help to rejuvenate the current sluggish property market.
These incentives include the reintroduction of the Developer Interest Bearing Scheme (DIBS), relaxed loan assessment methods, increased allocation of Employees Provident Fund (EPF) Account 2 and more 1Malaysia People’s Housing schemes.
Kenanga Investment Bank Bhd said these incentives, especially the revival of DIBS would likely be able to boost the current market.
However, Kenanga added that while DIBS will be able to help buyers pro-long the time before they need to service their mortgage, it does not help with the issue of low margin of finance faced by many first-time home buyers.
“The issue is many developers tend to price-in the DIBS cost into the property price, resulting in higher prices.”
The biggest obstacle these buyers face, according to the research firm, is obtaining financing. Therefore, the Budget should address the issue of the upfront deposit and other hidden costs of buying a property.
“It will be a game changer if first-time house buyers get a margin of financing of more than 90% or if the method of loan assessments for first-time house buyers is changed.
“However, we reckon it may take some time for Bank Negara Malaysia to study the long-term impact on banking risks,” it stated.
Another suggestion proposed by the firm is to increase the EPF Account 2 allocation to 40%, from the current 30%.
“If there are concerns that it would revive property speculation, the government could potentially limit it to first-time house buyers.
“We think this measure could be more meaningful compared to bringing back DIBS for first-time house owners.
“This will be quite helpful in servicing part or the full 10% deposit, or if one is unable to secure the full 90 per cent margin financing.”
However, the firm also questioned whether investors would benefit from these incentives and if the incentives would be enough to support strong sales growth.
Lowering or removing the real property gains tax (RPGT) or increasing the 70% loan-to-value cap on third house purchases would probably not happen in the upcoming budget because these addressed the “non-house ownerships” market, added Kenanga. These moves would be detrimental to the primary market.
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