Malaysia 2018 Budget: Expectations & Opportunities for the Real Estate Industry

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Malaysia’s 2018 Budget: Expectations & Opportunities for the Real Estate Industry

Malaysian government, led by Prime Minister Dato' Seri Najib Razak, announced Malaysia’s 2018 spending plan last week on 27 October.

 

We have studied the upcoming budget and are glad to discover some key policy changes that are designed to make the real estate industry a lucrative and promising investment for people of all walks of life and income levels.

 

From tax cuts to priority for affordable housing, this spending plan can open up new opportunities for you. Here’s a breakdown of the key points.

1) Transforming the urban scene with affordable housing

In the age of skyrocketing property prices, home ownership is an unreachable goal for many. We have seen cities, towns and neighbourhoods across the world change dramatically because of the lack of affordable housing for locals. This lack has driven the inhabitants to the poorer areas, left local businesses unprofitable and once vibrant and prosperous middle-class areas replaced by unoccupied properties.

 

The 2018 budget planned to support affordable housing is presented at a good time. It’s especially so as we want to see all our areas having access to more equal and sustainable growth opportunities.

 

To boost sales of affordable properties, the government is giving priority to the development of affordable housing whereby buyers can take on up to 90% to 100% margin of financing while RM2 billion has been allocated to boost home ownership.

2) A vote of confidence for the middle class

Without a doubt, middle-class taxpayers are one of the winners of the new budget. Thanks to the proposed changes, the members of this stratum will benefit from the tax cuts and growth of their disposable income.

 

Here’s how the proposed reduction in individual income tax rate will work:

 

  • RM20,001 to RM35,000: from 5% to 3%;
  • RM35,001 to RM50,000: from 10% to 8%;
  • RM50,000 to RM70,000: from 16% to 14%.

With these new rates, disposable income is expected to increase by RM300 to RM1,000 while 261,000 people will no longer have to pay any income tax.

3) New property investment opportunities 

Another positive change which property owners and investors will be thrilled to learn about is that the government will exempt the tax on 50% of residential property rentals, up to RM2,000. This will further encourage property investment and boost the rental market.

4) Growing support for rural infrastructure

To spur growth in the rural areas, the new spending plan allocates funds for the development of the rural infrastructure projects including: -

 

  • support of Felda settlers;
  • investment in the clean water supply in Sabah and Sarawak;
  • investment in the Pan Borneo Highway;
  • construction of the East Coast Rail Link (ECRL), and
  • development and maintenance of communication infrastructure in the rural areas.

5) The most promising industries in 2018

The new budget plan retains its focus on manufacturing, exports and construction. Malaysia has seen exports up 16.6% this year and the figure is expected to grow by another 3.4% in 2018.

 

This means the demand for industrial premises will most likely be holding firm in the coming year.

6) Increased subsidies for agriculture

Rising commodity prices might also boost demand for agricultural properties including plantations.

 

The greater interest in the agriculture sector also stems from the fact that in 2018 the government will allocate more subsidies in order to boost agricultural production including: -

 

  • rubber replanting will receive RM200 million while development, replanting and promotion of oil palm will get RM140 million;
  • to create additional incentives for the agriculture sector, another RM2.3 billion fund is allocated;
  • RM500 million fund is created to improve the agricultural infrastructure.

7) Private sector investment

The government expects the private sector investment to be the driving force behind the country’s economic growth. In particular, the total volume of the private investment is forecasted to reach RM260 billion in 2018.