LETTER | Many Budget 2020 wish lists are about the property market. In general, there are two main groups that call for some measures to incentivise the property market and they are the developers and the home investors.
Developers have been asking for the government to help them in multiple ways - relaxed lending guidelines, continue incentives under the Home Ownership Campaign (HOC), reduce compliance cost and terminate the real property gains tax (RPGT). Some developers are also calling for longer home financing tenures of up to 45 years and a higher percentage of withdrawal from the EPF for house-buying purposes.
On the other hand, current homeowners and investors are asking for a reduced rate or the removal of the RPGT, extending stamp duty exemption for primary market residential transactions to secondary market transactions, EPF savings as collateral for home loan applications, extending the HOC to the resale market and removing the Loan To Value (LTV) ratio of 70 percent for the third housing loan for buyers who have the financial ability to service the monthly instalments (as a comparison, Singapore has an LTV of 75 percent for the first house, 45 percent for second house and 35 percent for the third house).
All these wish lists are in general but are these wish lists something that the government should fulfil? Aren’t some of these "wishes' the very things that have caused the property market to be overheated (some call it a "bubble")?
Essentially, these are all proposed reactive measures by the real estate industry (developers and investors alike) to tackle the overhang issue. But what about proactive measure to avoid this issue from happening in the first place?
Fulfilling the developers’ and investors’ wish lists will probably resolve current overhang issues but will definitely contribute towards a greater problem in the near future. These measures are all things that facilitate speculative activities that caused the problems we are facing now. And as a responsible government, the government should no longer encourage speculative activities in the real estate market.
The Ministry of Housing and Local Government and the Ministry of Finance should look into innovative ways to reduce house prices and not facilitate easier financing that has been proven to be a major contributor towards higher house prices.
Instead of attracting foreign companies to provide financing for affordable housing schemes, the government should bring technologies that can reduce the cost and time of constructing houses. The government could also reduce development charges and compliance costs imposed on developers, especially for affordable housing projects.
And the simplest thing that the government can do to reduce the cost of doing business for developers is cutting the red tape when it comes to approving housing projects.
What the people really want is an affordable place to stay, be it their own or rented (as long as they have security of tenure). Fulfilling all these developers’ and investors’ wish lists will definitely make houses become more expensive and more unaffordable for the general public.
The writer is attached to the Institute for Research & Development of Policy (IRDP)
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.