More incentives for house buyers?

Property buyers, especially those looking for their first house, may see more goodies coming their way if the 2017 Budget includes some key incentives. These are 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.

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Kenanga Investment Bank Bhd said these incentives would help rejuvenate the market, adding that a revival of DIBS would be a sentiment booster. “While it does help ‘buy time’ before servicing the mortgage during the construction period, it however does not solve the issue of low margin of financing faced by many first-time house buyers. “The issue is many developers tend to price-in the DIBS cost into the property price, resulting in higher prices.” The research firm also highlighted the biggest barrier for first-time buyers, which is financing.

“The budget needs to address the concern of the deposit and hidden costs, especially whe655-20160411112938n these buyers cannot secure the full 10 per cent margin of financing. “It will be a game changer if first-time house buyers get a margin of financing of more than 90 per cent 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.

Kenanga also proposed the EPF Account 2 allocation be increased to 40 per cent from 30 per cent. “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 per cent deposit, or if one is unable to secure the full 90 per cent margin financing.”

The research firm also questioned whether investors would take profit upon any good news as the market remained challenging, and whether it would be sufficient for strong sales growth. Kenanga said lowering or removing the real property gains tax or increasing the 70 per cent loan-to-value cap on third house purchases was unlikely as these addressed “non-house ownerships” markets. Such a move at this juncture would also be detrimental to the primary market.