Property overhang or unsold properties means unproductive capital tied up in the economy. As of 23 November 2021, Malaysia has 30,290 unsold units worth RM 19.75 billion. If that amount of money can be released, the 150 industries associated with the real estate sector can contribute to the rolling economy significantly.

Considering 2022 as a hopeful year to turn the economy back, the Government is taking multiple measures to reduce unsold properties in 2022.

Here is a list of key steps planned by the Government to address the property industry overhang:

1. Encourage developers to reduce housing prices

The Government has been encouraging developers to reduce house prices so that homebuyers can afford them. To boost the cause, they also hint at incentives and service charge exemptions.

In lieu of that, developers made several promotional offers and discounts, which led to a 0.7% drop in the house price index from the third quarter of 2020 to the third quarter of 2021. This method seems to be working well as the property industry saw a 2.64% drop in unsold in the third quarter 2021, releasing RM 20.1 billion to the economy.

2. Real Property Gain Tax (RPGT) is exempted from sixth year onwards

Real Property Gain Tax (RPGT) was first introduced in 1976 as part of a cooling measure to curb the rapid increase of property prices. This was last updated in 2021 when individuals had to pay 30% property on their sale proceeds from property sale for the first four years. In the fifth year, 20% RPGT was implied with an indefinite RPGT of 5% from the sixth year onwards.

In 2022, the 5% RPGT implied from sixth year onwards has been exempted by the government to encourage more property transactions to take place. They believe it will invigorate the property market and create a positive multiplier effect in the economy.

3. Planning extension of Home Ownership Campaign (HOC)

Home Ownership Campaign (HOC) offers incentives to houses that are registered under the Real Estate and Housing Developers’ Association Malaysia (REHDA) by the developers. Under HOC, home buyers are exempted from stamp duty, tax exemption in housing loans and receive a 10% discount on houses ranging between RM 300,000 to RM 2.5 million.

Previously, this helped the developers to clear the overhang property. So, the government plans to extend the HOC campaign deadline that was previously until 31 December 2021. They may also extend HOC to benefit the secondary market to benefit house owners when they sell the properties, which has previously been limited to developers only.

4. Ease housing affordability

Malaysians do not seem to be able to catch up to the pace the housing prices have been escalating. So, there is always an ongoing problem of affordability, which can be solved in two ways. Either buyers need to have higher purchasing power, or more houses must be developed at an affordable rate.

The government focused on both ends to boost affordable housing in 2022. Under Budget 2022, RM 2 billion has been allocated under the housing credit guarantee scheme to assist small traders and gig workers, who do not have steady income, to apply for a mortgage loan.

On the other hand, they introduced RM 1.5 billion worth of housing projects for low income Malaysians. The government also addressed the affordability plight of the B40 and M40 groups via the Musharakah Mutanaqisah concept. Under this concept, a cooperative or government agency can jointly acquire a property with a homebuyer.

The ownership share of the corporate entity of the government will be leased to the home buyer for a specific period. They need to pay an upfront deposit and continue the remaining payment on a rental basis. This will help them to flexibility pay off the debt without interest, creating an affordable way to buy homes.

5. Lack of time sensitive and accurate data

Some industry players believe that the mismatch between demand and supply of property is caused by the lack of insight on relevant items. Some areas have an oversupply of houses while others are under supplied. Developers are left exhausted finding out what property buyers actually look for.

REHDA has been calling for an integrated housing database in collaboration with KPKT for a few years now but still seems to be lacking on providing relevant property insight on time. Now, further initiative is taken by the government via Big Data Analytics (BDA). They intend to implement the BDA system to enable a repository data centre for the property industry stakeholders.

The government is also allowing various private organisations like Guyub to populate relevant property insights to the market. Such online portals are playing a vital role in helping the property investors to find the right type of properties at the right location at the right price so that the developers no longer have to play the guessing game of who needs what.

2022 may be a turning point for the long going hangover of unsold properties in Malaysia if the above measures are effectively exercised. This will not only help clear the backlog of overhang properties but can aid in setting a path for speedier sales for upcoming property launches.