50PC RENTAL INCOME TAX PERK GOOD IDEA
IREFER to Datuk A. Jalil Hamid’s article in the New Sunday Times on the property glut (“Housing glut: Who’s at fault?” — Nov 19). He has highlighted a major issue that many Malaysians have been agitating about for some time.
It is a macro- and micro-economic issue, as the property glut reflects not only the lack of focus on affordable housing by private developers, but also exposes the government’s generosity in the past few years in allowing big developers to launch and develop high-value property projects, which many average wage earners, myself included, could not afford.
While pointing fingers is the easiest way to shift blame, a more practical way would be to put an immediate stop to what is wrong before it gets worse, that is, the immediate freeze on approvals for development of shopping complexes, offices, serviced apartments and luxury condominiums that are clearly oversupplied.
The freeze, as announced by the second finance minister, was backed by banking experts lauding the move as a positive and necessary step in addressing the oversupply issue.
But, where do we go from here, policy-wise?
In reality, there is not much motivation for private developers to pump in substantial resources to develop affordable housing.
Although there are affordable houses being built, the numbers are not enough to meet the high demand.
Freezing development approval, while positive, is not the immediate answer to correcting the demand-supply imbalance.
More practical solutions are needed to drive the market to digest the excess inventories, at the same time, exploring alternatives to allow average wage earners the option of affordable housing.
This is where I return to one of the main points Jalil highlighted in his opinion piece — the rental market.
In Prime Minister Datuk Seri Najib Razak’s 2018 Budget speech, he detailed salient points of what was needed to keep the country moving, and in between the deliberation, he said that in order to encourage the rental market, the government will implement a new policy of offering 50 per cent tax exemption on rental income for residential properties up to RM2,000 a month to Malaysian residents.
It was a quick sentence without a detailed explanation in the speech, but some property market observers did catch it and acknowledged the impact of that new policy, calling that announcement an indicator of the government’s seriousness in injecting the initial, but encouraging, synergy into the residential rental market.
The idea of a rental market is not new. in fact, when Datuk Seri Rahman Dahlan was in charge of the Urban Wellbeing, Housing and Local Government Ministry, he was already publicly waving the idea of “rent-if-you-can’town”, albeit the traction of that idea was impeded by lack of policy initiative. Until now.
Jalil’s opinion piece cited Bank Negara Malaysia’s recommendation of enacting the Residential Tenancy Act and establishing a Tenancy Tribunal to safeguard the rights of tenants and landlords.
This is one suggestion which hopefully, the Federal Government will look into seriously, since the relevant agencies are now no longer troubled by the excruciating workload of scrutinising and approving shopping complexes and luxury condominium projects.
In the past, reports have surfaced in print and social media on how landlords and tenants were locked in a tussle on a variety of issues, such as security deposit, utilities, general upkeep of the rented property and other finer details in the tenancy agreement.
The lack of proper legal structure to govern those details did not stop people from seeking the rental option, but often times, the absence of an effective overseeing authority did leave those issues unresolved, thus discouraging property owners from unlocking their assets for rental purposes.
While the tax exemption for rental income did sound tempting for residential property owners, and hopefully it will be backed by other legal mechanisms as suggested by BNM, it is a small step towards unleashing the full potential of the rental market for the benefit of those in middle-income group.
The rakyat needs to see it as more than just an announcement. But, it is a good start.