Incentive boost for property, auto sectors

Home campaign returns, sales tax exemption for CBU, CKD vehicles

AS expected, the property and auto sectors were among the sectors that received a much needed boost from the government’s ShortTerm Economic Recovery plan, which is aimed at alleviating the severe effects of the Covid-19 pandemic.

The week had seen the rallying of a number of property and automotive-related stocks, leading up to the government’s announcement yesterday.

Commenting on the Short-term Economic Recovery Plan, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid says the initiatives announced were well covered.

“It addresses the concerns on the labour market, the transition to a new normal especially in respect to digitalisation, as well as the mainstream economy such as property and automotive.

“It also shows that the government is committed to promoting growth and is willing to tolerate higher deficits. Should the reopening of the economy continue to do well, we can expect better growth in the second half of 2020.”

For the property sector, the government announced that the Home Ownership Campaigns (HOC) will be re-introduced.

Under the campaign, stamp duty exemption will be provided on the transfer of property and loan agreement for the purchase of home between RM300,000 and Rm2.5mil.

Meanwhile, the exemption on the instrument of transfer is limited to the first Rm1mil of the home price, while full stamp duty exemption is given on loan agreement effective for sales and purchase agreements signed between June 1 to May 31, 2021.

In addition, the government has also announced real property gains tax (RGPT) exemption for Malaysians for the disposal of up to three properties between June 1, 2020 and Dec 31, 2021.

Mah Sing Group Bhd founder and group managing director Tan Sri Leong Hoy Kum said the property friendly incentives announced are timely and much needed.

“The reintroduction of the HOC is particularly appreciated as we secured 60% of our sales in 2019 from the previous campaign.

“This bodes well for us to work towards achieving our 2020 sales target of Rm1.6bil.

“The stamp duty exemption and the uplift of 70% margin of financing limit for the third housing loan onwards during the HOC period, along with the RPGT exemption would certainly benefit Mah Sing, as our product mix echoes the government’s policies and in line with market demand,” he said in a statement yesterday.

Real Estate and Housing Developers’ Association Malaysia president Datuk Soam Heng Choon said the incentives will help address the fiscal challenges facing the local property sector currently.

“We believe that these measures will play a key role in reforming the economic standing of all industries by encouraging consumption, as well as spending and at the same time boosting employment.

“We are confident that these incentives will help alleviate the burden of buyers in home-ownership and ultimately contribute to the growth of the economy,” he said in a statement yesterday.

To address the overhang problem in the country, the government kicked off the HOC in January last year which is a six-month initiative that eventually got extended until year-end. The campaign proved successful, having generated total sales of Rm23.2bil in 2019, surpassing the government’s initial target of Rm17bil.

According to the latest data by the National Property Information Centre (Napic), the value of completed and unsold properties from all segments dropped 5.3% year-on-year to Rm18.91bil in the first quarter of 2020, despite more units being launched during the period.

A total of 127,604 units were launched in the first quarter of this year, compared with 120,309 units in the previous corresponding period. However, the level of unsold units was lower at 29,698 in the first quarter of 2020, compared with 32,936 units in the first three months of 2019.

The bulk of the overhang was contributed by the condominium and apartment units, valued at Rm8.12bil. This was lower than the Rm8.44bil recorded by the same segment during the first quarter of 2019.

Meanwhile for the automotive sector, the government announced 100% sales tax exemption on completely-knocked-down (CKD) vehicles and 50% on completely-built-up (CBU), fully imported vehicles from June 15 until the Dec 31, 2020.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said the sales tax exemption was a welcomed move, considering the beating that the local automotive sector has been taking due to the Covid-19 pandemic.

“We are very pleased that the government has chosen to support the sector, given the state of the industry at the moment. However, it is still too early too say whether it will spur sales for this year,” she said.

Aishah notes that cars are big-ticket items, adding that whether sales pick-up will depend on a variety of factors.

“It will depend on whether the incentives will entice buyers; whether the item is a necessity; or can that individual still hold on to their existing vehicle. Furthermore, car companies will also be having their own promotions and incentives.

“Also, hire purchase loans are harder to get, as the approval takes longer and banks are more cautious,” she says.

Last month, the MAA announced that it was revising downwards its 2020 total industry volume (TIV) forecast to 400,000 units from 607,000 previously. The 400,000 units forecast would represent a 34% contraction from 2019’s 604,287 units. It also marks the first time in 13 years since the TIV failed to surpass the 500,000-unit mark.

Total vehicle sales plunged 99% year-onyear to 141 units in April, as the government’s movement control order (MCO) forced all automotive companies to cease operations during the month.

Year-to-date April, total vehicle sales for 2020 stood at 106,601 units, compared with 192,971 units in the previous corresponding period. To tackle the rise in Covid-19 infections in the country, the government implemented the MCO on March 18.

On May 4, a conditional MCO (CMCO) was enforced to allow businesses to re-open for the economy to recover. The CMCO has been extended to June 9.

“We are very pleased that the government has chosen to support the sector, given the state of the industry at the moment.” Datuk Aishah Ahmad