Introduction to Budget 2024
All the efforts drawn up will follow every priority and benchmark of the MADANI Economy which is broken down into three main focuses which are:
The increased allocation totals RM7.7 billion, representing a significant boost from the previous budget.
Prime Minister Anwar Ibrahim has stated that the government has taken on a debt and liabilities burden amounting to RM1.5 trillion, equivalent to 82% of the country’s GDP.
Real Estate Highlights
This enhancement of the MM2H program is anticipated to bolster investment activities within the Malaysian financial market and stimulate growth in the country’s real estate sector.
Outlook for 2024
The 2024 budget will mark a pivotal moment for the nation’s economic development, with the government expected to introduce robust policies to provide substantial assistance to the people.
This budget is anticipated to fuel sustained economic development and contribute positively to the nation’s prosperity and the well-being of its citizens.
As we await the budget announcement, we look forward to witnessing the potential positive impact on the real estate sector and various key industries, paving the way for progress and growth.
]]>Acara yang dianjurkan oleh Persatuan Pemaju Hartanah dan Perumahan Malaysia (REHDA) Selangor itu akan berlangsung dari 26 hingga 28 April 2024 di Pavilion Bukit Jalil bagi menjanjikan platform untuk peneraju industri, pelabur dan pembeli rumah meneroka masa depan hartanah.
Pengerusi REHDA Selangor, Datuk Zaini Yusoff, berkata MAPEX Selangor 2024 menyasarkan untuk melebihi jangkaan dengan menawarkan pengalaman yang pelbagai bagi menampilkan pameran dan ceramah untuk mencerahkan peluang rangkaiannya.
“Dengan tumpuan kepada inovasi, kerjasama dan pertumbuhan, acara ini bersedia untuk mentakrifkan semula kejayaan dalam pasaran hartanah.
“Sama ada untuk pelabur berpengalaman atau pembeli rumah kali pertama, acara ini merupakan pintu masuk perhubungan dan peluang dalam membentuk masa depan pelaburan hartanah,” katanya pada sidang media di sini hari ini.
Zaini berkata, MAPEX Selangor 2024 menjanjikan pemandangan landskap di rantau ini daripada kondominium mewah sehingga pembangunan perumahan mampu milik yang direka dengan teliti.
“MAPEX Selangor 2024 akan menjadi tuan rumah kepada siri ceramah bagi menerangi pelbagai aspek industri termasuk trend pasaran termaju, strategi pelaburan dan amalan pembangunan mampan.
“Organisasi ini mempunyai keahlian sebanyak 1,022 ahli, membentuk cawangan terbesar dalam REHDA, yang mempunyai keahlian keseluruhan sebanyak 1,800,” katanya.
]]>Themed “Membangun Malaysia Madani”, Anwar, who is also the Finance Minister, stressed the government’s aim is to alleviate the rakyat’s struggles amidst the economic challenges, while ensuring a sustainable fiscal growth for the nation.
Houses for the rakyat
In line with that, there was a list of allocations for affordable housing programmes:
Stamp duty exemptions for first homes maintained
For first-time homebuyers, the following measures announced in the October budget have been maintained as follows:
Housing credit guarantee scheme increased
The housing credit guarantee scheme has been given an allocation of RM5 billion to help up to 20,000 borrowers with no fixed income from the gig economy to get loans. This is a significant increase from the RM3 billion budgeted in October.
Stamp duty on property transfer by way of love and affection revised
The stamp duty of only RM10 for transfer of properties between parents and children, and grandparents and grandchildren, which was proposed in the October budget, has been revised to the following:
They are applicable for transfers signed from April 1 this year, and only where the recipients are Malaysian citizens.
]]>This updates edition is prepared based on the Malaysia Budget 2023 speech at 4.00 pm today.
The Malaysian Finance Minister, YB Tengku Zafrul announced the Budget 2023 speech with the theme “Strengthening Recovery, Facilitating Reforms Towards Sustainable Socio-Economic Resilience of Keluarga Malaysia” underlying Budget 2023 (“Budget 2023”).
An allocation of RM372.3 billion is provided for Budget 2023 as compared to RM332.1 billion in Budget 2022.
Nominal Stamp Duty for Transfer of Property by Way of Love and Affection
In previous years, 100% stamp duty waiver was only provided for transfer between spouses. From year 2023 onwards, transfer of property by way of love and affection between family members such as parents to children, husband to wife or grandparents to grandchildren will subject to a nominal stamp duty of RM10.00.
Stamp Duty Exemption for First Home Buyers
First time home buyers will get an increase in stamp duty exemption on instruments of transfer and loan agreements from 50% to 75% until 31 December 2023 for property priced between RM500,000.00 to RM1,000,000.00. The full exemption of stamp duty for property priced below RM500,000 is still applicable up to 2025.
Housing Projects for Low-Income Group
RM367 million is allocated to develop People’s Housing Projects (PPRs) in urban areas. 4,250 housing units worth RM358 million will be built under Rumah Mesra Rakyat.
Low and Medium Cost Strata Development
RM290 million is allocated to replace and maintain lift services in low and medium cost strata development.
Credit Guarantee Scheme
RM3 billion is allocated for housing credit guarantees for those without a stable income.
Subsidy for Construction and Repair of New Houses
RM460 million is allocated to subsidize the construction of new houses and repairs in rural areas. In Sabah and Sarawak, the cap price for this purpose is revised from RM68,000 to RM79,000 for each unit.
]]>It essentially catered to new homebuyers looking to buy a beautiful home for their family.
After Covid-19 made its mark on the country’s economy, it was reintroduced under Penjana as an initiative to revitalise the property market. It is set to end on May 31, 2021.
The main attraction of HOC is that it provides stamp duty exemption on the instruments of transfer and loan agreement for the purchase of residential homes priced between RM300,000 to RM2.5 million.
The exemption on the instrument of transfer is limited to the first RM1 million of the property price, while full stamp duty exemption is given on loan agreement effective for Sales and Purchase Agreements (SPA) signed between June 1, 2020, to May 31, 2021.
Best of all, the HOC also offers a minimum 10% discount on houses bought under the scheme!
For those looking to purchase a second home or build their property portfolio, there is no better time than the present.
The property market is currently a buyer’s market, which means there is more supply than demand, thus raising your chances to snag a property below market price.
Even potential investors who want to capitalise on the current situation but do not have enough cash can jump on the wagon.
How? The answer is refinancing.
Refinancing is the restructuring of your loan in a way that gives you different terms or rates and usually gives you better cash flow, especially through cash-out refinancing.
Before deciding on whether to opt for refinancing or not, you must first weigh out various options — how much can you save by refinancing your home loan? Would it put you in a better position debt-wise? How will it serve you in the long run? Let’s find out!
Advantages of refinancing
Lower interest rate
Currently, the Overnight Policy Rate (OPR) in Malaysia is at its all-time low at 1.75%. If you refinance your home loan now, you can save on your monthly interest payment significantly. Combined with the HOC, you can apply to refinance for a new home loan at this all-time low interest to reduce your accumulated debt for both houses.
Debt consolidation
Usually, paying for multiple loans is hard. You are more likely to miss a payment or become overwhelmed by the mounting loan installments. To ease your burden, you can refinance to put all your home loans under one loan.
Paying your loans will be easier and you can even bargain a better interest rate in the current situation. Besides, if you invest in a new home under the HOC scheme, you can put that home loan together with your existing ones to put all your obligations in one neat package.
Healthier credit score
Refinancing allows you to save money thus releasing more free cash for your use. You have less monthly interest to pay and less debt obligation in your record. It puts you in a great position to meet your obligations regularly and your debt-to-income ratio also looks considerably better. Thus, it helps you to obtain a higher credit score for further loans in the future.
Large loans
Often, multiple small loans can add to your interest expense. Refinancing enables you to take a larger loan to cover all your existing loans in one single new mortgage. It is easier to maintain and saves you time and hassle in catering to different loans at different times of the month.
Longer repayment period
When you took your first loan, your financial capacity might not have been as good as it is now. Over time, your income has grown, your credit score went up and you are financially healthy.
If this is you, then refinancing your home loan today can give you a better negotiating position to get a longer repayment time. You will have more time to pay your loan which will free up your monthly cash to invest in other important things.
Disadvantages of refinancing
Risk of foreclosure
If you cannot pay your mortgage payment in time, you stand the risk of a foreclosure on your homes. However, if you are able to make your payments on time, then you need not worry about it.
If your sole purpose of refinancing is getting a better interest rate and better terms and conditions, then you will be freeing up cash. So, you will have enough money in hand to make your payments in a timely manner.
Closing cost
When you refinance your home, the closing cost can quickly add up. You will have to pay for a loan application, home appraisal, disbursement and stamp duty. But as long as you keep an eye on the cost and look for a bank that has the lowest closing cost, all will be well.
Interest cost
Refinancing often involves adding your other existing loans to put all debt obligations under one new mortgage. Hence, your new interest rate will be higher than the existing one as you are paying for a bigger loan amount. To avoid overpaying your interest, calculate your existing interest on loans to make sure your new interest is lower.
As with all financial decisions, choosing to refinance is not a decision you can make lightly. You’ll need to weigh all the pros and cons, as well as calculate your monthly commitments carefully before deciding to sign the papers.
Luckily, the approval process for refinancing is not as long as personal loans, so if you apply now, it may even get approved just in time for Raya!
]]>If you are keen about investing in property in Malaysia, Base Rate (BR) System and the Base Lending Rate (BLR) Structure are two cardinal metrics that you must know about.
The BR has replaced the BLR system since January 2, 2015. So when you apply for loans, banks across the country use this as the key reference rate.
Basic Background of Base Rate (BR)
But it is essential to understand the basis and background of the Base Rate. Home loans have a unique position in Malaysia.
Unlike, personal loans or purchase loans, the home loan rate was initially benchmarked against the Base Lending Rate Structure as fixed by the Malaysian Central Bank, Bank Negara.
Previously when the financial market is in good shape, the banks will offer home loans at BLR+ the specific amount a bank sets.
If the financial conditions are stretched, it is BLR- amount decided by the bank. This BLR was eventually replaced by the Base Rate System formally in January 2015.
So now the home loans in Malaysia have an interest rate based on the BR. The Base rate system is now the benchmark of the financial institutions’ fund expenses.
The final loan pricing is a combination of this interest rate other elements like
This new BR framework, as a result, becomes a reflection of all these components considered together.
The Banks, unlike in times of BLR system, can determine the BR structure without intervention from the Central Bank.
So, in other words, they can now get an edge in the loan market based on their efficiencies under this new system.
Why Was the BLR System Switched to BR?
The basic question that comes to mind is why was the BLR system switched to BR? How is the latter more desirable than the former one?
According to the Malaysian Central Bank, Bank Negara Malaysia, the primary motive was to promote healthy competition between the various regional banks.
In many ways, the BR system is a function of the individual efficiencies of the banks and differs from one to another.
The basis of this calculation is significantly different from that of the earlier BLR system.
So, the BR varies depending on the cost of funds and individual Statutory Reserve Requirement of a specific bank.
The new system is seen as introducing better transparency in the system. The customers have a better say in deciding the best option for themselves.
Unlike the previous system, they can’t borrow below the base rate in this system.
How Does the Change of BLR to BR Affect You?
So the cardinal factor that worries home buyers and homeowners across Malaysia is how does this affect their overall loan liability?
How does the bank make the change for those who have applied for home loans before 2015?
Most importantly, what’s better for homeowners when you compare the BR Vs. BLR in the Malaysian housing loan space?
Well, actually the overall difference is not very huge.
This is because the final loan liability of an individual is based on the Effective Lending Rate (ELR).
More than the BR, it is the ELR that determines how much the payout will be for individual customers.
In this context, the borrower’s don’t see a huge difference.
How is Effective Lending Rate (ELR) Calculated?
Well, you do understand that it is derived from the Base Rate but there are other factors associated with it.
Remember the ELR is calculated mostly in terms of floating rates for loans. The floating rate of interest though pegged on the BR has a few more elements.
ELR= BR + Spread Framework
Spread Framework is the catchphrase in this context. It includes a range of variants that affect the cost of funding for a bank. These are
So supposing the BR of a particular bank is 3.89% and it has a Spread Framework of 0.55%, the Effective Lending rate will be a sum of these two factors at 4.44%.
You can refer to the Bank Negara Malaysia website for the latest ELR rates that are offered by various banks.
Here is a quick look at how the BR Vs. BLR stacks up for some prominent banks in Malaysia.
The rates are as of Sept 2018:
Bank | BR % | BLR % |
Affin Bank | 4.10% | 6.96% |
Agro Bank | 3.85% | 7.00% |
Ambank | 4.10% | 6.95% |
Bank Islam | 3.90% | 6.85% |
Bank Muamalat | 3.95% | 6.95% |
Bank Simpanan Nasional | 4.10% | 6.85% |
CIMB Bank | 4.15% | 7.00% |
Hong Leong Bank | 4.03% | 7.04% |
HSBC | 3.89% | 6.99% |
Kfh Kuwait Finance House | 3.65% | 7.54% |
Maybank | 3.25% | 6.90% |
MBSB | 4.15% | 7.00% |
Ocbc bank | 4.08% | 7.01% |
Public Bank | 3.77% | 6.97% |
RHB | 3.90% | 6.85% |
Standard Chartered | 3.77% | 6.95% |
UOB | 4.11% | 7.07% |
Let us explain with an example:
Loan Amount: RM500,000 | BR % | BLR % |
Reference Rate | 3.25% | 6.90% |
Interest Rate | +1.5% | -2.10 |
Effective Lending Rate | 4.75% | 4.80% |
Monthly Installment (RM) | 2,444.28 | 2,460.02 |
Bank A BR is 3.25%
The home loan offer let’s say is BR+1.5%
So the Effective Lending Rate (ELR) is 3.25%+1.5%= 4.75%
Now how much was the bank offering the loans at earlier under the BLR?
Let’s say the BLR is 6.9% and the bank charged BLR- 2.10%.
So the Effective Lending Rate of BLR for Bank A stays around the same levels, which is 6.9%- 2.1%= 4.8%.
In this case, the monthly installment difference of BR and BLR is only RM15.74/month.
So, on the whole, there isn’t a whole lot of difference to the borrower under the new system.
But the onus is now more on the bank. It is but obvious that customers will make a beeline for banks with better efficiencies.
People with Existing Home Loans Before 2015
For those who have applied for loans before 2015, the payout is based on BLR. The Effective Lending Rate (ELR) that they are repaying the loan on is derived from the BLR.
So as of now, there is no change in your loan structure. You do not need to worry about how or why the BR works or changes loan tenures. You can continue paying your Equated Monthly Installment (EMI) as earlier.
However, it makes sense to understand the new structure. This will help you make an informed choice if you are planning to buy a new property.
It will also enable you to calculate the risk-reward ratios of real estate investment in a more comprehensive fashion under the new system.
But for those after 2015, the BR will apply for everyone.
Whether you apply for conventional loans or go for even the Islamic Loans, they are all tied to this Base Rate structure.
In case you want to refinance your home, change the existing loan structure or your bank, you need to understand the new provisions.
Remember they are all counted under new loans and will be processed according to the provisions of the Base Rate structure that has come to play since 2015 January.
Is BR System is Better Than BLR?
The question then veers on the most fundamental element.
Is the BR system a better one?
Experts and the Malaysian Central Bank have maintained that this is undeniably a more transparent system. The idea is to allow customers to leverage the efficiencies of a bank.
But if you ask us, we would say that this is a rather subjective issue and in many ways, it depends on how you are looking at it.
What in your approach is crucial in this case?
But it is true that the Base Rate is heavily based on the Kuala Lumpur Interbank Offered Rate (KLIBOR) and the Statutory Reserve Ratio (SRR).
The KLIBOR is essentially the inter-bank exchange rate, and the SRR is the Statutory Reserve Ratio that the Malaysian Central Bank decided.
Both these set of data is publicly published and updated on a regular basis.
There is nothing shady about how the bank arrives at the Effective Lending Rate (ELR) using this formula.
Experts also feel that this system allowing banks to take advantage of their efficiencies is a major positive.
They feel this will not just allow banks to be more competitive but allow customers to get the maximum benefit.
But you must remember what the Bank Negara has maintained and what we deduced in our previous example.
The Effective Lending Rate does not change drastically from the previous system with this BR structure.
So your tenure or Equated Monthly Installment (EMI) amount remains more or less similar under both these systems and that is the most important aspect for home loan applicants.
What Are the Impacts of Switching BLR to BR to the Banks?
A close study of the overall banking system in Malaysia reveals that the banking system has not seen a major upheaval as a result of this change in calculating the Base Rate.
Analysts say this switch from BLR to BR has not impacted their base business in a meaningful way.
It is more or less business as usual for banks across the country. The effective lending rate is still pretty much around the same levels.
There are many reasons for it. Most importantly, banks have the option to review it anytime if there are no perceptible changes in the Overnight Policy Rate (OPR).
If anything this new system spurs healthy competition amongst banks.
It is also seen as reflecting the rising cost of funds and forcing banks to undertake disciplinary steps to maintain efficiencies.
This is because the rates are now controlled by the banks and this will force them to take up measures that will help in reducing costs.
That is a win-win proposition for most customers and banks.
The only concern area is that the bigger players may have greater room to maneuver cost efficiencies and attract more customers.
Has BR Affected the Property Demand?
The other big question is has the shift from BLR to BR affected consumer demand. Has the Malaysian housing sector seen in the striking shift in demand as a result of this change?
In this context, it is very important to understand that the average consumer is more worried about the Effective Lending Rate (ELR) than the BR.
The ELR or the effective lending rate is the actual rate of interest that they are getting the loans at.
This will decide how they plan their EMI and take a call on loan tenure. On the whole, the new BR system actually benefit consumers more than banks. It is transparent and encourages banks to leverage their efficiencies.
There will be a far better choice of loan options for customers and help them make profitable choices.
However, the only point of concern at this stage is that of customers with questionable credit scores. Those with low income or bad credit scores may be at risk.
This is because the new system enables banks to set a higher ELR to keep their profit margins intact. This can lead to a considerably higher amount of default in this specific customer segment.
But with enough survey, you can obviously get around to deciding a loan that best addresses your limitations and challenges.
3 Determining Factors on How BR is Calculated
Therefore, we can say that the Base Rate is calculated using three primary metrics.
These are not just publicly published information but the Malaysian Central Bank, BNM updates it at regular intervals depending on the overall market and liquidity situation.
A) Statutory Reserve Ratio (SRR)
The Bank Negara will determine a specific SRR level for every bank. This is primarily the minimum cash reserves that the bank needs to maintain before lending out.
The liquidity and the cost of lending are directly dependent on the SRR. The cost of lending rises if the SRR does. As a result, it also impacts the BR and leads to its subsequent rise.
B) Individual Bank’s Profit Margin
The BR also has a direct correlation with a bank’s profit margins. If the profits increase, the BR comes down and vice versa.
C) Overnight Policy Rate (OPR)
The OPR level is the other key determinant of the overall BR. If the Central Bank raises the OPR levels, the BR rises too.
As a result, the Base Rate now becomes a key indicator of the financial health of the bank too.
This is because banks that are more effective and have adequate savings and fixed deposits will offer more attractive rates.
Decreasing efficiencies can become the first sign of strain in the balance sheet and banks with lower resources may not be able to match the rates offered by bigger players with greater savings.
This also introduces distinct flexibility in the banking system and encourages healthy competition.
Conclusion
Therefore from a customer standpoint, you can easily conclude that there is no perceptible change in interest rates as a result of the switch from BLR to BR. But overall with the BR instead of BLR, it is more or less, business as usual.