FIRST-TIME home buyers will enjoy a boost following the announcement of tax relief of up to RM7,000 for purchasing residential properties priced up to RM750,000.
The government’s Housing Credit Guarantee Scheme (SJKP) will now guarantee loans of up to RM500,000 for first-time home buyers purchasing homes on Wakaf land.
This initiative, aimed at helping and supporting young Malaysians in owning a house and encouraging home ownership among first-time buyers, is part of Budget 2025, which Prime Minister Datuk Seri Anwar Ibrahim unveiled in Parliament on Oct 18.
It is anticipated that this relief will assist first-time homebuyers in obtaining their ideal home at an early age.
The value of real estate frequently increases over time. Young purchasers can profit from property appreciation by making an early purchase, which could eventually increase their wealth.
First-time purchasers may be able to secure an asset that increases in value over time with these reliefs and incentives.
However, it’s important to consider that homeownership comes with risks and costs, such as maintenance, property taxes, and the potential for market fluctuations. I
t’s a decision that needs serious consideration and preparation because not all young people are prepared for homeownership, either financially or mentally.
Government tax reliefs and incentives for first-time homebuyers can affect people and the economy as a whole in several ways, both positively and negatively.
Unquestionably, these incentives facilitate first-time buyers’ entry into the housing market by lowering the initial financial burden, which in turn encourages homeownership.
Incentives and tax reliefs can increase demand in the housing market, which may boost house sales and encourage building.
Economic activity is significantly influenced by the housing sector. Growth in allied industries like construction and real estate services might result from an increase in home purchases.
People who may otherwise be shut out of the market can purchase homes because of tax advantages and the reduction of the financial obstacles associated with home ownership.
Nevertheless, from an economic standpoint, if demand surges too rapidly as a result of these incentives, it could escalate home prices in Malaysia’s market, potentially negating the advantages of the incentives and relief measures. In certain competitive housing markets, this could exacerbate affordability challenges for prospective buyers.
Government involvement in the housing sector might disrupt natural price indicators, causing some homes in specific areas to be overvalued. This could elevate the risk of housing market bubbles.
More accessible financing and incentives might encourage some first-time buyers to stretch their finances, taking on more debt than they can realistically manage, which could lead to future financial difficulties.
Significant debt responsibilities can negatively impact a person’s credit score over time if payments are neglected or if financial hardships occur. This can have implications for future financial choices.
Allocating a large portion of one’s income to a housing loan can limit opportunities for other financial ventures, such as investing in retirement funds, launching a business, or advancing education and career development.
In some situations, tax benefits may primarily favour higher-earning buyers who are already in a more secure financial position to purchase homes. If not structured thoughtfully, these incentives and relief measures could worsen wealth inequality instead of mitigating it.
If the incentives continue for an extended period or are excessively generous, they may generate artificial demand that does not correspond with the true market fundamentals. This situation could lead to volatility when these programs conclude or are reduced in scope.
To sum up, although governmental support for first-time homebuyers can enhance accessibility to homeownership and boost economic growth, it is essential to strike a careful balance to prevent overheating the housing market or posing long-term financial dangers to individuals.
Tax relief and incentives for first-time homebuyers can be sustainable, but only if they are carefully planned, focused, and complemented by policies that address the underlying challenges of housing affordability and supply.
Incentives should be in line with market dynamics and should not lead to a surplus of demand over supply, according to sustainable policies.
Budget 2025’s viability depends on its capacity to strike a balance between budgetary restraint and growth. However, that sustainability could be in jeopardy if structural fiscal difficulties are not addressed. – Dec 16, 2024
Jacqueline Chang is the Academic Coordinator at the School of Foundation Studies and lecturer at the School of Business at Swinburne University of Technology Sarawak Campus.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
