By Jacqueline Chang
First-time home buyers will enjoy a boost following a tax relief of up to RM7,000 announced 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 to own a house and encouraging home ownership among first-time buyers, is part of Budget 2025 unveiled by Prime Minister Datuk Seri Anwar Ibrahim in Parliament on Friday, October 18, 2024.
As this relief will only be available for home purchases after January 1, 2025, it is expected to help first-time home buyers own their dream house at a young age. Real estate often appreciates over time. By purchasing early, young buyers can benefit from property appreciation, potentially increasing their wealth over the long term. These incentives can help first-time buyers secure an asset that appreciates over time.
However, it’s important to consider that homeownership comes with risks and costs, such as maintenance, property taxes, and the potential for market fluctuations. Not all young people are financially or mentally ready for homeownership, so it’s a decision that requires careful thought and planning.
Government tax relief and incentives for first-time homebuyers can have several positive and negative impacts, both on individuals and the broader economy.
There is no denying that tax relief and reducing the financial burden, these incentives make it easier for first-time buyers to enter the housing market, thereby promoting homeownership.
Tax reliefs and incentives can stimulate demand in the housing market, which could help support home sales and drive construction activity.
The housing sector is a significant contributor to economic activity. Increased home purchases can lead to growth in related industries such as construction and real estate services.
However, from an economic perspective, if demand increases too quickly due to these incentives, it could drive up home prices in Malaysia’s market, potentially offsetting the benefits of the incentive and relief. In some hot housing markets, this could worsen affordability for future buyers.
Government intervention in the housing market might distort natural price signals, leading to overvaluation of homes in some areas. This could increase the risk of housing bubbles.
Easier access to financing and incentives might lead some first-time buyers to overextend themselves financially, taking on more debt than they can reasonably afford, which could result in financial strain in the future.
Large debt obligations can also affect one’s credit score if payments are missed or financial difficulties arise. This can affect future financial decisions. Committing a significant portion of one’s income to a housing loan leaves less room for other financial opportunities, such as investing in retirement accounts, starting a business, or pursuing education and career growth.
In some cases, tax incentives may disproportionately benefit higher-income buyers already in a stronger financial position to buy homes. If not carefully designed, these incentives and reliefs might exacerbate wealth inequality rather than address it.
If the incentives persist for too long or are too generous, they can create artificial demand that misaligns the underlying market fundamentals. This could create volatility when such programs end or are scaled back.
Tax relief and incentives for first-time homebuyers, typically provided by governments to stimulate the housing market and make homeownership more accessible, can be sustainable under certain conditions. However, the long-term sustainability depends on several factors, such as if incentives push home prices higher without increasing supply, they may make homes even less affordable in the long term, reducing the effectiveness of the relief.
In my opinion, we should consider environmental sustainability as well. As governments move towards more sustainable practices, it will be important to ensure that tax incentives and housing policies align with broader goals, such as reducing carbon footprints. Incentives for energy-efficient homes and sustainable building practices could make homeownership incentives more sustainable from an environmental perspective.
In conclusion, while government incentives for first-time homebuyers can make homeownership more accessible and stimulate economic activity, they need to be carefully balanced to avoid overheating the housing market or creating long-term financial risks for individuals.
Tax relief and incentives for first-time homebuyers can be sustainable, but only if they are well-designed, targeted, and complemented by policies that address the underlying challenges of housing affordability and supply. Sustainable policies should ensure that the incentives are aligned with market conditions and don’t create demand that exceeds supply.
The sustainability of Malaysia’s Budget 2025 hinges on its ability to balance growth with fiscal discipline. However, any failure to address structural fiscal issues could jeopardize that sustainability.
● By Jacqueline Chang is the Academic Coordinator at the School of Foundation Studies cum Lecturer at the School of Business at Swinburne University of Technology Sarawak Campus
DISCLAIMER:
The views expressed here are those of the writer and do not necessarily represent the views of the Sarawak Tribune.
