Property seeks boost

PETALING JAYA: As Budget 2027 approaches this Friday, real estate experts are hoping for policy measures that will address affordability concerns, streamline property transactions and enhance the sector’s appeal to investors.

Savills Malaysia group managing director Datuk Paul Khong
is hopeful that the government will review the Real Property Gains Tax, extend stamp duty incentives beyond first-time homebuyers and revisit the 8% stamp duty imposed on foreign purchasers.

“Lower property transaction costs would stimulate market activities, improve liquidity, encourage reinvestment and strengthen Malaysia’s competitiveness in capital.

“An active property market will benefit the wider economy through increased spending, financing and development activities,” he told StarBiz.

To improve housing affordability, JLL Malaysia managing director Jamie Tan believes the focus should extend beyond merely reducing development costs to achieving better and more sustainable outcomes for end-users.

“Government incentives should not only help make projects viable but also ensure that they deliver lasting benefits.

“This can be from reviving underutilised buildings and urban areas to keeping housing genuinely affordable for the end user and reducing unnecessary costs (such as taxes) embedded in the development process.”

He noted that Budget 2026’s 10% tax deduction for converting commercial buildings into residential use was a meaningful first step, adding, however, that Budget 2027 should take a more holistic approach to “bringing people back into our city centres”.

“Malaysia’s challenge is not simply a shortage of homes for the rakyat, but a mismatch between supply, affordability, product type and location.

“Not every ageing commercial building is suitable for residential conversion, and some may be better suited to mixed-use redevelopment, depending on their physical characteristics, location, planning requirements and market demand.”

Tan proposes an outcome-based urban regeneration incentive framework, where the level of support is aligned with the broader benefits delivered by an approved project.

“Higher incentives could be considered where projects deliver social benefits, such as affordable housing, public transport connectivity, childcare or community facilities, preserve heritage or deliver meaningful green upgrades.

“The objective should be to incentivise successful urban regeneration by prioritising the desired socio-economic outcomes and making our ageing urban centres more liveable.”

Khong echoes this sentiment, noting that Malaysia has a growing stock of ageing buildings and underutilised urban sites that require redevelopment, rejuvenation or adaptive reuse. “This has been mooted several years earlier in Budget 2024 and this regeneration segment continues to face challenges.“

Budget 2027 should prioritise the implementation of urban regeneration initiatives and introduce more targeted measures to improve market absorption.”

This, Khong said, would help unlock dormant land value, revitalise city centres and create new economic opportunities.

Additionally, Tan highlighted that Malaysia’s housing debate has often focused on the upfront cost of building affordable homes.

“However, affordability is not a one-off outcome – it needs to be maintained throughout the life of the project.”

This is particularly relevant if the Government expands incentives for adaptive reuse, Tan noted.

“A tax deduction at the point of conversion may help make a project viable for the developer, but it does not necessarily ensure that the end-product remains affordable once it is completed and operational.”

Tan proposes a recurring tax incentive tied to the creation of affordable rental units through approved adaptive reuse projects.

“The incentive would continue only while the units remain within a fixed affordability threshold, meet the eligibility requirements and comply with appropriate reporting conditions.“

If rents subsequently exceed the prescribed threshold, the incentive for those units would cease.

”As an example, Tan highlighted that Australia’s former National Rental Affordability Scheme provides a useful precedent.

“It linked annual government incentives to the continued provision of eligible rental homes at rentals of at least 20% below market.

“Malaysia need not replicate that model, but the main takeaway is that government support should be linked not just to building affordable housing but to keeping it affordable.”

Olive Tree Property Consultants founder and chief executive officer Samuel Tan, meanwhile, is hopeful that Budget 2027 will address the widening gap between stagnant wages and property prices.

As such, he hopes that key initiatives that could be introduced (or reintroduced) include reviving the Home Ownership Campaign (HOC).

“Industry leaders are pushing hard for a refreshed HOC.

“For consumers, this means critical stamp duty waivers and developer discounts. It is a proven mechanism to clear overhang stock and sustain owner-occupier demand.“

There is also a need to redefine “affordable housing”.

Each region has its unique demographic features such as household income, built-up areas and prices.

A similar definition will not be able to meet the needs of these differing criteria.

This will affect the take-up rates of the affordable houses.

”Additionally, Samuel said access to financing remains a massive hurdle, especially for gig economy workers or self-employed professionals.

“Increasing the Housing Credit Guarantee Scheme eligibility threshold from RM500,000 to RM600,000 for high-cost urban areas (like Kuala Lumpur, Selangor and Johor) would open the door for the middle-income demographic.

“Instead of a clear cut-off, a tiered stamp duty exemption for first-time buyers purchasing homes in the RM500,000 to RM1mil bracket would ease the financial squeeze on the urban middle class.

”JLL Malaysia’s Tan, meanwhile, believes that there is a need to address cascading and overlapping tax costs.“

The Government should address the cascading effect of the sales and service tax (SST), particularly in the construction industry, where projects involve complex supply chains and contracts worth millions of ringgit.

“While business to business exemptions have been introduced, SST still lacks the broad input-tax credit mechanism available under the goods and services tax (GST), potentially leaving tax embedded at various stages of the supply chain.

”This, Tan said, can add to construction costs and ultimately property prices.“

There is also a similar issue with the stamp duty, where both subcontract and main contract instruments are chargeable, resulting in potential double payment of stamp duties along the contractual chain.

“While the quantum may be smaller, it nevertheless results in higher construction costs that will very likely be passed on to consumers.”

Tan said Budget 2027 would be an appropriate time to bring tax experts and industry stakeholders together, following the Prime Minister’s indication that the Government is prepared to study combining selected elements of GST with SST.

He believes that this could help identify practical mechanisms to reduce overlapping costs. Elsewhere, Khong is hopeful that the Government will continue supporting and focusing on logistics and industrial and data centre developments while introducing additional incentives to further attract foreign direct investment into real estate, infrastructure and strategic industries.

“These sectors remain as key growth drivers and have consistently delivered strong investor demand and, at the same time, strengthened Malaysia as a preferred regional investment destination.”

Khong emphasised that the property sector is “more than just bricks and mortar”.

“It is a major economic pillar that drives investments, creates jobs and supports growth across many sectors of the economy.

Budget 2027 should focus on stimulation of property transactions, unlock urban value and reattract capital.

“A vibrant property market will contribute well to a stronger, more competitive and resilient Malaysia,” he said.