Budget 2020: 'It’s a low-profile Budget, but better than an overambitious one,' says IDEAS

PETALING JAYA (Oct 11): It is a very “low-profile” budget overall, observes the Institute for Democracy and Economic Affairs (IDEAS) senior fellow Dr Carmelo Ferlito.

“It is as if the government would want to stay in a “wait-and-see” position. But of course, a “stationary” budget is still better than an overambitious one,” Carmelo tells EdgeProp.my when commenting on Malaysia’s Budget 2020 which was tabled in parliament today.

What Budget 2020 needs or lacks, according to him, is a new strategy on taxation. 

“A new strategy as in moving beyond introducing new taxes, but reforming the system,” offers Carmelo citing a reformed and more progressive Goods and Services Tax (GST) to replace the current Sales and Service Tax (SST) as an example. 

He proposes the introduction of different GST rates for different purchases, including a higher “luxury” rate for purchases associated with higher income households.

Regarding the introduction of the rent-to-own (RTO) financing scheme for homebuyers who are unable to afford the initial 10% deposit and access to financing to purchase a home, Carmelo says it does provide an easier opportunity for them to own a house. 

However, he cautions that people must avoid being overexposed to mounting debt. “I understand the nice desire to help first-time home buyers, but by proving easy credit to those who cannot even afford the 10% down payment, in my opinion, it is not really helping them but instead putting them at more risk of financial instability in the long run,” says Carmelo.

“A house is a long-term [commitment] and in this period, difficult moments can arise,” he adds.

Carmelo also expresses similar sentiments to the Youth Housing Scheme extension announced in the budget. The scheme offers a 10% loan guarantee through Cagamas to enable borrowers to obtain full financing and a RM200 monthly instalment assistance for the first two years (limited to 10,000 home units). 

“The desire to help [the youth] to purchase a house should not be stronger than the imperative of avoiding overexposure,” he says.

Regarding the lowering of the threshold for foreign buyers (for condominiums and apartments in urban areas) to RM600,000 in 2020, Carmelo welcomes the proposal.

“It may not solve the issue (of oversupply) totally, but it is still helpful as it allows the market forces to be at work,” says Carmelo, hoping it will help foreigners who have settled down in Malaysia.

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