Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz announced on Friday (Oct 7) that RM372.3 billion will be set aside for Budget 2023 versus last year’s RM332.1 billion allocated in the previous budget.
In tabling Budget 2023, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the government has allocated RM15.bil for the Higher Education Ministry and RM6.7bil for various Technical and Vocational Education and Training (TVET) activities.
Budget 2023: Income tax cut by 2% for RM50,000-RM100,000 taxable range
The personal taxation rate will be reduced by 2% on taxable income ranging from RM50,000 to RM100,000 for domiciled individuals.
In tabling Budget 2023 in Parliament on Friday (Oct 7), Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said for the taxable income range RM50,001 to RM70,000, the rate will be reduced from 13% to 11%.
[LIVE] Tabling of 2023 Budget in Parliament
[LIVE] Special programme on 2023 Budget with former finance minister II Datuk Seri Johari Abdul Ghani and PKR deputy president Rafizi Ramli.
PETALING JAYA: Finance Minister Tengku Zafrul Aziz has tabled Budget 2023, announcing an allocation of RM372.3 billion.
This represents a RM40.2 billion increase compared to the RM332.1 billion allocated for 2022.
Around RM272.3 billion has been allocated for operational expenditure and RM95 billion for development.
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Here are the highlights of Budget 2023:
Education
RM55.6 billion allocated for education, the biggest in the budget for a ministry.
RM825 million in early school aid for students, with students receiving RM150 regardless of their parents’ incomes.
RM777 million for supplementary food programme (RMT), benefiting 800,000 students and 7,300 canteen operators.
RM2.3 billion to ensure students have a conducive and safe learning environment.
RM1.1 billion to repair and maintain all schools, including vernacular and religious schools.
RM430 million to construct five new schools in Sabah, Sarawak, Terengganu, Cyberjaya and Selangor.
RM20 million to improve facilities in special needs schools.
RM188 million to set up 10 Kemas daycare centres.
Development
RM1.5 billion for sustainable development.
RM562 million to implement the Sabo dam project.
RM510 million to improve road infrastructure to Pengerang.
Pan Borneo Highway to be completed by 2024.
RM11.4 billion for maintenance and repair of existing government buildings.
RM5.2 billion for maintenance of state roads.
RM150 million for the development of border towns near Thailand and Kalimantan.
RM3.7 billion for small and medium projects across the nation.
RM500 million on G1-G4 infrastructure projects.
Social Welfare
In total, Putrajaya will spend RM10 billion in welfare and Bantuan Keluarga Malaysia (BKM) aid.
RM2.5 billion in welfare aid benefiting 450,000 households.
RM2,500 in BKM aid for households earning less than RM2,500 monthly.
Up to RM1,250 BKM aid for singles and RM3,000 for single parents.
One-off RM500 incentive for female BKM recipients who give birth in 2023.
RM7.8 billion for BKM which will benefit 8.7 million people.
RM1 billion in welfare aid for the elderly.
RM1.2 billion to support disabled people to be financially independent.
RM10 million in e-hailing vouchers for the disabled.
RM8 million for social support centres.
RM734 million for MySalam programme. This will benefit 1.5 million people from the B40 group.
Voluntary Employees Provident Fund (EPF) contributions raised from RM60,000 to RM100,000 a year.
RM21 million in grants for operators of welfare homes.
Limits for Amanah Saham Bumiputera (ASB) and ASB2 savings to increase to RM300,000.
Government to provide incentives to establish more daycare centres for the disabled.
RM120 million for Kasih Suri Keluarga Malaysia programme, benefiting 200,000 housewives.
Security
RM431 million to procure new assets for the police.
RM42 million to upgrade police quarters.
RM118 million for the maintenance of armed forces homes.
RM28 million to upgrade prison staff quarters.
RM73 million to enhance cybersecurity.
The government will set up a national scam response centre.
Health
Total of RM36.1 billion allocated for the health ministry.
RM11 million for subsidies for mammograms and cervical cancer screening.
RM20 million to promote Malaysia as a medical tourism destination.
RM4.9 billion for public healthcare.
RM420 million to repair dilapidated hospitals and clinics.
RM1.8 billion to purchase new equipment for hospitals and clinics.
The government to set up a mental health centre of excellence.
RM10 million to purchase 3D printing machines for dental health services.
Allocations to treat rare diseases increased to RM25 million.
RM80 million for Socso health screening programme.
RM15 million for Agenda Nasional Malaysia Sihat programme to encourage healthier lifestyles.
RM80 million for the PEKA B40 programme.
Import duty and sales tax exemptions for nicotine replacement therapy products.
Economy
RM235 million to support the development of female entrepreneurs.
RM50 million for young trader scheme under Bank Simpanan Nasional.
2% reduction in income tax of micro SME operators.
One-off RM1 billion grant to all registered MSMEs and taxi drivers. To benefit one million recipients.
RM45 billion Semarak Niaga funds for entrepreneurs.
RM10 billion in funds from Bank Negara Malaysia (BNM) to automate and digitise SMEs.
RM200 million to boost income and productivity of smallholders.
GLCs and GLICs to invest up to RM50 billion in 2023.
Government-linked companies (GLCs) and government-linked investment companies (GLICs) to invest RM50 billion in 2023, including RM45 billion in direct domestic investments.
The government will provide incentives for multinational companies to establish operations in Malaysia.
RM100 million to support development of local technology companies.
RM10 million in matching grants allocated to help SMEs.
RM800 million to provide RM100 e-wallet credit for 8 million people in the M40.
Petronas will contribute RM2 billion to the National Trust Fund (KWAN).
RM1.4 billion to boost connectivity in the five main economic corridors.
Civil service
RM100 subsidy for civil servants for insurance coverage.
RM1.5 billion for RM100 increment for all civil servants between Grade 11 to Grade 56.
RM1.3 billion for one-off RM700 special aid for 1.3 million civil servants under Grade 56.
RM350 one-off aid for one million retired civil servants.
Aidilfitri aid for civil servants increased to RM600.
Special leave for over 500,000 teachers.
Higher education
RM15.1 billion allocated for the higher education ministry.
RM3.8 billion for scholarships and education loans.
RM6.6 billion for Bumiputera education loans.
RM6.7 billion for TVET training and education.
RM180 million to fund TVET training, benefitting 13,000 trainees.
Up to 20% discounts for PTPTN repayments from Nov 1 to April 30, 2023.
Environment
RM15 billion for flood mitigation initiatives.
RM2 billion to build retention ponds.
RM500 million to widen rivers in Kelantan.
RM3 billion for Green Technology Financing Scheme (GTFS).
RM150 million from Khazanah Nasional Berhad to support development of green projects.
RM165 million for Tenaga Nasional Berhad (TNB) to set up solar rooftops and EV charging stations.
Carbon tax to be introduced.
100 million trees to be planted by 2025.
The government will step up forest restoration projects.
RM100 million for ecological fiscal transfer (EFT).
RM36 million to support conservation of elephants and other endangered species.
RM216 million to clean rivers nationwide.
Job creation and community support
The MyStep programme will provide 50,000 jobs including 15,000 in the public sector and 35,000 in government-linked companies (GLCs).
RM750 million to upskill 800,000 workers.
RM100 million for Mitra to develop entrepreneurs.
Socso to provide incentives for employers to hire the disabled, Orang Asli, ex-convicts and women returning to work. The incentive worth up to RM750 a month will be given for three months per employee.
Socso will provide incentives for employers to hire jobless youths.
RM50 million to boost Bumiputera commercial property ownership.
RM20 million to set up new urban transformation centres (UTC).
RM11 million on mobile bank initiatives.
RM63 million for development of human capital.
RM50 million to support development of female contractors.
RM100 million for Khazanah’s Yayasan Hasanah to conduct various community initiatives.
Sabah and Sarawak
Total RM11.7 billion allocated for Sabah and Sarawak.
RM1.2 billion to improve the infrastructure in dilapidated schools in Sabah and Sarawak.
RM209 million to subsidise air travel to rural areas in Sabah and Sarawak.
RM1.5 billion to improve transport infrastructure in Sabah and Sarawak.
RM100 million to improve the water supply system in Sarawak.
RM250 million for expansion of the Sapangar Bay Container Port (SBCP).
Taxes
Personal income tax reduced by 2% for those earning between RM50,001 to RM100,000.
This will benefit over one million people in the M40.
Income tax exemptions of up to RM3,000 for Tadika and daycare fees.
Tax incentives to attract investors.
Government reiterates implementation of Tax Identification Number to widen tax base.
Tax incentives for local pharmaceutical companies will be extended.
Tax incentives and RM50 million to support development of aerospace components.
The government will provide special incentives for investors in the chemical and petrol chemical industry.
Import duties and sales tax exemptions for the purchase of film equipment.
Tax incentives for NGOs involved in sports at the grassroots level.
Tax incentives for green initiatives extended to Dec 31, 2025.
100% income tax exemption for manufacturers of EV charging parts.
Additional tax deductions for employers who hire former residents of juvenile institutions.
Government to introduce qualified domestic minimum top-up tax.
Tourism
RM200 million to promote tourism recovery.
RM90 million in grants to promote tourism activities.
New chartered flights to and from East Asia and the Middle East.
RM10 million to promote eco-tourism.
RM25 million in incentives to promote domestic tourism.
RM500 million in tourism financing from BNM.
RM10 million for the ThinkCity initiative in Kuala Lumpur.
Arts and Culture
RM50 million to support the local film industry.
RM102 million to support local artists.
RM5 million to strengthen national language programmes.
RM10 million to support preservation of local languages and cultures.
Commodities
RM200 million to subsidise the logistic cost for the distribution of essential goods.
The government will hold Keluarga Malaysia sales offering essential items at more affordable prices.
The government will continue measures to combat the illicit cigarette trade.
RM20 million in matching grants to support development of local products.
RM10 million to support the made in Malaysia campaign.
RM92 million for development of the halal industry.
Approved permit fees for import of EVs extended to Dec 31 next year.
RM256 million in monsoon aid for rubber smallholders.
Agriculture
RM1.8 billion in subsidies for farmers and fishermen.
RM228 million in aid for padi farmers. This will benefit 240,000 people.
The government will introduce an agriculture protection scheme.
RM1 billion to fund agrofood programmes.
RM56 million to support sustainable farming.
RM315 million for rubber planting programmes.
RM40 million to encourage smallholders to diversify their crops.
RM70 million to support the Malaysian Sustainable Palm Oil (MSPO) certification programme.
The government will support automation initiatives in the plantation sector.
Defence
RM17.4 billion for the defence ministry, including RM4 billion for the purchase of new military assets.
RM485 million for the maintenance of all MMEA ships and boats.
RM330 million for EV infrastructure.
Transport
RM180 million to improve bus services in Melaka, Kedah, Kota Kinabalu and Kuching.
Continuation of My50 RapidKL monthly pass to benefit 180,000 users.
RM16.5 billion for major transport infrastructure projects.
RM50.2 billion for the MRT3 project.
RM1 billion for the maritime and logistics industry.
Housing
Stamp duty discounts of up to 75% for houses worth between RM500,000 to RM1 million.
RM10 stamp duty for properties transferred between family members.
RM367 million to build people’s housing projects (PPRs), to benefit 12,400 new residents.
RM3 billion for housing credit guarantees.
RM40 electric bill subsidy to be extended.
Digital connectivity
Phase 2 of the Jendela project to involve RM8 billion in investments, including from industry players.
RM700 million allocated for Jendela to expand digital connectivity in 47 industrial areas and 3,700 schools.
Digital Nasional Berhad (DNB) to spend RM1.3 billion in infrastructure development to widen 5G internet coverage nationwide.
Youth and sports
RM305 million in loans for youths to start businesses.
The government will introduce a special internet package for youths at RM30 for three months.
RM400 million to continue the e-Pemula scheme, which will benefit two million youths aged 18 to 20.
The government will bear the costs of e-hailing, taxi, and motorcycle licences for youths.
RM145 million to improve sporting infrastructure nationwide.
RM154 million to develop the local sporting ecosystem.
RM20 million to develop a drag race circuit.
RM13 million to develop e-sports.
RM12 million to support disabled athletes.
Rural communities
RM305 million for the Orang Asli community.
RM2.6 billion for Felda, Felcra and Risda.
RM472 million to improve rural electricity infrastructure.
RM54 million to build 85 new bridges in rural areas.
Disaster management
Additional RM400 million in allocation for the National Disaster Management Agency (Nadma) to prepare for year-end floods.
RM100 million allocated for the national disaster relief fund.
RM20 million in grants for community associations to assist in natural disasters.
Others
RM1.5 billion for Islamic development.
RM150 million for the maintenance and repairs for educational facilities under Jakim.
RM364 million for research and development for higher education as well as science, technology and innovation ministry.
RM30 million to improve I-Saraan programme that will benefit 100,000 people.
All self-employed people will be required to contribute to Socso from next year onwards.
The government will introduce e-invoice similar to initiatives in France and Brazil.
The government will table a consumer credit bill in the second quarter of 2023.
Inflation likely to peak in the third quarter of this year.
PETALING JAYA: One could not help but notice that Bank Negara governor repeatedly emphasised in her latest speech – three times to be exact – that the Malaysian economy is no longer in a crisis.
Tan Sri Nor Shamsiah Mohd Yunus highlighted that the economic recovery is well underway, although she acknowledged that the future ahead will be “challenging, highly uncertain and unpredictable.”
Interestingly, in the same speech at the Khazanah Megatrends Forum 2022 yesterday, Nor Shamsiah warned that Malaysia could be left behind if no reforms are done.
“As a country, we must now focus on strengthening our economic fundamentals, resilience and flexibility.
“Our neighbours within the region are actively pressing on with reform measures. We run the risk of being left behind if we do not act now,” she said.
Amid speculation that a recession is imminent, Nor Shamsiah advised Malaysians not to act in a manner that jeopardises the recovery and the confidence of investors, which in turn can create a “negative self-fulfilling cycle.”
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Commenting on the economy, Nor Shamsiah noted that Malaysia’s investment activity and prospects continue to be supported by the realisation of multi-year projects.
The country’s exports have also been recording double-digit growth since the start of 2021.
Nor Shamsiah also said that the labour market has shown strength.
“Wages in both the manufacturing and services sectors have been increasing since the start of the year, at around 5% and 7%, respectively.
“Unemployment is now less than 4% and income prospects remain positive,” she said.
On price pressures, the central bank head said Malaysia’s inflation remains well anchored, with headline inflation averaging 3.1% year-to-date.
“It is largely supply-driven but we have also seen stronger demand with the reopening of the economy.
“That said, we project that inflation will peak in the third quarter of this year.
“In addition, the extent of upward pressures to inflation will remain partly contained by the existing price controls and the prevailing spare capacity in the economy,” she said.
Despite her optimistic view on the outlook, Nor Shamsiah acknowledged that rising geopolitical tensions and conflict, global inflationary pressures and extremely volatile financial markets will lead to slower growth in 2023.
However, she also pointed out that the fundamentals of the local economy and financial system are strong.
“The preemptive policy measures taken will help us to weather this storm,” she said.
With regard to the weakening ringgit against the US dollar, Nor Shamsiah said it is not a reflection of the state of the economy.
“The exchange rate is only one indicator among many.
“Like I said at the start, it is important to consider the strength and positive performance of the Malaysian economy.
“Growth is robust, the labour market is healthy and the financial system is resilient and continues to perform its role effectively,” she said.
Nor Shamsiah also noted that Malaysia has a strong external position with more foreign currency assets than foreign currency liabilities.
“Foreign currency borrowings only account for less than 3% of total federal government debt,” she said.
Between January and September 2022, the ringgit has depreciated by 10.2% against the US dollar.
The current depreciation of the ringgit is due to the strength of the US dollar.
Nor Shamsiah called upon corporate Malaysia to help maintain “orderly market conditions” by taking action that do not exacerbate the ringgit’s depreciation against the greenback.
“Bank Negara will ensure that our onshore foreign exchange market remains liquid, so businesses can be assured that all their foreign currency needs can be efficiently fulfilled.
“So there is no need to hoard or front-load US dollar purchases.
“Corporates and domestic financial institutions should also be prudent in managing their balance sheets.
“This includes to avoid creating new vulnerabilities, especially from foreign currency debt and financial imbalances, as well as hedging their risks appropriately,” she said.
As for businesses and investors that benefit from a ringgit depreciation, the central bank governor urged them to take advantage of the weaker ringgit.
“For example, for those in tourism and exports to increase production and capitalise on this opportunity, and for those with a global presence, to reinvest back home,” she added.
Khazanah Nasional managing director Datuk Amirul Feisal Wan Zahir, who also spoke at the Khazanah Megatrends Forum 2022, shared Nor Shamsiah’s views on reform initiatives.
He pointed out that Malaysia is still “too far down” the value chain of productive work and that growth has to be fully inclusive.
“Our past growth was based on foreign direct investments-driven, low-cost competitive manufacturing – this no longer serves at our current stage of development.
“Long term structural reforms are required – but these will require substantial resources.
“And future growth must not allow inequality to persist, it must be fully inclusive of all socio-economic classes, and fully include women – where structural norms have long impeded opportunities for this demographic,” he said.
Amirul also spoke on climate change, highlighting that there is much work to be done, globally and collectively.
“But this does not mean that all countries have the same work to do, the same amount of pain to bear, the same standards of accountability.
“There is nothing fair and equal about climate change,” he said.
He mentioned about the devastating floods in Pakistan, in which an area three times the size of the country of Portugal went under water, and yet Pakistan produces less than 1% of the global greenhouse gas emissions.
In order to meet critical climate goals, Amirul said the world needs to ensure a “just transition”, which is much more complex and nuanced than a common standard for all nations.
“Just six national entities are responsible for producing over 70% of the greenhouse gas already emitted in human history, namely the United States, the European Union, China, Russia, the United Kingdom and Japan.
“Malaysia’s contribution, as of 2020, has been a mere 0.37%.
“New ‘targets’ are not so easily attained by developing countries, who suffer the most from climate change, and yet historically have contributed the least to causing it,” he said.
Amirul also added that all businesses and organisations have an ethical duty to act immediately and must not just wait for regulations to be imposed.
“This is why Khazanah Nasional has already defined and adopted a Sustainability Framework which encompasses environmental, social and governance (ESG) standards.
“We have published these on our website to make them fully public, and they include carbon-neutral operations by 2023, net-zero emissions by 2050, 30% of board and senior leadership positions to be held by women by 2025 and ESG-linked key performance indicators for key leadership positions in our portfolio companies by 2023,” he said.
Repercussions of the US Federal Reserve's
aggressive interest rate hike cycle have emerged across the global
economy and in the US, as the US economy falls into technical recession
after two straight months of negative growth, final GDP data showed on
Thursday.
“Residential property transaction volume and values are up year-on year in 1H22.” Datuk Siders Sittampalam >>
SINCE the resumption of economic activities and reopening of
international borders, the residential property market has seen a
pick-up in activity.
According to the National Property Information Centre (Napic), the
residential property sector recorded 116,178 transactions worth
Rm45.62bil in the first half of 2022 (1H22), which was an increase of
26.3% in volume and 32.2% in value year-on-year.
However, in light of prevailing uncertainties such as the upcoming
Budget 2023, potential 15th General Election and macroeconomic
headwinds, can the steady trend so far be sustained for the remainder of
2022?
PPC International managing director Datuk Siders Sittampalam says it’s
“anyone’s guess” how the local residential property market will fare for
the remainder of this year.
“With plenty going on such as the looming elections and global economic
uncertainty, it could have an indirect effect on the property market,”
he tells Starbizweek.
Still, Siders says the residential sub-sector has been off to a good start this year.
“Residential property transaction volume and values are up year-onyear in 1H22 and it’s been the highest increase since 2016.
“This can be attributed to latent demand, post pandemic. Many that held
back purchases in the market are now back again (since January 2022),”
he says.
Siders adds that loan approvals have also picked up, adding however that approval rates are still below pre-pandemic levels.
He also points out that the increase in interest rates so far this year
has not had an impact on the market (in terms of demand).
“Going forward, I believe that volume and values should sustain, just
like how they were in the first half of this year. It will be steady,
barring unforeseen factors, be it domestically or externally.”
According to Napic, the property market performance recorded a rebound
in 1H22, a reflection of normalising economic activity as the country
moved towards endemicity.
“With the positive projection on economic growth by Bank Negara (at
between 5.3% and 6.3% in 2022), supported by the implementation of
various government initiatives and assistance, the property market
performance is expected to be on track.”
Meanwhile, CBRE|WTW in its property market performance for 1H22,
believes that moving forward, transactional activities should remain
resilient in locations with good accessibility and comprehensive
amenities.
“Developers are anticipated to remain prudent, focusing on established
townships and mature locations. In addition, upcoming launches would see
a shift towards more sustainable elements to meet buyers’ shift for
cost-efficient and eco-friendly homes.”
As at the first quarter of 2022, CBRE|WTW says the Klang Valley landed residential sector remained encouraging.
“Average transacted prices rose 6.8% year-on-year while transacted
volume increased 11.2% year-onyear (more than 9,100 units), but was less
than the 10,000 units transacted in the fourth quarter of 2021.”
CBRE|WTW says new launches picked up slightly in the second quarter, despite developers maintaining a cautious approach.
“Landed launches continue to perform well and launch prices of terraced
houses remained between RM500,000 and RM800,000, except for some priced
above the Rm1mil mark in the City of Elmina, Setia Eco Templer and KL
East.”
Meanwhile, locations such as Klang Valley South, such as Sepang, Salak
Tinggi and Kuala Langat remain the hotspots, says CBRE|WTW.
It says these locations recorded consistent growth, encouraged by industrialisation and good road accessibility.
“Several areas located in the north of Klang Valley are also hotspots of
new launches, typically in Rawang, Puncak Alam and Sungai Buloh.”
As for high-rise residential units, Siders says a market study needs to be conducted to ease the oversupply of such properties.
“Comparatively, landed properties tend to do well as there’s always demand,” he says.
Siders also believes that the government could consider bringing back the Home Ownership Campaign (HOC) to spur the market.
To help drive the sector, the government introduced the HOC in June 2020 under the Penjana initiative.
The campaign ended on Dec 31, 2021. Many industry observers and property
players believed that the HOC was a huge help to the market and urged
the government to extend the campaign period into 2022.
Meanwhile, CBRE|WTW says additional measures are still required to
improve market activities for the high-rise residential sub-sector.
“The waiver of stamp duty should continue. A continual increase of the
overnight policy rate (OPR) is expected in 2H22 amid the global
high-cost environment.
“Since project launches have been limited, competition would also not
intensify, with prices remaining stagnant. The cost of borrowing may
further impact demand and prices if there is an additional OPR hike
2H22.”
CBRE|WTW adds that the upcoming launch of Mass Rapid Transit 3 may
benefit property valuers along the route, including an increase in
project launches, particularly in Mont Kiara.
“Moving forward, developers may shift focus to offerings emphasising exclusivity and low-density living with better facilities.”
CBRE|WTW says the existing supply of high-rise residential units stood
at 68,555 units in 1H22, whilst 219,398 units are in the pipeline for
completion by 2024.
“The bulk of incoming supply will be in central Kuala Lumpur, namely the golden triangle area (30%).”
On market activity, CBRE|WTW says both the average transacted value and
asking rents are stable at RM779 per sq ft and RM3.80 per sq ft,
respectively, supported by the increased interest from homebuyers and
renters.
“The average occupancy rate also increased slightly to 64% due to
improved market conditions. Following that, project launches have been
limited and the focus is still on the sales of ongoing projects.
“Nonetheless, two transit-oriented development projects were launched in
1H22 in Pudu and Bukit Damansara, with unit sizes ranging from 480 sq
ft to 1,080 sq ft priced from RM360,000 and units sized from 1,001 sq ft
priced from Rm1.8mil and above.”
According to Napic, Penang, Kuala Lumpur, Johor and Selangor formed about 47% of the total national residential volume in 1H22.
“More than 10,000 units of new launches were recorded, down by 66.7% against 31,687 units in 1H21.”
Against 2H21, the new launches were lower by 13.3% (2H21: 12,173 units),” it says.
“Sales performance for new launches stood at 20.3%, slightly lower than 1H21 (20.6%) and 2H21 (28.1%).”
According to Napic, Johor recorded the highest number of new launches in
the country, capturing nearly 23.8% (2,509 units) of the national total
with sales performance at 31.8%.
Sabah recorded the second highest number (1,335 units, 12.7% share) with
sales performance at 10.6%. This was followed by Perak (1,317 units,
12.5% share) with sales performance at 19.4%.
Terraced houses dominated the new launches. Single storey (2,047 units)
and two-to-three storey (5,150 units) together contributed 68.2% of the
total units with sales performance at 22%, followed by condominium /
apartment units at 19% share (2,009 units) with sales performance at
12.4%.
By eu.ene MAHALIN.AM eugenicz@thestar.com.my
Positive1Hpropertymarketdatatrends
THE recently released property market data for the first half of 2022
(1H22) by the National Property Information Centre (Napic) showed that
the Malaysian property market has found a firmer footing over the review
period.
On a half-yearly basis, while transaction volume and value surged to a
new record high of 188,002 units worth Rm84.4bil, what was most
revealing is that the overhang market trend has finally eased, while
future and planned supply was reduced.
For the past four years, this column has been calling for stricter
measures to control the market’s oversupply situation and for property
developers to be more mindful of the market’s overhang status.
The data for the 1H22 shows that finally, some sanity has set in.
Having said that, as far as prices are concerned, the Malaysian House
Price Index (HPI), as seen in Figure 1, continues to show a declining
trend with the growth in the 1H22, slowing down to just 0.5%
year-on-year (y-o-y), dragged by a 2.5% y-o-y drop in Penang HPI, and in
terms of segment, detached homes and high-rises continue to dictate the
downtrend with a 2.3% and 0.5% y-o-y drop respectively.
An improved picture
For property overhang, this column aggregates the supply in the
residential segment and takes the data from both service apartments and
the Soho sub-segment to gauge the market’s overall residential overhang
status.
After all, it is the combination of the three that is the real market
supply in the residential market segment as shown in Figure 2.
In total, the residential overhang eased to 59,321 units valued at Rm42.59bil.
Although compared with a year ago, the number of overhang units and
value increased by 3.8% and 2.5% respectively, the overhang situation
for the residential segment improved as both the number of units and
value dropped by 6.5% and 4.4% respectively compared with six months
ago.
Nevertheless, the overhang situation within the high-rise segment (which
includes residential high rise, commercial service apartments, and Soho
units) remains elevated.
For the 1H22 period, Napic data showed that the overhang data is now at a
new record high of 45,502 units against 44,800 units as at end of 2021.
Only in terms of value, the 1H22 figure is relatively flat at Rm33.22bil against Rm33.32bil six months ago.
Overall, this translates to 76.7% of the overall market overhang in volume and almost 78% of the total value.
The overhang situation within the high-rise segment has indeed increased
as more than three out of four unsold properties are highrise units.
A steep drop
Figure 2 also shows the property market’s unsold units that are under construction.
From here, one would note that the 1H22 data showed a total of 108,826
units remained unsold valued at Rm60.95bil, down by 12.5% and 9.6%
compared with a year ago, and lower by 9.7% and 6.4% when measured
against the market’s position six months ago.
With the lower overhang and those under construction, overall, the
market saw total unsold properties down to 168,147 units worth some
Rm103.54bil.
Compared to a year ago, when the figure was 181,460 units worth
Rm108.93bil, the data for 1H22 saw a drop of 7.3% in volume and 4.9% in
value respectively.
When compared with the 183.918 units worth Rm109.69bil as at end of
2021, the 1H22 data showed a reduction of 6.4% in volume and 8.6% in
value respectively.
For the residential segment by state, the key overhang is located in
Kuala Lumpur and the states of Selangor, Johor, and Penang as they
account for 59% of total overhang units worth some Rm16.2bil, which
translates to 74.5% of the total overhang value in the residential
segment.
In terms of price points, properties marketed at above RM500,000 account for 43.4% of the market’s overhang.
For service apartments, Johor, Selangor, and Kuala Lumpur are key
geographical areas with the most overhang with a total of 96.8% of the
segment’s overhang in terms of units and 97.5% in terms of value.
Johor alone accounts for 68% of the segment’s total number of units and nearly 69% of the segment’s total value at Rm13.34bil.
Interestingly, in terms of the number of units, 89% of service apartment
overhang in Malaysia are priced at RM500,000 and above, valued at
Rm18.36bil, and they represent 95% of the total service apartment
overhang valued at Rm19.32bil.
As this column has repeatedly highlighted in the past that Malaysia has a
serious overhang issue, we are now finally seeing some light at the end
of the tunnel as the market has now seen a drop in future supply.
For easy reference, the data in Figure 3 for future supply includes
starts, incoming supply, planned supply, and planned new supply.
Overall, other than a 34% jump in purpose-built office space to 2.59
million sq m, all other segments are seeing a downtrend in future supply
with a reduction in the total number of units by between 8.1% for the
industrial segment to as much as 26.2% in future hotel room supplies.
The residential, service apartments and the Soho segment saw a reduction
of 16.3% in the total number of units to 1.196mil units from 1.430mil
units six months ago.
As a percentage of total in-stock, the future supply is lower by between
0.8 percentage points (pps) for the industrial segment to 21.1 pps for
the residential segment.
A word of caution though. Despite the reduction in future supplies, the
incoming supply for both the service apartment segment and Soho remains
significant at 104.4% and 92.8% respectively.
Despite the positives, the property market remains challenging as we are
still saddled with a high overhang as well as incoming supply. While
the positives are there based on the 1H22 data, it is not time to pop
the champagne just yet as it will still take a while (three to five
years) for a more positive trend to emerge.
Overall, the Malaysian property market is still up against a massive
over-supply situation and prices too are not expected to improve much,
as evident from the flattish growth or worse, negative, in the Malaysian
HPI.
Given the higher borrowing cost with an increase in the overnight policy rate, homebuyers are expected to remain cautious.
The US Federal Reserve will hold a new policy meeting on Tuesday and Wednesday, with the decision on interest rate growth being the limelight. It is widely anticipated that the Fed will deliver at least another 75-basis-point interest rate hike to tame inflation. This might further increase the value of the US dollar against other currencies, which is at its 20-year high. Driven by the Fed's aggressive rate hikes, the US dollar is viewed as "experiencing a once-in-a-generation rally." For many countries in the world, this might be the beginning of another nightmare.
The meeting will witness the fifth time that the Fed will raise interest rates. The direct reason is to ease the high pressure of inflation in the US. But if people dig the root cause, this is an inevitable consequence of US' blind and unlimited money printing to temporarily maintain "prosperity." In other words, in the face of the deep-seated problems exposed by the 2008 financial crisis, Washington has been powerless, and unwilling as well, to solve them. Instead, it was extremely short-sighted to cover up the crisis and curry favor with the Wall Street, while taking advantage of the hegemony of the US dollar to quietly treat the crisis like dumping wastewater - draining it to the world.
A super strong US dollar and the fall of other currencies will, to a certain extent, ease the scorching inflation in the US economy, but the world will have to pay for it, which is often referred to as "when the US is sick, the world has to takes pill." The ensuing severe inflation, economic recession and other problems have already appeared on a large scale in many countries. Thirty-six currencies around the world have lost at least one-tenth of their value this year, with the Sri Lankan rupee and Argentine peso falling by more than 20 percent, since the dollar strengthened.
This has not only worsened the already weak economies of Europe and Japan, but also forced a large number of developing countries to swallow the bitter pills of the economic recession caused by imported inflation. Countless families were impoverished overnight. This is a very abnormal situation that is not supposed to occur, but it is the cruel truth behind the US "containment of inflation."
In fact, since the end of World War II, the US has used dollar hegemony to carry out "financial looting" or "export crises" against other countries several times. As a widely popular phrase in the West goes, the US enjoys the exorbitant privileges created by the dollar and the deficit without tears, and used the worthless paper note to plunder the resources and factories of other nations.
Each round of dollar appreciation in the past decades has been accompanied by extremely bad memories: The Latin American debt crisis broke out in the first round, Japan suffered from the "lost two decades" during the second round and the Asian financial crisis took place during the third. Particularly in the Asian crisis, which is still fresh in many people's memories, more than 100 million middle-class people in Asia fell into poverty, according to the World Bank estimation. The strengthened dollar, time and again, cuts the world like a sharp blade.
Therefore, while the political elites in Washington boast of the "myth of the American system" and take credit for "alleviating the crisis," thousands of poor families around the world are being trampled by them. They are not unaware of this, but still collectively choose to be indifferent and arrogant, as if this is the privilege that the "hegemon" should enjoy. As US former treasury secretary John Connally put it in the 1970s, "The dollar is our currency, but it's your problem." Today, the dollar is once again the world's problem. In a sense, it's hard to believe that the "prosperity" of the US is clean and moral.
However, the crisis cannot be covered up forever. Washington keeps laying mines but never removes them, which will eventually explode the US itself. The incompetence of US financial policymakers has been exposed by the consecutive interest rate hikes that have contributed to the abnormal appreciation of the US dollar with the purpose of defusing the severe inflation.
For the US itself, what will rise accordingly are the cost of corporate financing, the pressure on residents to repay their loans, and the price of export production among others. Meanwhile, the credibility that the US dollar has as a global currency is being continuously exhausted by the US "beggar-thy-neighbor" policy. Now the anxiety and insecurity brought by the US dollar to the world has heralded the beginning of the decline of its hegemony - regarding Washington's insatiable exploitation, Europe, Asia, the Middle East and other regions have explored the path of "de-dollarization," leading to the inevitable diversification of the international monetary system.
The best way to restrain the rampaging hegemony is to practice true multilateralism. Whether it was the Asian financial crisis in 1997 or the global financial crisis in 2008, the world seemed to have stumbled more than once by the same stone, which, however, is not that firm anymore. The instability and fragility of international financial markets have once again become prominent. It is precisely at such times that the international community should be more determined to cooperate and build a reliable, systemic and long-term multilateral international financial system. This cannot wait.
The United States of America is in big trouble, short term and long term. In 2022, the stock market is crashing, bond market is down the most in 40 years, housing bubble is bursting, inflation is skyrocketing, debt is exploding, and GDP is shrinking. These are not temporary crises. Instead, they reveal systemic flaws in the American economy that is propped up by a rigged global financial system.
However, that fraudulent system is starting to crumble and the primacy of US dollar is in serious trouble, thanks to an emerging multipolar world. (Don't believe the nonsense that the US can keep printing infinite amount of dollars).
The US needs to default on its debt and start new. Declare bankruptcy and yet remain the #1 country. This will be the "Bretton Woods III" agreement.
Sounds ridiculous? Well, it's possible only if all the other countries are weak and nobody is strong enough to challenge the US.
This is why the US must not only crush Russia and China — its two biggest geopolitical rivals, but also weaken Europe. This paves the way for the US to establish a new global order which is similarly rigged and just as deceitful and corrupt — in order to prolong the American Century.
Dollar Hegemony
America's extraordinary power comes from the power of US dollar, which is the established global currency for trade. This also means that countries around the world have to accumulate US dollars in their foreign exchange reserves. But the US has been abusing its power by weaponizing the dollar through sanctions and confiscations of hard-earned reserves.
No wonder that China, Russia and others are seeking ways to circumvent the dollar in trade. Since 1999, the share of US dollar assets in central bank reserves has dropped by 12 percentage points—from 71 percent. Hence the share of US dollar in global reserves is now only 59%. When that number falls below 50%, the tectonic shifts in global finance will become more apparent to Americans.
To fully grasp the nature of the current world order, let's see how the US established the dollar as the world currency, carried about the biggest gold heist in human history, then defaulted on its obligations, but revived the moribund dollar with a clever deal. That's the story of Bretton Woods I and II.
Bretton Woods I - Gold-backed Dollar
WW2 was a wonderful thing for the US. First, it took the US economy out of the Great Depression. The US played the role of arms supplier and gladly watched European empires destroy themselves. Even before the war was over, the US brought in all the allies to Bretton Woods, New Hampshire, and said, "When the war is over, you will all be weak and broke. I will be the new empire and my dollar will be the global currency. And it will be as good as gold -- a guaranteed rate of $35 per ounce of gold."
This meant that if you have $35, you can go to a bank and get an ounce of gold!
The world agreed. When the war was over, everyone bought US dollar with gold and used it for trade. Huge amounts of gold were also physically transferred from Japan, Germany and other parts of the world into the vaults of the Federal Reserve Bank in New York.
This system worked until 1971 when the US suddenly declared that, "Oops, the dollar is not backed by gold anymore. If you have US dollars, they are just pieces of paper now. You cannot get your gold back!" People called it the "Nixon Shock."
1970s - When Fiat Dollar almost died
This was also the biggest gold theft in human history. But what could the world do? America had nuclear weapons and the mightiest military.
Of course, the switch to a fiat currency caused havoc. The value of US dollar fell precipitously and inflation skyrocketed. The US economy was in deep trouble. That's when the US elites came up with a clever idea to rescue the dollar and restore its primacy.
Bretton Woods II - The Birth of Petrodollar
How to make the dollar relevant? Hmm...What if everyone needed US dollar to buy something essential?
Like ... OIL. Brilliant!
This was the birth of Petrodollar.
Basically, the U.S. used Saudi Arabia’s oil to save the dollar. That is, Saudi Arabia (and other smaller producers) would sell oil only for US dollars. And to make sure that the Saudis don't get too powerful, they will be forced to recycle most of their profits back into the US economy. It was also a protection racket, which meant the US military would occupy Saudi Arabia and protect it from enemies.
Saudi King Faisal with Kissinger. Birth of Petrodollar. But why would the Saudis agree to this? Because the U.S. make Saudi Arabia the new king of oil and the most influential Middle East power ... after crippling Iran.
Win-win for the US.
Thus, the U.S. armed and funded Saddam Hussein of Iraq to wage a decade-long war on Iran. US provided arms/intelligence. Germany and France provided deadly chemical/biological weapons to Iraq. Here’s Donald Rumsfeld with Saddam in 1983.
Of course, the same Rumsfeld would bomb Iraq and kill Saddam twenty years later.
Thus, the Petrodollar deal with Saudi Arabia could be called as Bretton Woods II. It extended the life of the American Empire by a few more decades.
Bretton Woods III -
For the last four decades, countries around the world have been foolishly working hard for US dollars, buying US treasuries, and funding the American Empire. But within the next decade, those U.S. treasury bills and bonds might be worthless. Deja vu all over again.
The U.S. needs Bretton Woods, Version 3. Somehow, the world needs to write off all American debt and start the racket anew. But … with America still as #1 How the hell could this happen?? This is how:
If the world is full of weak countries, they will accept the new rules -- just like they did in 1944 and 1974. Imagine a world where Russia and Europe destroy one another. Imagine a world where Japan and India attack China … and they all get destroyed. A world on fire, destroyed by passion and bombs.
In that world, America will come in as the savior at the last moment, stop the war, and make everyone a happy vassal.
Great Reset. Bretton Woods III. New World Order. Call it what you will.
Conclusion
The wheels are in motion. After eight years of provocation, the US successfully forced Russia to invade Ukraine. And the US also brilliantly pulled Europe into the mess. Europe's economy is being crushed and de-industrialized.
As for China, the U.S. is trying its best to start a war using Taiwan as the pawn. Japan is being asked to re-militarize and procure 1000 long-range missiles. The US needs a few more years to manufacture this mother of all wars. A lot depends on India, since Japan wouldn't want to be the only Asian country to attack China.
Four years ago, I predicted all this in the article "The Most Dangerous Decade." However, much of the world is still happy to be mesmerized and led into the slaughterhouse.
Only Russia and China can change how this story evolves. If Putin can quickly and decisively win the Ukraine war, he can force a peace settlement with Europe.
And China needs to accelerate the internationalization of Yuan. There is no de-dollarization without a robust alternative financial system. China also needs to muster the greatest diplomatic efforts to make peace with Japan and India, the two most potent adversaries and puppets of the US.
In the most optimistic scenario, the Global South or the people of the developing nations can bring into fruition a new fair world without catastrophic wars or financial devastation. As Sun Tzu said, "The supreme art of war is to subdue the enemy without fighting."
https://mail.google.com/mail/u/0/#inbox/FMfcgzGqQclQQKsTXRZGBMLRQzQzJwZB
Brent Neiman, a counselor
to US Treasury Secretary Janet Yellen, urged China to "take part in
coordinated debt relief for vulnerable nations to avoid the specter of a
systemic sovereign-debt crisis," Bloomberg reported on Wednesday.
Companies attending the 7th China-Eurasia
Expo in Urumqi, Northwest China's Xinjiang region said the increased
use of the yuan in cross-border trade in Central Asia is making business
more convenient and reducing foreign exchange risks stemming from the
use of the US dollar, and they called for more arrangements to ...
Paying more: A file picture showing a truck passing by stacked containers. The ringgit’s loss of value against the
US and Singapore dollar attracts attention, considering that Singapore is Malaysia’s second largest import source, next to China while the
United States is the fourth largest import source, according to economists. — Bloomberg
Economists call for
the preservation of fiscal and debt sustainability THE weakening
ringgit against the currencies of two of Malaysia’s largest …
