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PETALING JAYA: A property expert has urged the government to review the rent-to-own (RTO) mechanism announced in the 2020 budget to prevent a situation in which buyers have to pay more for houses than they are worth.
Chartered surveyor Ernest Cheong told FMT the mechanism was weak because it required potential buyers to pay for houses at prices fixed earlier than at the point of purchase.
The scheme is for the purchase of a first home worth up to RM500,000 and will see an applicant rent a property for up to five years.
After the first year, he will have the option to purchase the house at the price fixed at the time the tenancy agreement is signed.
Cheong said this would look like a good deal on paper given the conventional wisdom that property prices could only go up.
“But this is not true,” he said. “There are numerous factors affecting property prices, such as location, demand, the economy and so on. The price at the point of tenancy may well go down five years down the road.”
He described the current property market as soft and said prices were already dropping.
The global economic uncertainty made it doubtful that prices would recover soon, he added.
Cheong also said circumstances might change for RTO applicants in five years to make the set prices unaffordable to them.
He said it would be fairer and more sensible if the purchase price was based on current market prices at the time an applicant made the decision to buy it.
National House Buyers Association secretary-general Chang Kim Loong also commented on budget proposals pertaining to property, saying his group was disappointed that the government would continue to impose a 5% Real Property Gains Tax (RPGT) on those selling their houses five years after buying them.
“The government should be punishing speculators and not genuine sellers,” he said.
“The current RPGT setup does not differentiate between genuine long-term property investors and property speculators.”