This Lawyer Shares How To Calculate Stamp Duty For First-Time Homebuyers

Question: Prime Minister Ismail Sabri announced that first-time homebuyers will get 100% stamp duty exemption for properties priced RM500,000 and below. In a simple calculation, how much will homebuyers get to save?

Answer: In fact, we have existing laws provided under P.U.(A) 53/2021 and P.U.(A) 54/2021 which provide exemptions for stamp duty for both transfer and financing documents for first-time homebuyers who purchase residential properties worth not more than RM500,000.00 effective J1st January 2021 until 31st December 2025.

These exemptions are applicable for the purchase of houses from developers and in the secondary market (sub-sale transactions). In any event, the announcement from Prime Minister recently, on stamp duty waiver known as Keluarga Malaysia Home Ownership Initiative (i-MILIKI) is a welcome move to stimulate further the property market which has been substantially affected by the Covid-19 pandemic.

Under P.U.(A) 53/2021 and Prime Minister’s Announcement, if a homebuyer purchases a property priced at RM450,000.00, the stamp duty that he may save can be calculated as follows:

Formula for Stamp Duty Calculation:

(RM100,000.00 x 1%) + (RM350,000.00 x 2%) = RM8,000.00

With that, the homebuyer may save RM8,000.00 from purchasing his first house and we believe such an incentive would certainly encourage the younger generation to take this opportunity to make their first purchase of the property within the stipulated period.

Question: Do you think this initiative will ease the burden for first-time homebuyers in owning homes? Or the impact will be fairly minimal?

Answer: We believe anyone who makes their first purchase of a residential property will have many financial concerns, for example, whether they have sufficient monies to pay for the deposit, legal fees, stamp duty, bank valuer’s fees and many other expenses which may not be known to them when they decided to sign above the dotted line on the Sale and Purchase Agreement. And those are only the initial costs, eventually, there will be other costs such as the monthly financing commitments, renovation and maintenance costs, to name a few.

Among all the initial costs and expenses in acquiring a property, stamp duty is always considered to be one of the biggest expenses which burden the purchasers. Assuming that the move to waive the stamp duty is aiming to encourage the younger generation to own a property, and given the fact that the younger generation may have their financial struggles, we trust that any efforts to reduce and/or fully waive the stamp duty are encouraging and would definitely ease the first-time homebuyers’ burden.

Q: Do you think it is the right time to buy amid inflation?

Answer: Personally I would say yes, now is indeed the right time for first-time homebuyers to utilise the i-MILIKI initiative and buy their first dream house if they have such plans and sufficient financial means. It may be hard to project the inflation given the volatility of not only Malaysia but the global economic system as a whole. Having said that, purchasing a property should never be a situation which would stretch one’s finances to the extent that it would impose a great financial risk to him.

For first-time homebuyers, there are various options for them to consider. If housing projects are their preference, do note that since the launch of the Home Ownership Campaign (HOC) in 2019, stamp duty was fully exempted for residential properties worth up to RM1,000,000.00, and a partial stamp duty exemption for those priced between RM1,000,000.00 to RM2,500,000.00 provided that such developments have participated in the HOC. Unfortunately, the HOC ended on 31st December 2021.

Notwithstanding the above, following the recent Prime Minister’s Announcement, HOC is reintroduced again and will be valid until 31st December 2025, under this effort, properties worth up to RM500,000.00 are fully exempted from stamp duty. For first-time homebuyers who aim for a property above RM500,000.00, they are not forgotten too as the Prime Minister has also announced that for properties priced between RM500,000.00 to RM1,000,000.00, 50% stamp duty will be exempted. One additional advantage of the HOC is that there are no limitations on the number of properties one may purchase under the HOC in order to be benefited from it.

Be that as it may, we would have to wait for the relevant laws to be gazetted for more clarifications as there were no further explanations of whether such an initiative would cover the sub-sale properties or is only applicable for newly launched projects.

*Disclaimer: All views expressed herein are those of Messrs Teoh Pek Wei and shall not be treated as legal advice in any form. Readers are advised to consult their own legal consultant for any queries or concerns they may have.