Sunday, March 15, 2009

Tax Deduction Incentive for Property – Should I go for it?

The recent news for Malaysian that they may now eligible to claim up to RM10K tax deduction for the loan interest that they pay. I have summarized this news below:

  • Applicable to all types of properties (i.e. landed house, flat, apartment or condominium)
  • Applicable to those who buy the property between March 10, 2009 and Dec 31, 2010.
  • Applicable to one property only and to those who buy the property for living (non-rental) purposes only.
  • If you’re eligible, you can enjoy this tax deduction incentive for 3 consecutive years.
So, the question now is should we buy property during this economy crisis especially with this kind of incentive?

Few things that you may want to consider:
What if the property value drops after you buy it? Isn’t that possible during this bad economy?

[In my opinion]: I don’t think it will drop. Worst come to worst if it drops, I believe in long term the property will still appreciate down the road. If you scare, you have till Dec 31, 2010 and you can still wait and see the market condition before making any decision.

What if the developer cannot finish the construction as promised after your down payment?

[In my opinion]: Yes, I do think this can happen especially for those not reliable developers. Even for the reliable one, we need to be careful also during this bad economy. So if I were to buy, I would prefer to buy those existing finished construction properties. I don’t dare to buy any still under-construction property, do you?

Summary

If you’re jobless now or financially not stable, I don’t think you should buy any new properties for the sake of this incentive program. If you have already planned to buy property for quite some times and you’re not jobless now and financially stable, I think you should definitely make use of this tax deduction incentive. Good luck!

8 Comments:

Alvin Lim said...

Good post. Some of my friends are actually thinking about buying homes after the mini budget. I told them to think twice. Unless they are very sure they will still have jobs or support the house loan for the whole 2009 and 2010. :D

Better to wait till the sky is clearer and the storm is over. :)

After all, I feel the property market in Malaysia has yet to bottom out.

Kris said...

Yeah..I do think the same also with Alvin.

KLCI still at hovering around ~800++ points. Whereas most countries have at least lost like 50% of their high.

Michael Tsen said...

there is no such thing as job security unless you have already have a good exit plan or backup then you will have personal income security, not job security.

if you really want to invest into property, these are some points of consideration.

also don't forget the purpose of this deduction - to get money out from people to save today's recession because govt knows however much money they take out, it will just go down the drain ...

good luck !

ChampDog said...

@Alvin & Kris
The condition now is getting worse in Penang. Few companies such as Motorola is laying off 40 ppl, Marvel is closing down and also Spansion & Dell.

@Mike
Yupe, totally agree and also whether you can secure your own job it is your own responsibility too. The purpose is to save the economy and if we can make used of this money then it will be win-win.

forex-tiwisue said...

This is one of the strategies to save the nation economy. I agree to what you all have said, we have the responsibility to save our economy i.e. spending money but we must always "listen" to our pockets.

ChampDog said...

Yupe, I agree. We shouldn't simply spend. You can't save someone if you can't save yourself. :)

Nadlique said...

It MAY be a good time to buy now.

If it was me, I don't think I would be buying into an unfinished project though. Too risky. I'd be buying a property already completed.

Tax incentives can only be claimed for 3 years? Adoi...

ChampDog said...

Yes, it may be good time to buy now. Don't forgot it if you get 4% appreciation of your property, it is considered a very good investment already in my opinion.

See some of my old post talking about ROI for property that I would prefer to get 7% ROI from property investment:
http://financialindependent.blogspot.com/2008/02/calculate-investment-return-on-real.html

Btw, don't forgot investing in stocks right now is a good idea as well.


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