Saturday, 26 October 2013

Malaysia's high property taxes may not stop prices going up, sub-sales residential houses likely to soar!


The increase in Real Property Gains Tax (RPGT) will dampen speculation but it is unlikely to stop house prices from escalating and may even lead to a rise, say developers and consultants.

Real Estate and Housing Deve­lopers Association (Rehda) president Datuk Seri Michael K.C. Yam said the drastic increase to 15%-30% from 10%-15% previously would discourage any would-be speculator.
 
“Having said that, I have no strong evidence that speculation was one of the main reasons that pushed up property prices. There were some hot spots but it was definitely not on a nationwide basis,” he told The Star.

Property prices in the sub-sale market, added Yam, could increase if homeowners decided to defer selling to avoid the new tax rates.


The sub-sale market, he said, comprised 70% of residential transactions and a decrease in market supply would be inevitable if homeowners delayed selling.

“This means buyers will move to the new properties market and further increase the demand-supply imbalance there. So, a possible side effect is that it could even move prices higher,” he said.

The flat rate of 30% RPGT for six years on foreign-owned properties, said Yam, would also hurt developers during their promotions abroad.

CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen said the doubling of RPGT to 30% would lessen or stop speculation but that in the long-term, this would only make the market more manageable instead of stopping prices from going up.

However, he said limiting foreigners to buying properties worth RM1mil and above should only be applied to major cities like Kuala Lumpur, Johor and Penang.

Khong & Jaafar Sdn Bhd managing director Elvin Fernandez said increasing the RPGT at this stage would also arrest undue price hikes, which was usual before the implementation of Goods and Services Tax scheduled for April 2015.

Deloitte Malaysia RPGT leader Tham Lih Jiun said property price escalation was due to other factors besides speculation, including rises in construction cost and building materials as well as land scarcity.

However, Johor Rehda branch chairman Koh Moo Hing said the increase in the ceiling price for foreigners was expected to have a “negative impact” on the state’s property market, calling it “not good news” for Iskandar Malaysia.

 Value of sub-sales residential properties likely to soar

THE market value of sub-sales residential properties is expected to increase in Penang this year.

ERA Malaysia president Dr Lee Ville said this was because there was still a gap between sub-sales pricing and pricing of properties in the primary market.

“For example, the price for a sub-sales condominium in Gurney Drive area is 20% to 30% lower than that of new properties in the neighbourhood.

“Therefore, there is still room for sub-sales pricing to increase,” he said.

Dr Lee added that the sales of most ERA associate members were registered in the sub-sales segment.

He said there was a need in Penang for more properties with 1,300sq ft to 1,400sq ft in built-up area, priced at around RM400 per sq ft.

Dr Lee spoke at ERA’s Malaysia 2013 Business Conference & Gala Dinner held at Flamingo Hotel in Penang recently.

Also present was ERA Malaysia managing director Christopher Lim.

Dr Lee said the demand for properties in Penang had not softened.

“It appears to be so because bank loans are more difficult to secure these days. Some one-third of the housing loans get rejected, affecting the transactions of properties in 2012,” he said.

On the 2014 budget, Dr Lee said ERA hoped the Federal Government would leave the real property gain tax (RPGT) alone.

Meanwhile, Lim said there was no overbuilding of residential properties in Kuala Lumpur.

“There is still a strong demand for properties priced between RM600,000 and RM1.2mil.

“The population in the Greater Kuala Lumpur area, presently standing at about six million, is growing. It is expected to reach 10 million by 2020, so there is a need for more housing,” Lim said.

Sources: The Star/Asia News Network

Related posts:
1. Malaysia Tax Budget 2014 Updates 
2. Malaysia's Budget to increase real property gains tax (RPGT) will dampen market short term but rise up prices
3. Time for crucial fiscal reforms: Malaysia Budget 2014
4. MaGIC, Malaysian Global Innovation and Creative Centre to spur entrepreneurship?

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