/// West Malaysia Property News
Reducing Speculation in the Property Market May Disrupt Healthy Property Market Growth
The profit on transaction within the
first three years has been raised to
30%, 20% in the fourth year, 15%
in the fifth year, while property held
for more then five years will not be
taxed.
Real Estate and Housing Developers’
Association (REHDA) president, Datuk
Seri Michael Yam
Given the comprehensive and
wide-ranging nature of the Budget
2014 measures to rein in excessive
speculation in the property market,
all the stakeholders, irrespective of
whether one is looking to buy or sell
or acting as market mediators, are
bound to be impacted in one way or
other by the measures come Jan 1,
next year.
The budget measures are among
the most pervasive and some
say “rather tough” on the market.
Whether one is a potential
house buyer, seller, developer
or consultant, the multi-pronged
measures have a good chance of
influencing their decision making.
Tailored to promote a more stable
and sustainable property market,
the reinstatement of the full real
property gains tax (RPGT), removal
of developer interest bearing
scheme (DIBS), affordable housing
initiatives by the Government, and
higher price threshold for foreign
buyers will undoubtedly bring forth
some major changes in both the
demand and supply sides of the
equation.
Market players, especially
developers, will have to brace
themselves for greater competition
in terms of product offerings
and pricing, targeting buyers and
financing facilities.
For starters, more affordable
residential projects are expected to
be launched in the coming months
since an incentive of RM30,000 a
unit will be granted to developers
who build such houses.
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“If the bulk of the market is
controlled and subsidised to some
extent in varying degree, should
the Government be too aggressive
in intervening in the free market
spectrum of the housing market?
This time around, foreign buyers
are also feeling the brunt of
these measures. Profit from their
transactions within the first five
years will be taxed at 30%, while
transaction from the sixth year
onwards will be taxed at 5%. The
price bracket for houses that
foreigners can purchase has
also been raised to RM1mil from
RM500,000.
“The needs of the mass market is
already taken care off, so shouldn’t
those who wish to acquire a lifestyle
and higher specification and prime
location home be prepared to pay
more? A one-size-fits-all measure
applied universally may have
drawbacks in that not only does it
impact that which the Government
aims to control, but it also affects
negatively healthy market forces,” he
concedes.
In terms of financing facilities,
developers can no longer offer
products for sale under the DIBS,
which means property buyers will
have to bear the bank interest rates
themselves during the construction
period. Buyers can no longer just
pay the minimum 5% or 10%
deposit downpayment and only
start to service their loans after the
delivery of vacant possession of
their property.
Top that up with the proposed
6% Goods and Services Tax come
April 2015 and market players
are practically staring at a slew of
challenges ahead of them.
CB Richard Ellis (Malaysia) group
executive director, Paul Khong calls
the Budget a relatively tough budget
especially for the property sector in
2014.
“The dismantling of DIBS will affect
the new launches in the mid and
mid-high end segments, especially
in the high-rise residential market.
RPGT, however, will cool off the
entire market as it applies to all
sectors and curb speculators looking
for short-term gains,” he observes.
Speaking up for the developers,
Real Estate and Housing Developers’
Association (REHDA) president,
Datuk Seri Michael Yam says the
measures to curb speculative
activities in the market may disrupt
the healthy and orderly growth of
the property market.
Surmising the concerns of his
fellow developers, Yam questions
the necessity for the Government’s
intervention.
Yam explains that the price increase
of property was primarily driven by
cost-push factors (input costs of
construction, particularly material
and labour, land bought at market
price, and compliance costs) and in
some urban areas, an imbalance of
demand and supply.
And in the longer term, inflationary
pressure and lack of supply will
continue to drive price, he contends.
“Fundamentally, data points to the
overall shortage of supply compared
with demand attributable to a
growing population and increase
in the house buying group. This is
more acute in the economic centres
of Greater KL, Penang and to some
extent Iskandar region,” Yam says.
He points out the increase in RPGT
would cause recent purchasers
to retain ownership for a longer
period beyond the five-year holding
period, thus reducing supply into
the sub-sale market. “As such,
would-be purchasers of older
properties would now turn their
attention to the new supply market
which could consequently tilt the
demand and supply equilibrium
and add to further price increase in
high demand enclaves and landed
housing,” he observes..
Giving the thumbs up for the
budget initiatives, National House
Buyers Association (HBA) honorary
secretary-general, Chang Kim
Loong says what Malaysia needs is
a vibrant and sustainable housing
market based on real demand,
and hopefully, the anti-speculative
measures will be effective in
stabilising the market.
“We certainly hope the measures
will stem the steep rise in property
prices that has affected the lower
and middle income groups that
typically comprise property priced
below RM200,000 for the lower
income and up to RM500,000 for
the middle income group.
“The higher RPGT will hopefully slow
down speculative effects which has
resulted in higher property prices
in recent years. It will not affect
genuine house buyers who buy
for own occupation or for longterm investment. Besides, buyers
of residential property can seek a
once-in-