Secondary market to taper as new homes become the focus

RPGT hike of 5% to almost all property classes will discourage real estate transactions, says chairman

By AFIQ AZIZ / Pic By MUHD AMIN NAHARUL

Budget 2019 gives more room to lower wage earners to own new houses, but the tax on sales of properties and incentives to remove the billions of unsold homes will hit the secondary market.

Royal Insitution of Surveyors Malaysia (property surveying) chairman Allan Sim Song Len said the increase in real property gains tax (RPGT) of 5% to almost all property classes will discourage activities and dampen real estate transactions.

“Wholesale investors or investment funds will have to factor in the higher exit cost which will reduce their return on investment projected across the fund life when making an asset acquisition.

“Vendors of sub-sale assets will be affected as they will now have to take into account the RPGT payable in their selling prices,” he told The Malaysian Reserve.

Finance Minister Lim Guan Eng had proposed to revise the RPGT rates on property disposals or shares in property holding companies from 0% to 5% for individuals; and from 5% to 10% for foreigners and firms after a five-year period.

Currently, the RPGT rates stand at 30% in the first three years, 20% in the fourth year and 15% in the fifth year for both corporations and individuals.

After the fifth year, companies are taxed 5% upon property disposal, while citizens are fully exempted from the RPGT.

On top of the RPGT revision, Sim also disagreed on the government proposal to revise the stamp duty charges for any property transfer valued higher than RM1,000,000 — from 3% to 4%.

PPC International Sdn Bhd MD Datuk Siders Sittampalam said the increase of 5% and 10% of the RPGT is considered huge and will not help the residential market to pick up in a overhang situation.

“It will only help those who buy for their own occupation. But for investors, by discouraging this market, there will be lesser houses to rent in the long term.

“We are taxing foreigners at 10% even after they hold the property for more than six years. It would not help the market as the pricing will be high. Subsequently, it would further halt supply,” he said.

Meanwhile, Hartabumi.com CEO Radzi Tajuddin said Budget 2019 had addressed the real issue of channelling the huge mismatch between supply and demand, especially for the affordable housing sector.

“It is good that the government has worked on the financing because home ownership is all about how buyers could be eligible to get a house. In the last budget, the government had touched so much on supply, now it’s the demand’s time,” he said.

The government had also announced the allocation of RM1 billion which will be set up by Bank Negara Malaysia to finance first house purchases, largely to cater for those with monthly incomes of less than RM2,300.

The fund — which would be provided for two years from Jan 1, 2019 — is created for buyers to help them purchase houses ranging up to RM150,000 with a low 3.5% financing rate compared to the conventional rates of about 6%.

Besides the initiative, the government also proposed the “property crowdfunding” platform, which aims to serve as an alternative source of financing for first-time homebuyers. Radzi said in theory, the platform — regarded as the first to emerge in the world — looks idealistic.

“It offers an out-of-the-box solution and we can leverage on the big data kind of technology. However, it is also a concern that it would fuel more speculation in the marketplace as it would encourage investors to block and invest in the affordable houses in a way to avoid taxes such as the RPGT,” he said.

The Securities Commission Malaysia said in a statement last Friday it will work with the relevant stakeholders to operationalise these measures and further details will be announced in due course.