GEORGE TOWN, Nov 13 — The hike in the Real Property Gains Tax (RPGT) is likely to fail in discouraging property speculators, industry experts have warned as they joined critics in dismissing the measure meant to stop real estate prices from spiralling out of control.

At a dialogue here, the experts agreed that doubling the RPGT from 15 to 30 per cent for properties disposed within three years of purchase would not deter investors from making speculative purchases, particularly if they still have confidence in the buoyancy of the market.

“Most high-rise buildings take 36 months (three years) to complete so for an investor, it is nothing to purchase a property and wait for completion before flipping it for a profit and he will only need to pay 20 per cent RPGT,” Real Estate and Housing Developers Association (Rehda) Penang chairman Datuk Jerry Chan pointed out.

International chartered accountancy firm KPMG’s audit partner Ooi Kok Seng agreed that the new RPGT rate would not deter speculators from continuing to make their profits from properties.

“They could actually circumvent the RPGT of 30 per cent by purchasing a property under their trading company and declaring it as a company asset and when he dispose of it, he need only pay 25 per cent in corporate tax, not RPGT,” he pointed out.

In the recently announced Budget 2014, property buyers will have to pay RPGT of 30 per cent if they dispose of the property within three year period from the time of purchase.

Subsequently, the RPGT rate for properties disposed off after four years is 20 per cent and after five years is 15 per cent.

For sales made in the sixth and subsequent years, no RPGT is imposed, whereas companies are taxed at five per cent.

Putrajaya also forbade the Developers Interest Bearing Scheme (DIBS) in which the developer pays the interest payments for the buyers’ loans during the construction of a property, which was seen as an incentive for speculation.

The minimum price of property that may be purchased by foreigners was also doubled by Putrajaya from RM500,000 to RM1 million.

Ooi added that even if the investors were to purchase as individuals and dispose of the property within the three-year period, the RPGT rate was only 30 per cent, which is affordable for investors.

“We must remember, they still have the remaining 70 per cent of the profit so it is nothing for them,” he said.

Both Ooi and Chan were speaking at a post-budget dialogue session moderated by real estate agent Henry Butcher’s director Dr Jason Teoh to discuss the implications of several Budget 2014 measures such as GST, RPGT and developer interest bearing scheme (DIBS) on the property sector.

Ooi and Chan are not alone in their critique of the RPGT.

According to leading global property consultant firm Knight Frank last month, the effort to bring down prices by tweaking the RPGT rates would only result in a very slow and gradual dip.

The managing director of its Malaysian branch, Sarkunan Subramaniam, said the only way that Putrajaya could bring house prices down was to flood the market with new properties.

“I also feel even though the RPGT has been introduced, I don’t see it will bring house prices down. You may have lesser transaction, but I don’t see the value going down,” Sarkunan told reporters here.

In order to encourage more low and medium-cost houses to be built, he also suggested more incentives for private developers instead of relying on efforts by the government.