KUALA LUMPUR, Oct 30 — The average Malaysian wage earner looking to afford a new home will be disappointed if they had pinned their hopes on an immediate drop in the rocket-high prices through the government’s recent hike in the real property gains tax (RPGT).
Putrajaya’s bid to bring down house prices through the tax raise in Budget 2014 will see a slow and gradual decrease rather than an immediate drop, leading global property consultant firm Knight Frank said today.
According to its Malaysian branch managing director Sarkunan Subramaniam, the only way that Putrajaya can bring house prices down is by flooding 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 fewer transactions, 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.
In Budget 2014 tabled last Friday, Putrajaya doubled the tax to 30 per cent for properties disposed within three years of acquisition, 20 per cent within the fourth year, and 15 per cent on the fifth year.
Putrajaya also did away with 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.
Sarkunan, however, agreed that increasing the floor price for foreigners may beat off speculators, leaving only genuine foreign investors buying properties in Malaysia.
“Yes, certainly it will have an effect (on foreign investors). We’ve had a number of years where the RPGT was is low. (Prime Minister Datuk Seri Najib Razak) has been slowly increasing the RPGT, but this year the increase is substantial.
“Raising it from RM500,000 to RM1 million, however, is not a big issue... What they buy is easily above RM1 million,” he added, referring to foreign investors.
The RPGT hike was slammed by the Real Estate and Housing Developers’ Association Malaysia (REHDA) last week, calling the move “insignificant” and detrimental to the property sector.
The association was also critical of the decision to raise the floor price of property available to foreign buyers, saying this measure may encourage builders to reduce the number of smaller properties, such as studio or single-bedroom apartments, as they will not be able to price these in the seven-figure range.
On the opposite end of the spectrum, however, the National House Buyers Association (HBA) enthused over the measures, expressing confidence that it would go towards preventing a “homeless generation” of Malaysians.
The House Price Index by National Property Information Centre showed that in 2011 and 2012 the house price index recorded the highest increase for the last five years especially in Selangor, Kuala Lumpur, Penang, Pahang, Sabah, Perak and Terengganu.
Putrajaya has been under pressure to address the issue, after an increasing number of Malaysians complained that home prices have soared beyond what average wage earners could afford.
The government also committed to building more “affordable homes” to cater to low and medium-income households last week, promising another 223,000 such units throughout the country next year.
