AUGUST 18 — Mark Twain once said “Buy land, they’re not making it anymore.” This is easier said than done for a vast majority of Malaysians. House price inflation has grown at a faster pace than income, making home ownership seem like a pipe dream for the majority of wage earners.
This, coupled with the contracting Malaysian economy as a result of the Covid-19 pandemic has seemingly pushed the dream of home ownership further away.
For those who have already purchased property and are looking to sell, the property market has been soft. A comparison of volume of transactions of residential property between Q1 2019 and Q1 2020 saw a 9.9 per cent dip.
The Short-term Economic Recovery Plan (Penjana) announced by the Prime Minister has introduced a couple of tax measures aimed at reviving the property market by reducing the entry and exit cost for home buyers and investors.
The first tax measure is a stamp duty exemption for any instrument of transfer and loan agreement for the purchase of residential property with market value between RM300,000 and RM2.5 million under the reintroduced National Home Ownership Campaign (HOC).
The exemption is given as follows: (i) For sale and purchase agreements (SPA), the first RM1 million of the market value of the residential property is exempted. Any amount exceeding RM1 million will be subject to stamp duty at 3 per cent and (ii) For loan agreements, 100 per cent stamp duty exemption is applicable.
The SPA must be signed during the period June 1, 2020 to May 31, 2021.
This incentive is given, provided a minimum 10 per cent discount from the original price is given by a registered property developer under the HOC.
The stamp duty exemption will effectively result in cash savings of up to RM39,000 on the instrument of transfer for property valued at up to RM2.5 million and savings of up to RM12,500 on loan agreements for borrowings of up to RM2.5 million.
The second tax measure is a much welcomed real property gains tax (RPGT) exemption. This exemption is granted to a Malaysian citizen who disposes up to three units of residential property.
It is important to note that the residential property disposed of must not be acquired during the period from June 1, 2020 until December 31, 2021, by way of a transfer between spouses or by way of a gift between spouses, parent and child, or grandparent and grandchild.
Furthermore, the SPA or instrument of transfer (where there is no SPA) for the disposal must be executed between 1 June 2020 and 31 December 2021, and duly stamped not later than 31 January 2022.
Where the contract for the disposal requires the prior approval of the Federal or State Government, the said approval must be obtained on or after 1 June 2020.
There has been a lot of discussion on who really benefits from the above incentives. After all, most men on the street would not be able to afford a million-dollar property or have up to three residential properties to sell.
Some observers opined that the stamp duty exemption is more of a boon to property developers than it is for the man on the street. They are not wrong, after all, the stamp duty exemption is geared towards property bought from the primary market and does not benefit the secondary market, which according to the National Property Information Centre, makes up 80 per cent of all residential property transactions in the country.
However, from a policy perspective the government is keen to help clear the overhang of residential properties (approximately 30,664 units valued at RM18.82 billion) in the hopes that the multiplier effect will spur the domestic economy which would at the end of the day, benefit the man on the street.
But while waiting for the multiplier effect to work its magic, potential home buyers and investors should consider capitalising on the above incentives during the incentive period.
* Shiranee Niles is a director of Tricor Taxand Sdn Bhd.
** This is the personal opinion of the writer(s) or organisation(s) and does not necessarily represent the views of Malay Mail.
