Govt asked to deter property speculation via RPGT and stamp duty

Chang: 'Only those who transact their property after holding them for more than 10 years should be exempted from tax." 

PETALING JAYA: With the number of property transactions and new project launches having dropped since the Government’s market cooling measures imposed early this year, will there be further tightening of the market to rein in property speculation or will there be some easing in Budget 2015?

National House Buyers Association honorary secretary-general Chang Kim Loong, who supports further tightening, urged the Government to impose stronger measures to deter property speculators in the form of higher real property gains tax (RPGT) and stamp duty.

Chang said although Budget 2014 had reinstated the quantum of RPGT for profits made from property transactions that were owned for less than five years, “the measure is not enough as it does not differentiate between genuine long-term investors who buy properties for their children or as a hedge against inflation versus speculators.”

In Budget 2014, the RPGT for profits on properties disposed of within the first three years was at 30%, and for disposals within four to five years, the rates were 20% and 15%, respectively.

He said that for long-term investors, their portfolio would typically be held for more than 10 years compared with speculators who hold for three years (construction stage) to perhaps six years (to escape the RPGT).

“HBA is of the opinion that for the first two properties disposed, the RPGT can follow the Budget 2014 rates, but for the third and subsequent properties, the RPGT should be at a flat rate of 30% for properties held within 10 years from the date of acquisition.

“Only those who transact their property after holding them for more than 10 years should be exempted from tax,” Chang told StarBiz.

Property valuers and consultants, however, do not expect any further increase in the RPGT as they feel the market has stabilised to a more sustainable level since the introduction of the cooling measures in Budget 2014.

CB Richard Ellis Malaysia group executive director Paul Khong said the current measures were more than sufficient to cool the market and that “hopefully Budget 2015 will bring back some goodies to the property sector after the tightening of the market since 2012/13.”

Khong said a reduction of the overall RPGT rates would be welcomed by all sectors as “this will bring back some of the action to the investment market which should be healthy”.

He also called for a relaxation of the current financing guidelines in 2015 to ease end-financing for low and mid-priced properties, and the reintroduction of the developer interest bearing scheme (DIBS) for first-time house buyers, especially for those who qualify financially and preferably for their own occupation.

VPC Alliance Malaysia Sdn Bhd managing director James Wong said Budget 2014’s cooling measures such as the removal of DIBS and tightening of bank borrowings had reduced speculation in the property market to a large extent.

He does not expect any further changes to the RPGT, noting that the current rates were healthy and acted as a sufficient curb for property speculation, and will encourage more long-term investment in the property market.

Wong said the property market was undergoing a consolidation phase, and that any further changes to the RPGT “will send the wrong signal that the Government seems to be interfering too much in the property market and will further dampen the property market”.

However, he recommended an increase in stamp duty to a flat rate of 3% for the third property purchase, and also measures to regulate and control property investor clubs.

Khong & Jaafar Sdn Bhd managing director Elvin Fernandez said RPGT had played a smaller role in deterring excessive speculation compared with the ban of DIBS, and responsible lending guidelines.

“For now it could remain in place as it is. In the longer term RPGT must be aligned in a holistic way to play a part in the total framework of policy to keep property prices as close to their fundamentals as possible,” Fernandez said.

Knight Frank Malaysia managing director Sarkunan Subramaniam also felt that there should not be any further changes to the RPGT.

“The last revision (Budget 2014) has already incorporated a significant increase in the RPGT rates. If reviews are too frequent, they may not augur well for the industry as they would affect potential investors’ perception of Malaysia’s property sector policy,” he said. - The Star