Describing the proposals for the property sector as “apt, correct and measured”, property professionals said Budget 2014 will curb excessive speculation and help to solve affordability issues besetting the housing market.
In a post-budget commentary on Saturday, James Wong, the publicity chairman of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia (PEPS), said the proposals, along with macro-prudential measures taken by Bank Negara, would stabilise and strengthen the market.
The proposed establishment of a National Housing Council and the provision of RM1bil in a public-private partnership to boost the affordable housing sector was much needed as previous measures were ineffective, Wong said.
“The affordable housing model has to be tweaked to include pre-fab housing, releasing more land by government agencies and increasing urban area density, particularly in places near transport terminals in order to average out land cost,” he said.
“It is not that private developers do not want to build affordable housing. Land prices have gone up too high in the Klang Valley, Penang and southern Johor. It is impossible for private developers to build homes priced between RM150,000 and RM450,000 in urban centres.
On the 30% tax on gains within the first three years of disposal in the proposed real property gains tax (RPGT) effective Jan 1, 2014, Wong said such measures in previous budgets for 2012 and 2013 were ineffective as an anti-speculation tool. The latest move would give RPGT more bite, he said.
“The budget promotes properties as a long-term investment, not something to be flipped to make short-term gains,” he said.
The Budget 2014 review of the RPGT has extended the quantum of increase from 15% within the first two years of disposal to 30% within the first three years of disposal. It has also re-imposed a prevailing 5% tax on companies and non-citizens in the sixth and subsequent years.
The new RPGT, and the removal of developers interest bearing scheme (DIBS) which enable buyers to pay a 5% or 10% downpayment with mortgage payments kicking in until the property is completed, would also stamp out bulk buying by foreigners, Wong said.
Although this would affect Iskandar Malaysia in southern Johor, over time the proposed measures would bring about confidence into that market as there had been “too much hype and speculation going on there”, he said.
The exemption of RPGT between 2007 and 2009 and the entry of DIBS in early 2009 created fertile ground for speculation. Home prices have increased by between 20% and 30% annually in urban centres, a situation PEPS president Lim Lian Hong said was “unhealthy” and needed to be corrected.
“Research by RAM (Ratings Agency Malaysia) into the past 50 years shows that a steady annual growth of 7% is healthy for the market,” said Lim, who is also the executive director of Raine & Horne International Zaki+Parners Sdn Bhd.
He said the property sector was an important part of Malaysia’s economy – or any other country for that matter – and that excessive speculation had a destabilising effect on the overall economy.
“The RPGT is an important anti-speculation tool, and with the removal of DIBS, we expect the market to self correct in the next six to 12 months,” Lim said, adding that affordable houses must be build as quickly as possible.
On the impact of the 6% goods and services tax (GST), buyers will try to complete transactions before April 1, 2015 when the GST is enforced. There may be a dearth of launches after the GST is in place.
He said the imposition of GST, the removal of DIBS and the RPGT must be considered in totality.
Although housing is GST-exempt, there will be an impact on house prices. At the same time, the RPGT will weed out speculative elements and remove the artificial element in the market.
A check with a developer showed that they have removed DIBS packages starting yesterday.
The developer will discuss with its bankers and lawyers as there is a lack of clarity when the scheme is prohibited. The move would not be retrospective, a marketing personnel said.
Separately, in a statement, C H Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen said it was “surprised at the quantum”.
Foo said he had reservations that foreigners had been discriminated against with a 30% RPGT imposed for all five years.
“Considering that foreign investments in Malaysian properties have been consistently encouraged, RPGT should have been equally applied to Malaysians and foreigners at the same rate.” he said.
