The recent budget dropped a double whammy for property buyers: An increase in real property gains tax (RPGT), ranging from 30% to 15% within five years, and the prohibition of Developer Interest Bearing Schemes (DIBS) where developers pay for interest on buyers’ loans during construction.
What will be the impact on the property market? According to property consultants CH Williams Talhar & Wong, an increase in RPGT would cause property transactions to drop, as they did this year when RPGT was increased in Budget 2013.
Indeed, outside of stampedes on projects like Sime Darby’s Bandar Bukit Raja, YTL Land’s Fennel, SP Setia’s Seri Mutiara apartments in Setia Alam and Setia Eco Hill in Semenyih as well as Eco World’s debut previews, the market of the last two years has cooled compared to the double-digit bull runs of 2010 and 2011.
While total property transactions dropped about 1% last year after having climbed more than 10% in 2010 and 2011, the number of home sales in the first half of this year dropped about 13% compared to the first half of last year.
This was from around 136,000 units to about 119,000 units, according to the Ministry of Finance’s National Property Information Centre (Napic). Number of home sales dropped by about 16% in Selangor, and by almost half in Kuala Lumpur!
“Since early 2012, when Bank Negara imposed the property responsible lending guidelines, we have seen the market slow down,” says MIEA president Siva Shanker. “Before that, it was a bit of a free-for-all. Anyone could get all sorts of loans, especially in the primary market.”
