The National House Buyers Association (HBA) has criticised the apparent collusion between some developers, valuers and banks for pushing up property prices to levels which it called “exorbitant” and said that stronger measures are needed to deter speculation.

This is a very good article about the current 'exorbitant' property prices in Malaysia. All credit goes to Lee Wei Lian (The Malaysian Insider). Happy reading!

‘Unholy alliances’ to blame for exorbitant property prices, says HBA
By Lee Wei Lian
May 04, 2011

The association recommended that the government implement stronger measures to deter speculation. — world-stay.com pic

KUALA LUMPUR, May 4 — The National House Buyers Association (HBA) has criticised the apparent collusion between some developers, valuers and banks for pushing up property prices to levels which it called “exorbitant” and said that stronger measures are needed to deter speculation.

HBA said in a statement that in addition to low interest rates and easy credit which had fuelled speculative activity, greed had taken over the market.

“A ‘unholy alliance’ exists between certain developers, valuers and banks,” said HBA.

“In an environment of hot demand, the banks work in cahoots with developers assisted by those wayward valuers. Our ‘teh tarik syndrome’ is also very relevant. When the price of condensed milk increases by 20 sen, the entire cost ‘teh tarik’ increases by 20 sen. Similarly, when the cost of construction increases by 20 per cent, the equivalent cost of housing increases.”

The association suggested that the government implement stronger measures to deter speculation as the 70 per cent loan-to-value ratio (LVR) mortgage cap introduced would be of limited effect.

“For those in the speculation business, the 20 per cent reduction in LVR will not really deter them,” said HBA.

It gave the example of a RM300,000 house, which would now require a 30 per cent downpayment, but this would be based on the subsequent progressive payments for a property under construction, after which the end-financing loan of 70 per cent kicks in.

“If he (the speculator) can flog the house off at a profit at this stage, he does not need to incur an additional sum to his housing loan,” HBA pointed out.

“Speculators or maybe ‘syndicates’ are also cash rich because of the roll-over system they are using. In other words, whatever profit they earned from the previous house, they put into the new house, thus the 30 per cent up-front is not a major deterrent factor. Those who buy en-bloc may feel the heat but when collaborating with their ‘friendly’ developers/ builders, terms and conditions may be ‘cushion off’.”

The association also called for the sliding scale Real Property Gains Tax (RPGT) rate to be reintroduced.

This would entail a one-time RPGT exemption after which the next two properties should be taxed starting at 30 per cent for properties disposed of within two years and a reduction to zero per cent for properties disposed after five years.

For third and subsequent properties, HBA is proposing that a 30 per cent flat rate RPGT would apply.

The association also proposed that a quota of low-medium and medium-cost houses priced between RM250,000 to RM550,000 be imposed on developers similar to the 30 per cent quota for low-cost houses.

“It has always been the Government’s aspiration for every citizen to have a roof over their head and the Government should continue to push this agenda,” said HBA.

The high prices of property in urban areas prompted the Najib administration to introduce a first-home ownership scheme in March in addition to the loan-to-value ratio cap in a bid to stave off discontent.

The measures pale in comparison, however, to efforts seen elsewhere in the region, such as China and Singapore.

The Chinese government last year introduced curbs on foreigners buying property and raised the minimum downpayment for first-time buyers to 30 per cent from 20 per cent and banks were ordered to suspend mortgages on third homes and above in some cases — in addition to hiking interest rates three times since October.

Singapore, meanwhile, raised stamp duty on new properties to as much as 16 per cent of the sale price to be paid by the seller if the house is offloaded within a year of purchase.

The amount that banks can lend for a second property has also been lowered to 60 per cent of the home’s value.

Source : The Malaysian Insider

Unduk Ngadau 2009 ~ Ms. Rowena

Photo source : http://blog.malaysia-asia.my/

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Yes. That is right.
I was surprised to read the report from the Star online today. Based on the Budget speech by the Prime Minister yesterday, I thought that a fixed tax  rate of 5% would apply to gains from the disposal of real property from 1 January 2010. Here is the screen shot of the relevant paragraph taken from the budget speech (click on the image for better view).

The Star reported that the Malaysian Government has proposed to reimpose real property gains tax (RPGT) for gains arising from property disposal.

Based on the Finance Bill, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond will still be subject to 5% tax.

If these rates of RPGT are restored come January 2010, I foresee that the property market will become less attractive. As I mentioned in my earlier post, the reintroduction of RPGT will be good for the property market as it will be able to control the rising of property prices due to manipulation / speculation by certain group of people. So the way I look at it, the government has made the right move to reintroduce RPGT as it is a good tool to counter speculation.

What do you think?

Read the full report here
Property gains tax makes comeback
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THE Government has proposed to reimpose real property gains tax (RPGT) for gains arising from property disposal.

Based on the Finance Bill, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond will still be subject to 5% tax.

The latest measure, which will come into effect in January next year, has been described as “a knock-out punch” by Deloitte Malaysia country tax leader, Ronnie Lim.

“It was merely four short sentences in the 2010 Budget speech. However, that short reference to RPGT carried a knock-out punch,” Lim said in a statement yesterday.

He pointed out that from the speech itself, many would have thought that a low rate of tax of 5% would apply to most gains arising from disposals of real property.

“Be prepared for a shock – this is not the case and the highest rate of RPGT will be 30%,” he said.

Most rates of RPGT from January 2010 will be restored to those prevailing immediately before its suspension in April 2007.

Lim said one notable difference was that the exemption from tax for disposals after the fifth year of acquisition has been removed.

“Even where a property was purchased over 20 years ago, a gain on disposal from 2010 will attract 5% RPGT (without any indexation of acquisition price to reflect current purchasing power of the ringgit),” he said, adding that a flurry of property transactions could be expected soon.

Concurring with Lim, OCBC Bank Bhd director and chief executive officer Jeffrey Chew described the measure as a counter-productive move in efforts to encourage property investments among local and foreign investors, particularly to attract real estate investment trust investors.

“Furthermore, this would make Malaysia’s property market less attractive compared to other neighbouring countries in the region despite our property prices being among the lowest in the region,” Chew said.

However, Khong & Jaafar Sdn Bhd managing director Elvin Fernandez gave the thumbs up to the RPGT, saying “it shows that Malaysia, like other Asian countries, is not for unfettered speculation.”

“The RPGT is an anti-speculative tool, not a revenue earner for Government coffers,” he added.

To promote home ownership and enhance the people’s quality of life, the Government has also proposed a scheme to allow Employees Provident Fund (EPF) contributors to utilise their current and future savings in Account 2 for home purchase.

Meanwhile, to encourage green technology in the property sector, building owners obtaining Green Building Index (GBI) Certificates from Oct 24 until Dec 31 will be given income tax exemption equivalent to the additional capital expenditure in obtaining such certificates.

Those purchasing buildings with GBI certificates from developers will be given stamp duty exemption on instruments of transfer of ownership.

The exemption amount is equivalent to the additional cost incurred in obtaining the GBI certificates. This exemption is given to buyers who execute the sale and purchase agreement from Oct 24 until Dec 31, 2014.

And to promote rehabilitation of abandoned housing projects, the Government will consider extending appropriate financial assistance to rehabilitate low and medium-cost houses based on the existing project list.

An allocation of RM200mil will be provided under the housing and local government ministry.

Under the Government’s initiative to provide housing facilities for the low and middle-income groups, the National Housing Department will provide 74,000 low-cost houses to be rented in 2010.

As published in the Star online, 24102009

Update 24 Oct 2009 : Only Five Per Cent Real Property Gains Tax Next Year, says Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah

"The real Property Gains Tax for the first year is five per cent and is the same for the second, third, fourth and fifth year," he said in clarifying a news report in the business page of the Star Saturday.

Read the full report from BERNAMA

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