Malaysia restraining property boom

CHRIS METCALF commutes for 45 minutes to Singapore each day from Iskandar, a region just over the border in Malaysia, to work as a lawyer at Clyde & Co LLP.

“It’s too expensive to live in Singapore,” said Metcalf, who moved across the Johor Strait in June after finding he could no longer afford the island-state on a local salary and with four children. “We’re selling a house in the UK and when we do we’ll consider buying in Malaysia because it’s definitely better value.”

Malaysia is seeing the spillover from Singapore’s four-year property boom and its subsequent efforts to cool the market. Prices of homes at Horizon Hills, where Metcalf now lives, have jumped almost threefold over the past five years amid a flurry of foreign buying, according to data from property broker Knight Frank LLP.

Now Malaysia is taking steps to prevent its own real estate inflation from emerging and appeasing locals who say they can no longer afford to own a home. In last month’s budget, Prime Minister Datuk Seri Najib Razak doubled the minimum amount foreigners must spend on property and raised the capital gains tax to 30% on homes they sell within five years. The state governments of Johor, where Iskandar is based, and Penang, are considering additional tariffs on overseas buyers.

While Horizon Hills surrounds a golf course and is luxurious by Malaysian standards, homes cost far less than in Singapore. Four-bedroom houses in the 1,200-acre (487ha) development, popular with expatriates, are advertised online at US$270 (RM860) per sq ft (psf), compared with the US$503 psf asked for a four-bedroom public housing flat in Singapore’s central Bishan district.

Comparative costs

The average price of a new 1,000 sq ft condominium in Singapore is between US$800,000 and US$960,000, according to London-based broker Savills plc. A similar sized place in Kuala Lumpur costs about US$374,000, according to CBRE Group Inc’s Malaysian unit.

Singapore has ramped up efforts to bring down housing costs with measures such as linking borrowers’ maximum debt levels to their incomes, higher stamp duties and capital gains taxes. Home prices have still jumped 40% to a record since the island-state started introducing curbs four years ago. The gains led to Singapore being ranked the most expensive city to buy a luxury home in Asia after Hong Kong by Knight Frank in a wealth report in March.

Malaysia attracts

The difficulties of purchasing in Singapore have prompted potential buyers to explore Malaysia.

“Malaysia has certainly been the recipient of a lot of Singaporean money since the tighter cooling measures here,” said Nicholas Holt, Knight Frank’s Asia-Pacific research director. “Singaporeans probably top the list in terms of overseas buyers in Malaysia, most notably in Iskandar, but also in Kuala Lumpur and Penang.”

That’s prompting Malaysia to act, joining Hong Kong and mainland China in seeking to cool surging housing markets to help combat concerns over affordability and prevent a housing debacle from emerging in the financial system.

Bank Negara Malaysia shortened the maximum length on mortgages in July, saying household indebtedness has risen by an average 12% per annum in the past five years. Last month, the government barred developers from helping home buyers by absorbing some interest payments on loans.

Malaysians have accumulated Southeast Asia’s highest level of household borrowings at 80.5% of GDP, according to Bank of America Corp’s Merrill Lynch unit.

Priced out

B Shashikumar, a 32-year-old bank manager, wants to buy a home before he gets married.

“Even with my RM5,000 monthly salary, I can’t buy a house in Kuala Lumpur or Selangor below RM300,000,” he said. He spends three hours daily commuting to and from work in KL from Shah Alam, where he lives with his parents. “I’ll have to find one in another state. It’s difficult to get high loans for a house in the city.”

Average home values rose 43% to a record in the 4½ years to June, according to government data. Prices in Kuala Lumpur climbed 62% to RM605,711 between the start of 2009 and the end of the second quarter this year, said CBRE, citing government data. They rose 49% to RM298,697 in Penang and 37% to RM187,644 in Johor during the same period, the data showed.

Cooling measures

Cooling measures may slow home sales, according to consultants, including CBRE and Knight Frank. “The market is expected to self-correct in the next six to 12 months,” said Judy Ong Mei-Chen, a Kuala Lumpur-based executive director at Knight Frank.

Iskandar, a development zone spanning 2,217 sq km, three times the size of Singapore, started to develop in 2006 to compete for manufacturing and logistics business with its neighbour in the south. It’s aimed at piggy-backing on Singapore’s economic rise, just as Guangdong gained from Hong Kong, by offering lower-cost alternatives to manufacturers, food processors and energy companies.

Residential neighbourhoods featuring large homes, gardens and swimming pools, are being built. Spin-offs of foreign schools and universities are also opening offering cheaper international standard education than Singapore, including Britain’s Marlborough College, where Metcalf now sends his kids.

Legoland, Pinewood

Some high-profile projects, including the Legoland Malaysia amusement park and Pinewood Iskandar Malaysia Studios — a franchise of the UK-based company where James Bond films were made — are done or nearing completion in a flagship development zone called Nusajaya.

Wealthier foreigners are encouraged to settle in the country under the government’s Malaysia My Second Home Programme, which provides them with renewable 10-year multiple entry social visit passes. About 77% of the 22,709 people who have applied are from Asia, with the largest number of recent arrivals coming from China, government data showed.

Singaporeans account for 70% of overseas buyers in Malaysia, making them the largest group of foreign purchasers, Datuk Wan Abdullah Wan Ibrahim, CEO of UEM Sunrise Bhd, told reporters on Nov 13. UEM, which is co-developing Horizon Hills with Gamuda Bhd, is the biggest landowner in Iskandar.

“The impact of the budget measures will be temporary,” Wan Abdullah said. “Developers are very creative. We will find other means of attracting buyers.” — Bloomberg


This article first appeared in The Edge Financial Daily, on November 21, 2013.

抑制产业投机应适可而止 过度干预料现反效果

（吉隆坡23日讯）鉴于全面和广泛的2014财政预算案措施，可以遏制过度投机的房地产市场，而所有利益相关者，不论是否正在寻求购买或出售产业或作为产业经纪，皆在明年1月1日起，受到不同程度的影响。

今次预算案措施所涉及的范围是最广泛，但有人说，“市场将会面对艰辛”。无论你是潜在购房者、卖家、发展商或产业顾问，在多管齐下的措施中，将会影响他们的决策。

该预算案将会促进一个更加稳定和可持续的房地产市场，主要是它恢复实施产业盈利税（RPGT）、禁止发展商推出负担利息计划（DIBS）、落实增加兴建廉价屋，以及提高外国买家购买本地房屋的价格门槛，无疑对产业需求和供应带来一些重大变化。

而发展商无论在产品种类、定价方面，以及针对买家的融资额度上，将面对更激烈的竞争。

对于首次置业人士来称，自从政府给每单位3万令吉的奖励予发展商兴建廉价屋后，较实惠的住宅项目预计将在未来数个月内推出。

本地买家在购入房屋的3年内出售，所取得的盈利须缴交30％的产业盈利税，在第4年是20％，第5年是15％，而超过5年则不须缴税。

此外，连外国买家也受到影响，他们在购入房屋的5年内出售，所取得的盈利须缴税30％，而在第6年起则是5％。至于购买房屋的价格限制也由之前的50万令吉起提高到100万令吉。

在融资额度方面，发展商不能为买家提供负担利息计划，这意味着购房者在房屋施工期间必须承担利息。今后，买家不能够仅仅支付最低5％或10％的首期订金，以及待房屋交付后才开始偿还贷款。

再加上2015年4月开始推行6％的消费税，市场业者将会紧盯着一系列在未来的挑战。

世邦魏理仕（马）集团执行董事孔保罗（译音）认为，今次的预算案，尤其是对明年房地产行业来说，是比较艰辛的。

他观察道：“取消发展商的负担利息计划，将影响新推出的中及中高档产业，尤其是高层住宅市场。然而，产业盈利税可以将整个市场冷静下来，因为它可以遏制投机者寻找短期收益。”

说到发展商，实业及房屋发展商协会（REHDA）主席拿督斯里任麦克（译音）说，利用措施打击市场上的投机活动，可能会扰乱房地产市场的健康发展。

在关注发展商的利益下，任氏质疑政府干预房市的必要性。

如果大部分市场是在一定程度上受到控制，以及获得不同程度的补贴，那么政府该不该咄咄逼人地干预自由的房产市场。

他承认：“大众化的房屋需求已经被顾及到，难道那些廉价屋还需提升设施以满足不断要求的买家吗？若然如此，他们必须付出更多。至于推行一刀切的打房措施，可能会对市场产生不良影响。”

任氏解释，产业价格上升主要是由成本因素推动（包括建筑投入成本，特别是材料、劳动力、土地，以及遵从成本），并在一些城市地区，需求和供应出现不平衡。

他声称，从长远来看，通胀压力和供应不足将会继续推高价格。

任氏透露：“基本上来说，数据显示由于人口增长和购屋者增加，导致整体供应短缺。尤其是在财经中心的吉隆坡、槟城，以及在某种程度上的依斯干达特区，这种情况更为严重。”

他指出，提高产业盈利税将会导致近期买家，保留产业拥有权至超过5年期限，从而降低了二手楼的供应量。他表示：“因此，原本打算购买旧产业的买家，现在将注意力转向新的供应市场，例如有地屋和高需求的住宅区，导致供求平衡被推高，并加添房价的上涨压力。” - 光华

Gains tax won’t affect property sales, says expert

THE Real Property Gains Tax (RPGT) will not have much of an impact in deterring speculators from buying property, said KPMG partner Ooi Kok Seng.

Ooi said since the RPGT was only 30%, property speculators would still be left with a profit margin of 70%, which was still attractive in drawing speculators.

He was speaking during a round table dialogue on Budget 2014 hosted by Henry Butcher Malaysia (Penang) recently.

“RPGT will not curb speculations in the long run but the removal of the Developer Interest Bearing Scheme (DIBS) will.

“Many property buyers have entered the local property market via the DIBS scheme which allows them to pay 5% outlay to buy property without paying any interest during the construction period,” Ooi said.

On the proposed Goods and Services Tax (GST), Ooi said the GST on building materials would raise residential property prices.

“The increase in commercial property prices will however be slight as developers can obtain rebates from the Federal Government for the GST paid on building materials to construct a commercial project,” he said.

Henry Butcher Malaysia (Penang) vice-president Shawn Ong said the property market would cool off slightly next year as residential property prices had reached unprecedented level.

“Over the past five years, property prices in Penang had gone by about 6% annually,” Ong said.

Spiral Synergy Sdn Bhd director Michelle Grimsley said the RPGT would not deter foreigners from buying property in Penang because most Western expatriates were not buying for speculation.

“Most of them buy new property in Tanjung Bungah area to stay,” she said.

The RPGT rate for property disposed within three years is 30%, disposal within four to five years is 20% while no RPGT will be imposed for property disposed in the sixth and subsequent years.

Also present at the dialogue were Hong Leong Bank senior branch manager John Lau, KPMG partner Ooi Kok Seng, and Henry Butcher Malaysia (Penang) Teoh Poh Huat. - The Star

Bringing Bangsar to PJ

LOW profile OSK Property Holdings Bhd’s most prominent project is the rejuvenation of Atria mall in Damansara Jaya, Petaling Jaya.

It used to be “the mall to go to” in the 1980s. In March 2007, the group bought the property from property group Lien Hoe Corp Bhd for a cash consideration of RM75mil.

When it launched the 392 units of small office flexible office (SoFo) suites, it was among the most highly-priced high-rise property in that area.

“We launched the SoFo suites in November 2011. It was sold within seven hours,” executive director Ong Ju Xing says of the record-making launch. Sales of the SoFo suites hit RM1,100 per sq ft (psf), the highest on a psf basis.

At the bottom of the twin SoFo towers is a five and a half-storey shopping gallery with a net lettable area of 470,000 sq ft, comprising 250 shops, which will be OSK Property’s source of recurring income.

Announcements to Bursa indicate that OSK Property has acquired two companies Atria Shopping Gallery Sdn Bhd and Atria Parking Management Sdn Bhd to operate the mall which is targeted to open in the third quarter of next year.

“We’ve got strong tenants coming in whom we are unable to disclose at this point. This mall will cater to an untapped market,” says Ong, the younger son of Tan SriOng Leong Huat.

OSK Property’s plan is to position the place as a high-end neighbourhood mall similar to Bangsar Shopping Centre and the Gardens Mall which PJ does not have currently.

“Damansara Jaya is one of most affluent residential areas in PJ but Atria lost its lustre as it did not keep up with the times,” Ong says, “Also, new malls came up in the area.”

Ong says the group sees a huge potential in Damansara Jaya as it is a proven site for a neighbourhood mall.

“The population (there) is looking for more high-end and customised products and services.”

The statuesque young man adds: “We would be able to carve out a niche for ourselves in that area.”

Purchasers comprise the older generation who have lived there for decades and new families who have moved into the neighbourhood.

Ong has also noted the substantial hike in property prices in Damansara Jaya.

“Back in 2007, shoplots were transacted at about RM1mil a unit. Now, the same intermediate shoplot is transacting for over RM4mil,” he says.

With the project nearing completion, Ong is hopeful of creating another Bangsar Baru.

“After Bangsar Village I and II came up, a lot of shoplots in the Telawi area underwent a transformation. New retail concepts came in attracting very different sets of clientele,” he says.

On why the group maintains its modest public profile, the media-shy Ong says: “The market is very intelligent. Even when we are low profile, the serious investor or buyer will know about our projects.”

OSK Property does not believe in land-banking either. It attributes that strategy to the umbrella group OSK Holdings Bhd and its conservative approach of allocating resources in nine industries. “We buy land when the area is ready for development.”

“The group’s philosophy is to run a sound company, not risk the business at the expense of growth,” Ong says.

The group’s portfolio includes a mixed development in Shah Alam called Emira and SoFo suites in the business district of Sri Damansara called Opus Suites.

The company will launch Emira’s boutique retail shops and serviced apartments towards the end of this year and in the first quarter of 2014, respectively.

The group did not reveal any plans on Opus Suites, however, other than it would be launched next year.

OSK Property’s other ongoing project includes mixed development Pangaea in Cyberjaya. Phase 3, comprising two condominium blocks called Eclipse Residence, was launched recently.

Phase 4 and 5 comprise a boutique hotel and office, shopping gallery and a street mall. The shopping mall will have 300,000 sq ft of net lettable area.

It has also launched Vale II, a modern-concept low density townhouse development in its nature-inspired township Sutera Damansara. Ong says this is the last parcel of landed property within the township and is by far the best location as it sits on a hilltop.

It is close to 70% sold. Vale I will be completed by the end of next year and Vale II, a year later.

Recently, the group has also gone into industrial property development. These are mainly large scale factories, warehouses and showrooms in Section 22, Shah Alam. The project is called Gravitas.

The group is also planing to build the largest mall in Sg Petani, Kedah within its sprawling 2,582-acre township development named Bandar Puteri Jaya.

OSK Property’s total gross development value is about RM9bil with Pangaea taking up the largest slice at RM3.5bil, Bandar Puteri Jaya at RM2bil followed by Atria at RM1bil. - The Star

More measures to boost transparency in property sector

WHEN the measures with regards the property sector were unveiled in the Oct 25 budget, developers and house buyers viewed them with confusion.

There were essentially three issues – a more stringent real property gains tax (RPGT) compared with previous years, the banning of Developers Interest-Bearing Scheme (DIBS) and increased transparency imposed on developers who now have to display detailed sales price including benefits and incentives such as legal fees exemption, cash rebates and free gifts. In short, the net price minus the freebies.

While the RPGT is a straightforward tax on gains upon disposal, property professionals and developers felt the ban on DIBS would result in other forms of marketing strategies. A check with a couple of developers reveal they have replaced DIBS with other schemes. The new schemes – developers interest subsidisation schemes and developers interest rebate schemes, to name two – requires buyers to pay the interest first. The developer reimburses the buyer for the interest paid on submission of receipts on a periodical basis; every quarter, for example.

By whatever name it is known, interest is still factored into the house price.

Last week, a circular by Bank Negara to financial institutions may have put paid to such marketing strategies.

The circular Measures to Promote Sustainability of the Property Market tackles the issue of lending on two fronts. It targets both house buyers and developers. It prohibits financial institutions from lending to individuals and non-individuals buying a property offered under an interest capitalisation scheme (ICS), or any permutations thereof.

Second, it prohibits financial institutions from granting bridging facilities to finance a development that offers ICS.

ICS is a generic term which covers any schemes in which interest is capitalised, or imputed into the price of the property. This measure by Bank Negara can be viewed from different fronts.

First, it is part of the mechanics of putting the budget measures into operative mode. Second, it is an outcome of the government, the central bank and the various agencies coming together to ensure compliance. Its single aim: to ensure sustainable prices.

That circular came about as a result of a statement by the Urban Wellbeing, Housing and Local Government Ministry dated Nov 15.

The National Housing Department (NHD), which comes under the purview of the ministry, implemented a new condition effective Nov 15. It will not grant developers a housing development licence or an advertisement and sales permit if a project has ICS elements. Incidentally, a developer must apply for an advertisement and sales permit in order to sell a project.

Because of this statement, Bank Negara issued that circular to ensure co-ordination between the different authorities. “This measure is taken to enhance the ability of the people to buy a house and to ensure stable home prices and also to curb speculation. In addition, speculative activities also have an impact on house prices. This situation may adversely affect the property market in the long run,” the NHD statement said.

To comprehend how ICS rises prices, one must view the workings of this mechanism from a big picture perspective. Properties, whether landed or high-rise condominiums, are launched in phases. There is generally a 10%-15% price increase with each subsequent launch. If there are 100 units to be launched, a developer may launch 50. If the demand is good, it may launch the remaining 50 the same weekend, with a price increase of 10% to 15%.

Factoring interest into the cost of the house raises prices within a short span of time, especially if demand is strong. Initial buyers will be happy because they perceive their property has “increased in value” in a span of a weekend.

Further to this, the Bank Negara circular also raised the subject of the loan-to-value ratio.

In 2010, those who buy a third and subsequent property have to pay a 30% downpayment, what is known as a loan-to-value (LTV) ratio of 70%. This 30% was supposed to be calculated on the net value. At around that time, developers also gave freebies in the form of price discounts or rebates, free air conditioners, free first year maintenance and legal fee exemptions. Developers did not display the net value of the property. As we all know, there is no free lunch. The cost of these freebies have already been factored into the house price. Over the years, this gross value was used in the sales and purchase agreement and in determining the LTV ratio.

This practice of using the gross value tends to inflate prices over the longer run. These gross numbers are recorded by the National Property Information Centre (Napic). This result is a distortion of property values over time, This call for transparency ensures that Napic has access to the net and true value of the properties. This is important for valuation of the property sector on a longer term.

In the event of a foreclosure, complications arise because the price includes freebies. Therefore, this ruling by Bank Negara must be viewed positively. It will help to bring down household borrowings, bring about banking stability and transparency when it comes to record-keeping purposes.

Deputy news editor THEAN LEE CHENG wonders if there will be more measures coming. - The Star

Linking developments in PJ Sect 13

ABOUT 10 new developments with a gross development value of RM4.7bil have been approved in Section 13, Petaling Jaya, a check with developers involved shows, and these projects are causing much concern to residents in Sect 12 and in the larger PJ area.

They are worried the projects will cause overdevelopment and traffic congestion in the area.

It is uncertain if the Budget 2014 measures with regards the property sector – an increase in taxes and banning of developers interest-bearing scheme – will result in a go-slow among developers there. It seems unlikely.

Recently Fraser & Neave Holdings Bhd (F&N), one of the largest developers there with 12.75 acres, says it will launch 900 units of service apartments in the fourth quarter of next year. The project comprises a mall, small office home offices (SoHos), corporate office and a 250-room hotel. It will be a joint venture with Singapore-based FCL Centrepoint Pte Ltd.

The project is located at the Jalan Kemajuan-Jalan Universiti junction while at the other end of Jalan Kemajuan-Jalan Semangat, Best Western Hotel will be part of the CentreStage development that will be ready next year.

This means that at this juncture, two hotels with a total of about 600 rooms are being planned there. PJ Hilton, Crystal Crown and Lisa De Inn are three of the nearest hotels in the vicinity.

Section 13, developed under the Special Area Action Plan mooted by the Petaling Jaya City Council, will have an 85-bed Columbia Asia Hospital on 2.5 acres. Construction is estimated to be completed by November next year and the hospital operational by the first quarter of 2015, a statement from Columbia Asia Sdn Bhd says.

Medical facilities

The company is 30% owned by the Employees Provident Fund and the remainder held by US-based fund International Columbia USA LLC. It has 10 facilities in Malaysia.

This facility and another in Klang will be its 11th and 12th property. It has other medical facilities in India, Indonesia and Vietnam.

“The company believes in setting up smaller hospitals – fewer than 100 beds – built in residential areas for accessibility and efficiency,” a statement says.

Currently, the slant of Section 13’s various developments is towards residential. Interest in the leasehold land, which has between 50 and 55 years more to run, is due to its convertibility from industrial to commercial use. In Section 13, parcels of five acres and below have a plot ratio of 1 to 3.25; a one-acre site can have a maximum built-up 3.25 times its foot print. Parcels of 5-15 acres have a plot ratio of 3.5 times and beyond 15 acres, 3.75 times.

One of the largest parcels is the Colgate Palmolive land. Redevelopment will take time because of the capital investment in the form of machinery, a source says. The same applies to the Dutch Lady land. F&N freed land for redevelopment when it moved to Pulau Indah.

A similar scenario is expected with the other landowners as land value rises above the value of old machinery, says Ahmad Jefri Clyde from Garis Architect who helped draw up the Special Area Action Plan years ago.

There is also nothing stopping landowners, or developers, to buy out neighbouring sites to amalgamate adjacent plots, Clyde says. The F&N land is an amalgamation of two parcels. There are two adjacents parcels in the Colgate Palmolive land. This increases the land size, and thus raises the plot ratio.

The F&N site is interesting because its larger land size frees it to have a variety of components. The trend in real estate development today is towards mixed use with residential, retail, hotel and office components integrated in one location. This is only possible with larger land area. Compare this with the less than one-acre site of Avenue D’Vogue which has 360 units of SoHos.

Reduce congestion

Congestion and lack of open space are the two challenges there. Because land parcels are privately owned, this makes it difficult to release land for open space.

In order to reduce congestion within and in the peripherial of Jalan Universiti, Jalan Semantan and Jalan Kemajuan and in the internal roads like Jalan 13/2, Jalan 13/4 and Jalan 13/6, developments within these three major roads must be connected or linked within and with other developments in the area. Linking Plaza 33 with the up-and-coming former Jaya Supermarket development will enable access to two areas by foot and reducing traffic volume.

Public transport is also unsatisfactory. As these 10 projects become a reality, there will also be more traffic.

Bearing in mind that public transport is a federal government matter and Section 13’s impending congestion is a local authority matter, the Petaling Jaya City Council may need to impose on developers to do the needful, that is linking the developments with sky bridges or foot paths.- The Star

Pressure on property, new ruling likely to impact housing loan growth

PETALING JAYA: A new circular from the central bank that took effect last Friday will pile more pressure on an already hard-hit property sector, even if its merits are likely to be felt in the long-term, analysts and industry executives said.

In a bid to make the property market sustainable, the new rules have put the brakes on interest capitalisation schemes (ICS) and the developer interest-bearing scheme (DIBS).

It also calls for the use of the net selling price of a property as the benchmark for obtaining bank loans, which raises the amount to be paid upfront.

Alliance Research’s banking analyst Cheah King Yoong said the measures were “more onerous” than anticipated and posed downside risks to his 9% loan growth estimate for the banking sector next year.

“Although the guidelines on the prohibition of the DIBS was not a surprise, the new rule on using the net selling price to determine the loan-to-value (LTV) ratio is a negative surprise to us.

“While it is difficult to gauge the impact on banks, the fact that this new rule applies to all property financing, including first-time home buyers, means that property buyers’ affordability will be affected, and this will lead to lower property loan growth,” Cheah said in a report yesterday.

“We believe the latest policies illustrate the sheer determination of the authorities to contain the growth of household debt.

“These measures, together with potential rate hikes in 2014, fiscal tightening by the federal government and subsidy rationalisation next year, could further drag on loan growth in the retail segment, temporarily leading to a rise in credit costs, and dampen investor sentiment on the banking sector,” he added.

The circular prohibits financial institutions from granting end-financing facilities to individuals or non-individuals for the purchase of property offered under an ICS, including the DIBS.

Financial institutions are also barred from granting a bridging facility to finance a property development that offers ICS.

According to Alliance Research’s Cheah, this effectively removes any alternative incentives that developers might concoct to replace the DIBS.

“Nonetheless, our channel checks show that for the banking groups under our coverage, property loans with the DIBS only made up 1% to 3% of their outstanding mortgages,” he said.

Affin Bank is the exception, with some 7% of its mortgage loanbook comprising loans tied to the DIBS.

“Given that property loans with the DIBS are immaterial to overall outstanding mortgage loans as well as new mortgage loans approved, we do not expect the restrictions to have a significant impact on the banking sector,” Cheah said.

Public Bank has the highest exposure to housing loans at 56% of its gross loans, followed by Alliance Bank with 55% and Hong Leong Bank, 46%, company data showed.

Another key item on the circular requires banks to calculate the LTV ratio based on the net price of a property instead of its gross price.

To illustrate, a property with a list price of RM1mil, rebate of 5% and 90% financing would incur a down payment of RM50,000 after discount.

Under the new regime, the down payment increases to RM95,000 because the 90% loan will be computed using the discounted price tag of RM950,000.

While property executives expect a slowdown in sales, they believe that genuine buyers will remain undeterred.

Mah Sing Group Bhd group managing director and CEO Tan Sri Leong Hoy Kumtold StarBiz via email that demand for properties would continue to be robust, especially among those buying to own or for long-term rental income.

“There is still a large supply-demand gap as supply growth for properties has been on a decreasing trend since 2003, with Malaysia’s supply growth in the second quarter of this year at only 0.8%.

“The fundamentals driving the property market’s growth in recent years have not changed, for example a younger population leading to new household formation, a rising middle-income group, the supply-demand gap and stable employment.

“Initiatives in Budget 2014 may remove the speculative element, but not the fundamentals,” he said.

Leong noted that the lending environment was still conducive, with low interest rates and banks offering BLR minus 2.4%, from BLR minus 2.1%-2.2% a year ago.

Mah Sing had stopped offering the DIBS for most of its launches since the start of the year. None of its projects in Iskandar Malaysia feature the DIBS. - The Star

噢！我们忘了槟城要领先

●黄泉安

政府管治机制出现问题，影响运作效率而引起民怨，便要先看相关标准作业程序(SOP)，然后收集和分析相关数据，尝试找出弊端的根源和负责单位的问责记录，再回归相关的标准作业程序做比拟，SOP若有鄙陋就修改，不然，只剩一个行动方向，不外是依据操作指南条文，对症下药，及时纠正、延续改善。这是公共管理学的第一年基础课程，不是新药方。

有个外坡投资者联合国际豪华酒店集团想来槟州发展新旅游景点，计划5年内注金2亿令吉，建成后能以国际精致品牌（名称暂时不便透露）将槟城列入世界豪华旅游版图，并能带动槟州内需经济，只要符合槟州政府和市政局条例，我们没有理由拒绝。岂知，这份计划申请书在槟岛市政局（MPPP）一站式中心（OSC）卡了两年半，投资商向我投诉，如果在符合所有条规之下到今年年底还是不能解决，他们只好被迫撤离槟州投资计划，把资金转向其他地方。

我3年前首次接触有关投资商时，身份是槟州首长幕僚兼发展槟城的董事，曾经极力游说投资者驻金槟城，现在他们颓丧见我，自己除了感觉槟州做事怠慢而颜面尽失，也想极力挽回行将流失的投资额。经过两个月的调查和跟进，发现市政局SOP样样齐全，问题只是卡在一站式中心的发展规划部审核进度颠三倒四。对症下药后，现在问题解决，听说相关申请书快将进入建筑部审查阶段，相信我们能够及时稳住这份2亿令吉的投资额和建设槟州新旅游景点的机会。

经历这个特殊经验，我决定机制化探知市政局的机制和工作效率，槟城绝对不能因为管治机制效率差而被拖累，有病就要求医。

我的日落洞服务队耗时两个月，向联邦政府房屋及地方政府部掌管的国家地方政府理事会（Majlis Negara bagi Kerajaan Tempatan、简称MNKT)讨教，并向槟威两地市政局收集数据和对话，拟出一份116页的调查报告和5大要点，已经呈交首席部长、州秘书署、相关行政议员、槟岛市政局及媒体代表做参考，让他们继续跟进。

这份详细报告是专注针对一站式中心的表现做客观评估，发现众多发展计划申请书被怠慢处理，是因市政局一站式中心的几个关键部门差劲表现所造成，尤其是处理发展准证的发展规划部，和建筑图测申请的建筑部。

怠慢处理图测申请

根据国家地方政府理事会制定的关键绩效指标，在缺乏地方蓝图(Local Plan)作为依据的地方政府范围（槟岛市政局至今还没有地方蓝图），一站式中心必须在108天內处理发展准证申请，37天內处理建筑图测申请。这是国家地方政府理事会依据马来西亚标准MS9001:2008强制实行的工作标准，不得违反。

官方数据显示，2008年变天后至今年9月，槟岛市政局发展规划部处理的共2211项发展规划准证申请中，只有362个申请（17.59%）赶在规定的108天內完成处理程序。截至今年10月28日，仍有85项申请还未被批准或拒绝，其拖延的时间介于最低111日至最长1358日（差不多近4年）。

同样的，建筑部处理建筑图测申请怠慢案例方面，数据显示， 同个时期的37天达标率只是57.77%, 截至今年10月28日，仍有55个申请还未被处理，其拖延的时间介于最低39日至最长951日（将近3年）。

该份报告书公布后，槟州政府相关单位的第一反应是：“一些人在不清楚状况下挑课题”，理由是，每份呈交予一站式中心的申请书，必须包括其他相关政府部门的批准，例如公共工程局、水利灌溉局、古迹部门或完成环境评估报告等；而这些技术部门单位的工作期限，是在108天时限以外。

我要指正，讲话的人是自踩香蕉皮，不是被人误导就是误导别人。因为，当我再次联络国家地方政府理事会负责官员时，得到以下回答（请见手机截图）：“YB，有关（发展规划部）从申请书提呈日算起直至相关申请书完全审核的108天时限，也是包括所有技术部门单位必须提供报告的期限。这个条件必须达标，因为每份发展规划申请书提呈时，所有技术部门单位也同步收到同样的申请书，实施同样的时限。”

没想到，槟州政府发言人不但没有针对弊端提供任何改善措施，竟还扬言，如果硬要一站式中心唯依标准行事，那么，申请一满108天就马上“砍”，不会再给予空档期，发展商必须重新再申请。

我很感叹，为何我们的长官竟会这么消极看待正在讲话的数据？莫非我们做了政府思维也不同了，竟然忘记我们槟州样样要领先！ 

Govt to monitor effect of new RPGT regime in 1H14

PETALING JAYA: The government will be monitoring the property market closely when the new real property gains tax (RPGT) regime is enforced on  Jan 1 next year, said Deloitte tax leader Yee Wing Peng.

“Perhaps in six months [from the commencement of the RGPT regime], we would be able to better gauge how the market is responding to this,” Yee told the press at the tax forum, Deloitte TaxMax 2013, yesterday. 

He anticipated that within that time frame, the government would be able to determine whether or not the increase in RPGT is a good enough measure to cool down the market and curb speculation. 

Yee said the volume of property sales and purchase transactions would be a good indicator of the market response to the new regime. 

The tax leader suggested an increase in stamp duty by one to two percentage points to bring the stamp duty to 4% to 5%, as a measure to help cool the property market even further. 

“If the property market remains hot, and speculation cannot be curbed, what the government can do is to introduce higher stamp duty on the buyer,” he said. 

Another measure that can be introduced is to impose stamp duty on the seller as well.

According to Yee, Singapore is an example where non-resident sellers have to pay a stamp duty of up to 17% for disposing of their property within a year.  

“These are flexible measures that the government can introduce depending on the circumstances and the state of affairs of the property market at a particular time,” said Yee. 

The forum also featured speakers from Iskandar Regional Development Authority (IRDA), the Performance Management and Delivery Unit (Pemandu) and the European Union Malaysian Chamber of Commerce and Industry (EU MCCI).

At the forum, senior vice-president, economics and investment for IRDA Gan-Low Mei Leong commented that the new RPGT regime is a positive move to curb speculation and to bring real investors into the Iskandar region. 

She pointed out that while in the past property buyers would be looking at the combined salaries of themselves and their spouses before deciding to buy property, the trend over the past two to three years was to buy many properties at one time to profit from the resale value once the project is completed. 

“We want to curb the speculation so there will be time for new players to come in, and more opportunities for real investors to buy. We look at it as something good and a breathing point for Iskandar Malaysia,” said Gan-Low. 


This article first appeared in The Edge Financial Daily, on November 13, 2013.

City & Country: Will GST exemption translate into cheaper homes?

ANTICIPATION is high that an increase in the Real Property Gains Tax (RPGT) and a ban on the developer interest-bearing scheme (DIBS) will bring down property prices. But there has been little focus on the government’s move to exempt residential properties from the Goods and Services Tax (GST), which will replace the current sales and service tax from April 2015.

That the government will revise the RPGT upwards in Budget 2014 was a foregone conclusion that generated many a discussion. However, the effectiveness of the new RPGT structure, and the DIBS ban, in forcing property prices down to more affordable levels remains to be seen because, ultimately, pricing is a function of supply and demand.

In the meantime, let’s focus on the exemption of residential properties from GST and its impact on homebuyers. Will prices dip or at least remain unchanged?

Unlikely. Why? First, there is a need to understand GST and the three supplies that come under it — standard-rated supply, zero-rated supply and exempt supply.

Simply put, standard-rated supply refers to goods and services that are subject to GST at a standard rate (which will be 6% based on the Budget 2014 announcement).

What this means: GST is collected by the businesses and paid to the government. Businesses providing standard-rated supplies are required to charge a GST of 6% on products or services provided to customers. This is known as the output tax. They themselves would have paid for supplies (goods or services) that are subject to GST, which is known as the input tax. If the input tax of the businesses is bigger than their output tax, they can recover the difference from the government.

Under zero-rated supplies, businesses are eligible to claim from the government input tax credit incurred from acquiring supplies to produce such goods or services. This means the consumer does not pay any GST.

Yam: There needs to be engagement and clarity, so that there will be no hiccups come April 2015

As for exempt supplies — the category in which residential properties have been placed — they are not subject to GST. Businesses providing exempt supplies cannot charge their customers GST on the end product (in this case, the residential property), but the developer of the residential property is not eligible to claim input tax credit from the government on GST paid to develop the project.

This being the case, the developer will be saddled with extra costs due to the 6% GST that is payable on nearly all its inputs (construction cost, services, materials and so on) which it cannot claim from the government. Being business entities, they would pass on the non-claimable input tax to the consumer (read: residential property buyer).

The effective percentage increase in cost to the developer due to the non-claimable input tax credit is not immediately clear.

Yes, a developer currently pays a certain amount of sales and service tax on, for example, consultant fees, but that would be a fraction of the input tax credit for, for instance, the cost of construction and infrastructure, which, incidentally, could account for up to 40% or 50% of the total cost of a development.

So, how can housing prices dip?

Commercial properties, on the other hand, come under standard-rated supplies. But will serviced apartments, which are, for all intents and purposes, dwellings built on commercial land, be classified as residential or commercial properties for the purposes of GST?

Then, there are the mixed-use developments that comprise residential, commercial and industrial offerings. Developers will face challenges in apportioning input tax credits on indirect costs. Should it be based on the gross built-up area? Or perhaps even on employee time for different aspects of the project.

Whatever the model, variations in the numbers can be expected as the project gets underway and this could stretch for 5, 6 or even 10 years, depending on the project’s size and market conditions.

Inevitably, developers will need to spend a hefty sum on GST compliance. Now, who will pick up the tab for this added cost? The consumer, of course.

Still, to echo Real Estate and Housing Developers’ Association Malaysia president Datuk Seri Michael Yam, the government cannot be expected to declare property development a zero-rated supply. Indeed, development companies are paying some form of sales and service tax even now.

“We support GST. Because the business of property development is complex, there needs to be engagement and clarity, so that there will be no hiccups come April 2015,” Yam says. “Otherwise, the experience could be hellish …”

Level the playing field

If you had bought a property last year, you would have signed on the dotted line with the understanding that whatever gains you make will be subject to a 10% or 5% tax if you were to dispose of it in the second or third year of ownership.

The government’s moves may not result in lower property prices

However, with the new RPGT structure that is effective from Jan 1, 2014, you will be taxed 30% on your gains should you sell the property within the first three years of ownership.

If indeed the sole intention of the government in raising the RPGT is to curb speculation, is there a need to render it retrospective? While this is not a new practice, what would stand Malaysia in good stead would be to level the playing field and make it transparent so that investors are bound by the RPGT that existed at the point of investment.

According to Rehda, the government collected a total of RM540 million from RPGT in 2011; RM300 million in 2010; RM42 million in 2009 and RM110 million in 2008.

Another move by the government to curb speculation is the abolition of DIBS. Developers are also required to be transparent on their pricing. In addition, foreigners can only buy properties priced at least RM1 million — up from RM500,000 before.

In all these moves, Yam sees the government equating the rise in property prices with speculation, and he begs to differ.

For instance, he says, the secondary market accounted for the bulk or RM50 billion of the RM68 billion worth of residential property transactions last year. Speculators tend to focus on new launches.

The minimum entry level of RM1 million for foreign buyers should also be location-specific, Yam says.

For instance, a Malaysia My Second Home participant wishing to settle away from the property hot spots will not require a RM1 million home, which would be too spacious for his or her lifestyle.

“We have 26,000 acres to build in Iskandar Malaysia. Do we or don’t we wish to roll out the red carpet for foreign buyers?” asks Yam.

And, oh, for those who are relieved that Budget 2014 was silent on higher stamp duties on property purchases, it may be too soon to celebrate. The government does not need to wait until Budget 2015 to review this.

Au Foong Yee is managing director of The Edge Communications Sdn Bhd


This article first appeared in The Edge Malaysia Weekly, on November 4, 2013.