Increase transparency in prices

Companies factor in freebies into the cost of the property

DEVELOPERS often offer sales gimmicks and marketing ploys like free legal fees, rebates, air-conditioners and furniture. Budget 2014, however, seems to make it a requirement that developers be transparent about their property prices.

The adage “There’s no such thing as a free lunch” rings true in this instance. While developers are quick to advertise various blandishments such as “free legal fees/stamp duty, etc”, such freebies are always factored into the property price. These freebies should be translated into cash incentives to be deducted from the purchase price of the property, as otherwise, it becomes meaningless to offer these gimmicks, which are usually recovered in the form of substandard materials. Here, we again thank our Prime Minister for announcing that developers, when offering their products, should disclose the value of the freebies to the buyers. Such transparency is a move in the right direction so that buyers would know what they are letting themselves in for. The enforcers of the law should be able to count on the Urban Wellbeing,

Housing and Local Government ministry to do its job to ensure that there is strict compliance and observance.

Whilst such a requirement will not deter speculation, it will hopefully educate house buyers on what makes up their final property price and not to be misled by developers advertising such freebies.

Additional measures

The National House Buyers Association (HBA) reiterates its call on the Government to take additional measures to stem the steep rise in property prices. There are basically two ways to reduce speculation: increasing the entry cost and increasing the exit cost.

Whilst Budget 2014 has increased the exit cost in the form of the higher real property gains tax or RPGT, more measures are needed to increase the entry cost to further reduce speculation.

The current stamp duty payable for the transfer of properties is based on the value of the property. This does not deter speculators, as the stamp duty payable is the same, regardless of the number of properties already held or bought.

The Government’s current low stamp duty regime has been misused by property speculators to accumulate multiple properties, driving up these prices by creating false demand and denying genuine buyers the opportunity to buy such properties.

It is every Malaysian’s wish to buy at least one property in their lifetime for their own dwelling, and perhaps an additional piece of property as a long-term investment or to fund their children’s education. Hence,

HBA has proposed that the current scale stamp duty remains the same for the first two properties bought, but is increased to a flat rate based

on the property price for the third and subsequent properties to discourage speculative buying.

(See table for a comparison between the current stamp duty and the stamp duty proposed by HBA.)

With the same scaled stamp duty payable regardless of the previous number of properties held, speculators are not deterred from buying multiple properties.

Even for properties costing RM600,000, the stamp duty payable is only 2% of the value of the property.

The HBA-proposed stamp duty would not cause any disruption to genuine house buyers who can only afford two properties in their lifetime (one for their dwelling and one for long-term investment).

On the other hand, property speculators would be discouraged as the stamp duty greatly increases their entry cost.

RPGT will not lead to higher property prices

Certain parties with vested interest are claiming that the revised RPGT rate would lead to higher property prices, as speculators would definitely factor in the RPGT into their property prices, only for the subsequent buyer to end up paying the RPGT indirectly.

Such statements only confirm that speculators are indeed responsible for driving up property prices.

If indeed the speculators factor in the additional 20% to 30% RPGT into their property prices, then it would make the property prices unattractive to the next buyer.

Financial Institutions may be unwilling to finance such exorbitantly overpriced properties, as such institutions have their own market intelligence to determine the fair value of such properties.

RPGT will lead to an orderly property sector

The aspiration of every rakyat is to own a roof over their heads and shelter their young rather than making money from properties. Hence, having the RPGT in place would deter speculators, and eventually lead to a more orderly property sector driven by market demand and not speculative forces.

Therefore, HBA supports the Government’s RPGT proposal and urges the public to support such a move to curb the current excessive speculation in the property sector.

HBA strongly believes that the cost of a roof over one’s head should not be left to market forces. The repercussions whereby a large section of society is deprived of affordable housing is serious and far-reaching. The present property price increase does not commensurate with the present rise in wages. The affordability of house ownership is becoming an elusive dream to the present generation. Controlling the upward spiral of property costs is not in the interest of housing developers. In fact, they certainly favour it. Therefore, it would be totally unrealistic to expect any developer to be interested in bringing down property prices.

CHANG KIM LOONG is the honorary secretary-general of the National House Buyers Association (www.hba.org.my), a non-profit, non-governmental organisation (NGO) manned by volunteers. He is also an NGO councillor at theSubang Jaya Municipal Council. - The Star

发展齐来也路可负担房屋 Zubicon公司得标

槟岛西南区14日讯）槟州政府通过公开招标，委任Zubicon有限公司成为S.P.齐来也路可负担房屋发展计划的发展商。

槟州首长林冠英今日见证槟州发展机构和槟岛市政局与该公司签署联合发展合约，计划在S.P.齐来也路的11.04英亩地段上，兴建1900个廉价和中廉价房屋单位。

有关合约阐明，该项发展计划必须在4年內完成，并在2017年全面建竣。

该项计划的1900个单位中，包括：

883个单位（每单位最低面积800平方尺，最高售价20万令吉）

770个单位（每单位最低面积700平方尺，最高售价7万2500令吉）

165个单位（每单位最低面积900平方尺，最高售价30万令吉）

82个单位（每单位最低面积1000平方尺，最高售价40万令吉）。- 

Pay some premium and it’s done, owners of leasehold properties told

GEORGE TOWN: The state government has no objection to renewing the leasehold land status of residential owners, including the 465 households in Bukit Gelugor.

Chief Minister Lim Guan Eng (pic) said houseowners only need to pay the difference in terms of premiums to extend the lease.

“There is no problem for houseowners who wish to extend their lease for another 99 years.

“They can just submit their application to the land office. For the record, we have actually renewed some of the leases,” he said.

Lim, however, said the conversion of leasehold to freehold status was a different story.

“Under the National Land Code and the Federal Constitution, we have to get permission from the National Land Council before we can award freehold status to leasehold land owners.

“The National Land Council, however, did not agree to the state government’s application to give freehold status to owners of residential properties.

“Nevertheless, we are still trying. The problem is that the National Land Council meets only once a year.

“We will still try our luck during the meeting to be held either this month or the beginning of next month,” he told a press conference at his office in Komtar yesterday.

Lim was responding to the 465 households in Bukit Gelugor who wanted the state government to help them renew their leasehold land status which will expire in 2052.

Penang Bukit Gelugor Residents Association vice-president M. Ganesh had said they were uncertain about the state policy on the matter. - The Star

Lim said they had explained the situation to the Bukit Gelugor houseowners many times, including once before the last general election.

He also said the state government adopted a people-centric policy, under which houseowners with expired leasehold land status in new villages, traditional villages and estates get to enjoy 90% discount in premiums for their lease renewal.

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张宝发：槟产业市场处巩固期 交易量降 价值保持

（槟城12日讯）马来西亚亨利行（Henry Butcher）槟城分行董事张宝发博士透露，自2011年开始，槟城产业交易量已逐渐下降，但这是一种健全的现象，因为任何市场到达顶点时，都会回跌。

他认为，槟城产业市场目前是处于巩固期，虽然产业交易量下降，但在产业价值上升下，成交的价值仍然保持。

他举例，以单位计算，于2012年，槟城产业交易量为1万5891单位，于2013年则只是1万1550单位，下降大约27.3%，而于令吉款额计算，2012年的交易量为60亿9425万令吉，2013年则56亿3528万令吉，下跌只有7.53%。

他是于该公司槟城办事处2014年财政预算案圆桌讨论会过后，受到记者询问时，如此指出。受邀参与该讨论会的尚包括马来西亚房地产商会槟城分会主席拿督陈福星，丰隆银行个人金融服务高级分行经理刘铠樑，比马威特许会计行股东黄国成及米雪儿等。

陈福星认为，槟州政府建议于明年实施征收额外3%产业交易价税款，不足以阻止外国人在房地产的投机，因为如果大量类似活动，仍然会造成冲击，屋价将继续上涨。

黄国成建议只对售屋者，而并非购买者征收有关的税款，以阻止外国人的投机活动，因为槟州政府不应阻止外国人前来购买产业。- 

Restoring stability in the market

WITH a number of Asian countries bracing for a potentially devastating asset bubble burst, Malaysia is also rolling up its sleeves if the Budget 2014 measures were to offer a glimpse of the Government’s foresights.

The measures are meant to deter speculators and promote a more stable market that is driven by real demand. Although generally applauded by various stakeholders for its noble intentions, there are also some apprehension as to the measures’ potential impact on the property market.

Real Estate and Housing Developers’ Association president Datuk Seri Michael Yam says while the measures are meant to curb speculation, they may also dampen the market as a result of slower velocity of transaction, even though prices are not expected to fall but to remain flattish.

Yam says in the medium to longer term, the short-term knee-jerk reaction to delay decision to purchase may lead to an acute spike in demand, if supply does not keep in step. “However, those in the mass market should be less concern about this possible scenario as the Government’s strategy and incentive to supply affordable housing would ensure that those who cannot afford premium propertywould not be impacted,” he explains.

He says while the higher RPGT rate would discourage speculative activities, its potential effect will be rather limited, since only RM18bil (assuming 10% of this is speculation or only RM1.8bil or less than 3% of the RM68bil market) is in the total new residential sales market in 2012.

“It will impact the secondary market more. Recent owners and future buyers are expected to hold onto their property beyond the five-year period, thus reducing the availability of stock in the secondary market which accounts for 70% of the total value of residential transaction in 2012.

“Less supply with no change at best, or at worse increase in demand leading to further price increase. Likewise, if intending purchasers can’t buy old property, they will turn their attention to the primary market, thus increasing demand for new properties,” he points out.

Association of Valuers, Property Managers, Estate Agents and PropertyConsultants in the Private Sector, Malaysia (PEPS) president Lim Lian Hongbelieves the measures would be able to prevent people from over-committing themselves and driving prices up to astronomical heights.

“It will immediately curtail flippers of both commercial and residential property. As such, the measures will be able to put sanity back into the property market and prevent a property bubble where prices have risen beyond the reach of the masses and the income level of the population,” Lim says.

Lim, however, stresses that the effectiveness of the measures will “really depend on the liquidity situation”.

“Loan availability, employment and income factors are paramount in determiningproperty prices. It’s money that drives up property prices. It’s such an obvious statement but the availability of money is a factor of employment, banking policies as well as fiscal policies on lending. So, effective or not, it is in the control of money supply by the government and ultimately the central bank,” Lim concedes.

Managing director of property consultancy Khong & Jaafar Sdn Bhd Elvin Fernandez says with the budget measures all excessive speculation is expected to subdue fairly substantially.

The property market as a whole will move closer to its basic fundamental relationship with household incomes and long-term rental returns (for residential properties), and long-term rental returns and returns from business operations for commercial and industrial properties.

Fernandez does not expect prices of residential properties to rise in the near term as the slew of measures take effect.

CB Richard Ellis (Malaysia) group executive director Paul Khong concurs that the two measures will “surely curb speculation in the local market”.

Khong says the reinstatement of the full RPGT will obviously impact all types of properties as it was designed to curb speculation.

Investors and house buyers will now take this tax into consideration before making any purchase decisions.

“The measures will control the sharp rise of all segments of the markets. The dismantling of DIBS is an immediate measure to curb new investors from the cash-flow angle, while the RPGT affects investors’ decisions in terms of his investment tenure.

“The higher tax will cut off short-term players looking for attractive capital gains.”

Nipping the bud

However, with the escalating cost of development land and construction materials, there will still be pressure on house prices to move northwards, albeit on a slightly lesser degree, Khong concedes.

He says the categories of buyers called “the flippers” who are forced to sell down by year-end may flood the market with properties which they need to off load to escape the RPGT.

“The property market will stabilise further and many existing speculators will be looking to exit the market by year-end or be subject to 30% RPGT next January.”

He says while property prices will be affected slightly, there will not be a substantial drop as the difference between the current and the latest RPGT rates is just about 15% of the net gain.

“Investors will not loose any money due directly to this measure but will merely gain slightly less.”

The higher RPGT levied on foreigners will hit those who are in the market for short-term gains, and they may now look for a quick exit by year-end or be subject to the new rates come 2014.

Khong believes property prices will stay flattish for the next six months to a year, and that many investors will defer their decision to purchase until they come to accept the new changes.

The medium and high-end condos will be affected; with many speculators and short-term investors likely to reconsider their options. Some may just stay away.

Khong says the higher price bar for foreign buyers of RM1mil will impact the mid-level segments of the residential market and not the luxury end products.

“In the Klang Valley, most of the residential properties are already moving above the RM1mil mark. A two-storey terrace house in Sri Hartamas costs RM1.5mil now.”

He says new projectssuch as studio or one-bedroom apartments which are about to be launched priced below RM1mil will be impacted.

“However, it may not be substantial as the majority of the local residential projects usually have less than 30% foreign buyers. Projects affected would largely be in the Klang Valley, Penang and Iskandar, locations which are popular among foreign investors,” he says.

Meanwhile, National House Buyers Association (HBA) honorary secretary-generalChang Kim Loong opines that while the higher tax on profits will cut investors’ profits when they exit the market, the entry cost side has not been addressed.

He says the best way to control the entry cost to deter speculation is a review on the stamp duty payable for the transfer of property.

The present stamp duty payable does not deter speculators as the rate imposed is the same regardless of the number of properties already held or bought.

“The low stamp duty regime has been misused by speculators to accumulate multiple properties, driving up these prices by creating false demand and denying genuine buyers the opportunity to buy such properties.”

To nip speculative tendencies, he urges for a higher flat rate to be imposed on the third and subsequent properties, although the current scale can still be used on the first two properties.

Allaying market concerns, Chang says: “The HBA-proposed stamp duty would not cause any disruption to genuine house buyers who can only afford to buy two properties in their lifetime (one for own stay and one for long-term investment). On the other hand, property speculators would be discouraged as the stamp duty will greatly increase their entry cost,” Chang explains.

According to Rehda’s Yam, the higher-end premium segment of the housing market and large built-up apartments bought for investment may be most affected by the measures. Commercial strata offices which are bought by investors for recurring rental income may also see a lull.

Property in highly sought after addresses and landed housing are not expected to be affected although the rate of price increase is likely to be at a slower pace. - The Star

Shanghai tightens housing rules

BEIJING: Shanghai will raise the minimum down payment for second-home purchases to 70% from 60% in a bid to calm surging home prices, according to the city’s housing bureau, following similar moves by other big cities in China.

Home prices in large Chinese cities have set records, despite a four-year long government campaign to cool the property market, raising concerns over a potential price bubble and even social unrest as housing becomes increasingly unaffordable for many people.

Shanghai is the third city to implement a minimum down payment for second-home buyers of as high as 70%, and its move comes after Shenzhen and Beijing tightened measures in recent months.

“We will continue to improve the systems of the property market and affordable housing to effectively curb excessively fast property price rises,” the bureau said in a statement on its website. www.shfg.gov.cn. More cities are expected to follow suit.

“Guangzhou should be the next to move,” said Liu Yuan, a head of research at property consultancy Centaline.

In Shanghai, where houses are among the most expensive in China, home prices rose 17% in September from a year ago. Guangzhou’s prices jumped 20% and Beijing prices rose 16% in the month, both record growth rates.

China property shares extended losses yesterday after the announcement. Poly Real Estate ended down 1.1% in Shanghai, while Country Garden sank 3% andChina Resources Land was down 1.6% in Hong Kong.

Property shares have been roiled by uncertainty ahead of the Communist Party’s Third Plenum from today to Monday, which will see some of China’s top leaders gather behind closed doors to set the economic agenda for the next decade. Investors are waiting to see if any controls on the market will be announced after the meeting.

Also under the new Shanghai rules, migrant families in the city without residence permits must have paid their monthly social security fees or income tax for two years before they are qualified to buy a first home in the city. Previously they only needed to pay the fees for one year.

The housing bureau would increase the land supply for residential homes and study ways to lower the threshold for affordable housing applicants next year to allow more people to be covered by public housing, it added. – Reuters

RPGT won't hurt genuine buyers

Banning DIBS is the right move

FOR many years, the National House Buyers Association (HBA) has been urging the Government to take measures to stem the steep rise in property prices to avoid a “homeless generation” as current property prices are far beyond the reach of many low and middle-income families in urban and suburban areas.

This is a ticking time bomb that will result in many social problems if left unchecked.

Real Property Gains Tax (RPGT)

The announcement of the revised rate of tax on gains made in the disposal of properties, namely, the Real Property Gains Tax (RPGT), formerly known as the Anti Speculation Act, under Budget 2014 is far more superior to what had been proposed under Budget 2013 (See table above)

This is because, typically, if the property is purchased directly from the developer, it takes two years (for landed properties) and three years (for strata properties) to be completed.

Hence, under the previous RPGT, speculators could purchase properties from property developers upon their launch and then flip these properties on completion (after two years) and having to pay 10% (i.e. within the 3rd to 5th year).

It is hoped that the revised RPGT rate will deter speculators and, at the same time, not punish genuine house buyers who buy for their own stay or long-term investment. It is worth noting that buyers of residential property could seek a once-in-a-lifetime exemption from the tax.

Budget 2014 is best described as an “excellent mathematical formula” to curb the unbridled escalation of house prices, which has in the last three years skyrocketed. The Government has taken a step in the right direction with measures to slow down the steep rise in property prices due to false demand caused by excessive speculation fuelled by easy housing loans and the previously low RPGT.

Foreign purchasers to pay more

HBA applauds the move to increase the minimum price of property that can be purchased by foreigners from RM500,000 to RM1mil. Foreigners must be prevented from “snapping up” property meant for the lower and middle income.

This artificially inflates prices and creates a domino effect which can result in higher property prices across the industry. This is especially true for development corridors such as Iskandar Malaysia which has seen foreign purchasers arriving in droves and scooping up properties with their advantageous exchange rate.

Banning the Developer Interest-Bearing Scheme (DIBS)

DIBS is popular with speculators as they pay nothing to make a profit. Their initial down-payments and deposits are sometimes factored into the purchase price by the collusive developers, and some unethical financial institutions do not even require that the developer collect the deposit that has to be paid by the so-called purchaser.

This is one of the factors which induces “bogus” house buyers (which I have written about in this column on Aug 31 entitled: Of Speculators and bogus house buyers) who merely flip the property at the right time.

Kudos to Bank Negara for heeding our call and banning DIBS. It may be worth noting that Singapore banned DIBS in 2009.

Considering the deep pockets of property speculators, the effectiveness of these measures remain to be seen. However, they are expected to make speculation unworthwhile. HBA praises the Prime Minister for putting a stop to DIBS, which is one of the reasons attributed to the steep increase in property prices for three reasons:

1. DIBS encourages speculation as the house buyer does not need to “service” any interest/instalment during the construction stage. This will “lure” and tempt many house buyers to speculate and buy into DIBS projects hoping to flip on completion and make a quick profit with little or no capital upfront. Connivingly, the interest element is “serviced” by the participating developers.

2. DIBS artificially inflates prices as all interests borne by the developer are ultimately imputed into the property price. This in turn creates a domino effect which pulls up property prices in surrounding locations.

3. Bank and financial institution staff conniving with developers using the DIBS model should be investigated on their “modus operandi” in financing those artificially inflated prices (DIBS + sales price) and ignoring guidelines on prudent lending.

Banks and financial institutions are to be prudent and only provide mortgage financing up to the fair value/market value of the property. In this respect, a benchmark of fair value or market value is the current properties available. Somehow, properties sold under DIBS are always priced much higher; 15% to 20% higher compared with those without DIBS.

For standard condominiums costing RM500,000 without DIBS, should the developer market such properties under DIBS, the selling price could be as high as RM650,000. This creates a potential property bubble should the developer default in “servicing” the interest and the borrower/purchaser also defaults. The bank would only be able to recover up to RM500,000 if the said property is auctioned at market value.

In the event of an economic downturn, banks saddled with too much DIBS end-financing could collapse as the losses from such DIBS end-financing will erode the banks’ capital.

The collapse of just one bank/financial institution could cause a systemic collapse of the entire financial industry.

Bank Negara should take action against such bank and financial institution staff who have provided both project financing and end-financing to DIBS projects under the newly-minted Financial Services Act, 2013.

With the RPGT increase, banning of the DIBS and the Government’s aspiration to supply more ‘ownership housing schemes’ at affordable pricing, it is hoped that speculative demand for properties will stabilise to a more realistic level. I have heard that many businessmen do not do business anymore but indulge in property speculation as a livelihood and for income.

It is akin to the stock market dealings that were rampant during a ‘bull run’. Certain things have to be stopped before they become worse like the sub-prime crisis in the US.

If readers were to take a drive around completed projects, they will find signboards advertising units for sale upon the delivery of keys. If the purchaser is purchasing for his own occupation, why is there this need to put up these signboards or appoint estate agents to dispose of the units? It goes to show that some purchasers are merely speculators (not investors) from day one and the banks and financial institutions choose to “close one eye” despite knowing this.

Have the banks ever gone to the ground to check whether the units purchased and financed are actually “owner occupied”? If the property is “owner occupied”, the risk rating is lower and thus, he enjoys a lower interest rate. But if it is non-owner occupied, it should have higher interest rates. Borrowers of “owner occupied” properties are normally required to make a declaration to that effect to enjoy a lower interest rate.

But does the bank participate in this booking of credit risk?

If the property is non-owner occupied, the lending will fall under ‘real estate classification’ and not ‘housing’.

So, there may even be misreporting to Bank Negara and subsequent national statistics.

This column continues next week.

> CHANG KIM LOONG is the honorary secretary-general of the National House Buyers Association (www.hba.org.my), a non-profit, non-governmental organisation (NGO) manned by volunteers. He is also an NGO Councillor at theSubang Jaya Municipality Council.

Reducing speculation in the property market

GIVEN the comprehensive and wide-ranging nature of the Budget 2014 measures to rein in excessive speculation in the property market, all the stakeholders, irrespective of whether one is looking to buy or sell or acting as market mediators, are bound to be impacted in one way or other by the measures come Jan 1, next year.

The budget measures are among the most pervasive and some say “rather tough” on the market. Whether one is a potential house buyer, seller, developer or consultant, the multi-pronged measures have a good chance of influencing their decision making.

Tailored to promote a more stable and sustainable property market, the reinstatement of the full real property gains tax (RPGT), removal of developer interest bearing scheme (DIBS), affordable housing initiatives by the Government, and higher price threshold for foreign buyers will undoubtedly bring forth some major changes in both the demand and supply sides of the equation.

Market players, especially developers, will have to brace themselves for greater competition in terms of product offerings and pricing, targeting buyers and financing facilities.

For starters, more affordable residential projects are expected to be launched in the coming months since an incentive of RM30,000 a unit will be granted to developers who build such houses.

The profit on transaction within the first three years has been raised to 30%, 20% in the fourth year, 15% in the fifth year, while property held for more then five years will not be taxed.

This time around, foreign buyers are also feeling the brunt of these measures. Profit from their transactions within the first five years will be taxed at 30%, while transaction from the sixth year onwards will be taxed at 5%. The price bracket for houses that foreigners can purchase has also been raised to RM1mil from RM500,000.

In terms of financing facilities, developers can no longer offer products for sale under the DIBS, which means property buyers will have to bear the bank interest rates themselves during the construction period. Buyers can no longer just pay the minimum 5% or 10% deposit downpayment and only start to service their loans after the delivery of vacant possession of their property.

Top that up with the proposed 6% Goods and Services Tax come April 2015 and market players are practically staring at a slew of challenges ahead of them.

CB Richard Ellis (Malaysia) group executive director, Paul Khong calls the Budget a relatively tough budget especially for the property sector in 2014.

“The dismantling of DIBS will affect the new launches in the mid and mid-high end segments, especially in the high-rise residential market. RPGT, however, will cool off the entire market as it applies to all sectors and curb speculators looking for short-term gains,” he observes.

Speaking up for the developers, Real Estate and Housing Developers’ Association (Rehda) president, Datuk Seri Michael Yam says the measures to curb speculative activities in the market may disrupt the healthy and orderly growth of the propertymarket.

Surmising the concerns of his fellow developers, Yam questions the necessity for the Government’s intervention.

“If the bulk of the market is controlled and subsidised to some extent in varying degree, should the Government be too aggressive in intervening in the free market spectrum of the housing market?

“The needs of the mass market is already taken care off, so shouldn’t those who wish to acquire a lifestyle and higher specification and prime location home be prepared to pay more? A one-size-fits-all measure applied universally may have drawbacks in that not only does it impact that which the Government aims to control, but it also affects negatively healthy market forces,” he concedes.

Yam explains that the price increase of property was primarily driven by cost-push factors (input costs of construction, particularly material and labour, land bought at market price, and compliance costs) and in some urban areas, an imbalance of demand and supply.

And in the longer term, inflationary pressure and lack of supply will continue to drive price, he contends.

“Fundamentally, data points to the overall shortage of supply compared with demand attributable to a growing population and increase in the house buying group. This is more acute in the economic centres of Greater KL, Penang and to some extent Iskandar region,” Yam says.

He points out the increase in RPGT would cause recent purchasers to retain ownership for a longer period beyond the five-year holding period, thus reducing supply into the sub-sale market. “As such, would-be purchasers of older properties would now turn their attention to the new supply market which could consequently tilt the demand and supply equilibrium and add to further price increase in high demand enclaves and landed housing,” he observes.

Giving the thumbs up for the budget initiatives, National House Buyers Association (HBA) honorary secretary-general, Chang Kim Loong says what Malaysia needs is a vibrant and sustainable housing market based on real demand, and hopefully, the anti-speculative measures will be effective in stabilising the market.

“We certainly hope the measures will stem the steep rise in property prices that has affected the lower and middle income groups that typically comprise propertypriced below RM200,000 for the lower income and up to RM500,000 for the middle income group.

“The higher RPGT will hopefully slow down speculative effects which has resulted in higher property prices in recent years. It will not affect genuine house buyers who buy for own occupation or for long-term investment. Besides, buyers of residential property can seek a once-in-a-lifetime exemption from RPGT,” Chang says.

Association of Valuers, Property Managers, Estate Agents and PropertyConsultants in the Private Sector, Malaysia (PEPS) president Lim Lian Hongvoices his confidence that the measures should help the market to mature and market players will be responsible and considerate in their investments.

“Property will remain as a major long-term investment instrument and buyers will get better value for the money they pay for in comparison to the yields they may get. Capital appreciation will not be as astronomical as before but increase there will be,” Lim observes.

Concurring with Lim is Khong & Jaafar Sdn Bhd managing director, Elvin Fernandez who says the measures in the Budget are bold and needed, for the economy and the property market.

“The Government hopes to make the taxation system more efficient and in line with international practices. The right set of messages is sent and this should be followed with good implementation and continued consistency as we move forward,” he notes.

Calling for “taming the market until it is tamed”, Fernandez says if the measures do not bring prices closer to the underlying fundamentals, then further and additional measures should be taken.

“Such an overall strategy is the clear message that should be transmitted to market players. Tame until it is tamed.”

He says in the past, monetary policy by way of interest rates was the main instrument used to tame asset markets. But after the global financial crisis, most countries use macro-prudential measures directed at specific sectors, such as theproperty market.

On the proposed Goods and Services Tax (GST), Rehda’s Yam calls for greater clarity on its implementation.

“Although it is rumoured that residential properties may be GST exempt, developers would still need to bear the increased cost of input, which would be subject to GST and (there will be the) need to pass (on) the incremental costs. Thus, subject to further clarification, selling prices would need to be adjusted to account for the increased costs.”

Khong & Jaafar’s Fernandez says: “The GST, 17 months from now, has the potential of increasing the price of residential properties by 1% to 2%, but that too will depend on the state of the market at that time. If the residential market is buoyant at that time prices may go up, but if the residential market is not that buoyant and is in a steady state, it is likely that developers may just have to absorb the “input” costs.”

“Some input costs (sales tax) for building materials at present are at 5% so that means a 1% increase in the future, whereas others are at 10% and this will result in savings when the 6% GST comes into play.” - The Star