KUALA LUMPUR: Imposing higher real property gains tax (RPGT) will not be effective in arresting rising property prices, say industry players.
Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan said on Tuesday that his ministry is studying the imposition of a higher RPGT next year to stabilise housing prices.
Currently, an RPGT of 15% is imposed on properties sold within two years of ownership and 10% if sold within three to five years. Properties sold after five years are exempt.
"Politically, the government needs to be seen as doing something about property prices. The RPGT is a good hint to speculators that the government plans to cool the property market, without affecting genuine homeowners," said DTZ Malaysia director Eddy Wong.
"Singapore has so far imposed eight rounds of cooling measures. It can mean that the previous seven rounds did not quite achieve the intended effect and that's why there is an eighth round. But this time, the Real Estate Development Association of Singapore is saying the Singapore property market is approaching 'inflexion point', so perhaps this time it will work?
"Two of the fundamental drivers of property prices are a growing young population who are setting up their own households and income growth. Some people may speculate, but so long as these drivers are there, prices will go up," he said.
CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen proposed some changes to the existing RPGT structure, and additional measures to curb rising prices.
"The government may want to consider raising the RPGT quantum and period, and impose a stamp duty on property sellers who have a lot of transactions in a certain timeframe," he told The Edge Financial Daily.
"I am in favour of a further 5% increase in the RPGT and stretch the disposal period from two years to three years. For example, the RPGT on disposals made during the first three years is raised to 20%.
"Most speculative transactions happen around the second and third year. The third year is when most properties are completed. So, this longer period will cover a wider basket of speculators," Foo explained.
On the imposition of stamp duty on sellers, he said: "For example, you can impose a 3% stamp duty on sellers who have sold more than four properties in the last five years."
Foo urged the government to monitor other trends in the primary market. These are bulk purchases, group discounts, rebates and freebies, such as waiving legal fees and offering partially furnished units, which are usually included into the price tag.
"I think there is a need to make sure property prices are sustainable and affordable. If prices are sustainable, in line with the income of the rakyat, there is no need to reduce prices," Foo said.
Real Estate and Housing Developers' Association national treasurer Datuk NK Tong said, raising the RPGT may work in the short term, but will backfire.
"To introduce cooling off measures — including raising RPGT — at a time like this, will slow down the construction of houses. While this will stabilise prices in the short run, the shortage of supply will further drive up prices in the medium to long run," he said.
Tong said cities in Australia — Melbourne, Adelaide, Sydney and Perth — are ranked among the top 10 most livable cities in the EIU Global Livability Survey 2012. Kuala Lumpur ranked 77 out of 140.
Australia has 22 million people living in 9.1 million homes in the city, while Malaysia has 20 million people living in only 4.8 million homes in urban areas.
"If we are to be a truly developed nation, Malaysia needs more houses.
"There will be a higher number of people per household, which could also be due to multi-generational homes, rather than married couples moving out," Tong said.
Assuming no further population growth, he estimated that Malaysia would need 8.3 million homes, or a new supply of 100,000 homes per annum over 35 years, for the 20 million urbanites in Malaysia, for the country to be as livable as Australia.
"Everywhere in the world, the need for affordable housing has been one of the key responsibilities of the government. Malaysia tried to address this through many agencies in the past, but the numbers are still way behind. Hopefully, with the advent of PR1MA [1 Malaysia Housing Programme], it can finally catch up with the demand of the people.
"Governments are also challenged to find ways to increase the incomes of people, in order to keep up with inflation. Artificial price controls are not sustainable in the long run. What should be done is to address the need for us to move ahead, to be a high-income nation, and this is in line with Malaysia's aspiration to be a truly developed nation," said Tong.
This article first appeared in The Edge Financial Daily, on August 30, 2013.