Consultant: Consider RPGT for companies and foreigners beyond 5-year period

KUALA LUMPUR: The government can consider imposing the real property gains tax (RPGT) on property disposal by companies and foreigners beyond the five-year period to curb speculation and excessive rise in property prices especially in the Klang Valley, said a prominent real estate consultant.

Swhengtee International Sdn Bhd president and founder Gavin Tee said the authorities should also consider raising the fixed 5% RPGT on properties that were held by companies and foreigners against the backdrop of the Mass Rapid Transit (MRT) project taking off which would likely impact the properties along the MRT track in terms of appreciation in value.

"There is expected to be plenty of development in areas such as the Kuala Lumpur City Centre (KLCC), Sungai Besi and Cochrane. Prime areas, be they residential or commercial, will mostly be owned by corporates and foreigners in the near term," he told The Edge Financial Daily on Monday, Mar 28.

Tee said with Kuala Lumpur as a global city coupled with property development accelerating in Penang and the Iskandar Malaysia region, the fixed 5% RPGT rate should be applicable to more than five years of the holding period for the "non-individual category" in an effort to ease overheating in the property sector.

He stressed that under the progressive RPGT rate basis in the past, companies were still subject to a 5% RPGT if they were to dispose of a property in the sixth year of the holding period and beyond but individuals were exempted. As such, he explained, with income disparity between individuals and companies, it would only be fair if there were separate RPGT rates and holding period for the two categories.

"The government stands to collect more in taxes if RPGT on companies is increased to, say 10%. However, the bottom line is the government must be able to fix a policy that will see RPGT rates unchanged in the long term to be fair for foreign ownership. If you raise it to 10%, you can't just hike up to 30% the following year," said Tee, who is also founding president of SwhengTee International Real Estate Investors Club.

RPGT was reintroduced under Budget 2010 whereby tax on gains from property disposal are subject to a fixed 5% within a five-year holding period irrespective of the category of ownership. While there was a brief period for RPGT exemption beginning April 2007, tax on gains from property disposal prior to that were on a progressive basis from 30% to 0% depending on the holding period of the property and category of ownership.

On the property market, Tee said while there were certain types of properties in several locations that were considered to be priced above the market, there was in general no oversupply as the pricing structure provides plenty of opportunities to own properties.

"Even in the 1998-2000 period when people said there was a lot of oversupply of properties, this was mainly concentrated on areas like Semenyih, Nilai and Rawang but not the city areas or Damansara and Bangsar," said Tee who has more than 20 years of experience in property and retail marketing.

Tee also said while many quarters believed Mont'Kiara and the surroundings of KLCC have an oversupply of condominiums and high-end homes, the government's effort in coming out with the "city living concept" under Greater Kuala Lumpur/Klang Valley national key result area (NKEA) should be able to change the "concrete jungle" perception.

"As an investor, we look at how long it takes to absorb the number of oversupply units. For me, Mont'Kiara is still a good place to invest although some people still think of the infrastructure and accessibility as the priority," he noted.

He said some of the hot spots in the property market have condominiums priced at RM800+ per sq ft at the top range with the medium range launches averaging RM600+ per sq ft, there was no large huge gap if compared with medium-cost apartments in Damansa Perdana, TTDI, Sentul and Bukit Jalil which were priced between RM400 and RM500 per sq ft.

Tee added there had been a surge in demand for landed properties that are gated and guarded, stressing that some communities also came with clubhouse facilities which have attracted many medium to high income earners.

Tee, who is also managing director of Arborland & Co, will be among the speakers at the annual Asia Trader & Investor Convention (ATIC) 2011 to be held on April 2 and 3 at the KL Convention Centre.