Delay in RM1m floor price

KUALA LUMPUR: The government’s ruling to increase the floor price for foreigners’ purchases of properties in Malaysia to RM1 million from RM500,000 by Jan 1 has yet to be implemented.

It is understood that developers, while awaiting the official directive from the authorities, have been busy clearing stocks before the ruling kicks in. This is happening mostly in Johor Baru (except the Medini zone which is exempted from the RM1 million floor price ruling) where Singaporeans account for about 30% of buyers in popular projects, said real estate consultants.

When contacted by The Edge Financial Daily, Malaysia Property Inc (MPI) general manager Veena Loh said the guideline for the new minimum purchase price for properties purchased by foreign buyers has yet to be gazetted.

“There is a delay in the implementation because the ruling has yet to be gazetted,” she said.

MPI, according to its website, is a Malaysian government initiative (under the purview of the Economic Planning Unit) that “serves as a bridge between foreign investors (both corporate and private) and real estate investment opportunities in Malaysia”.

Sources said the ruling may only come into force as early as March or as late as May.

At the time of writing, they confirmed that there has been no indication from government agencies on when the new minimum purchase price requirement for foreigners will be enforced.

“We have been told that there has been no official directive from Bank Negara Malaysia or the Economic Planning Unit on this matter yet. We are still waiting for the circular to be issued to us,” said a source.

The increase in the minimum purchase price for foreigners was among several measures the government had announced under Budget 2014 to curb speculation in the property market.

According to some developers, foreign buyers make up a small proportion of their sales, hence the hike in the floor price will not impact them much.

“Our foreign buyers are minimal — it is only in the Klang Valley that we are selling property above RM1 million to foreigners. In Johor, our properties fall under the Iskandar Medini special zone which is exempted from this ruling,” said a spokesman from Mah Sing Group Bhd, adding that only 6% of the company’s sales consist of foreign buyers.

Yam: The increase in the minimum purchase price for foreigners would not lead to much change in the absolute value of purchase.

However, the case could be different for China-based developer Country Garden, which had launched 9,000 units of apartments in one go at Danga Bay in August last year. The company had managed to sell some 6,000 units, believed to be mostly to mainland Chinese buyers, and is now trying to clear the remaining units. Unlike Medini, Danga Bay is not exempted from the RM1 million floor-price ruling for foreign purchasers.

The Real Estate and Housing Developers Association Malaysia (REHDA) views the RM1 million floor price ruling negatively, as it believes there is no evidence of significant foreign buyer speculation in Malaysia.

“The increase in the minimum purchase price for foreigners would not lead to much change in the absolute value of purchase. It would (merely) dampen further the insignificant trend of foreign purchases. This impact would be felt most in areas outside Greater KL, Penang Island and parts of Iskandar as there are hardly any properties sold at more than RM1 million in these districts,” said REHDA president, Datuk Seri Michael Yam.

He explained that the housing market and its products are not homogeneous and a “one size” or “one price fit all” policy will not be fair to smaller seaside resorts or rural towns which are unable to price their smaller type units at more than RM500,000.

REHDA proposes that the minimum purchase price limit should be varied depending on the location.

“While it is acceptable and reasonable to impose a minimum purchase price of RM1 million in the urban areas of Greater KL, Penang and Medini in Iskandar, a RM500,000 minimum can be set for towns like Malacca, Ipoh, Kuantan, Seremban and Johor Bahru,” he said.

“In quieter secondary towns, an even lower limit should be set to enable investment and encourage the retirement of expatriates and foreigners to these places. REHDA looks forward to further engagement and consultation with the Government to streamline and refine this policy,” he added.

Other measures which were announced to cool the property market include the ban on Developers’ Interest Bearing Scheme (DIBS), the restriction of mortgage refinancing tenure to 10 years from 35 years, and a hike in real property gains tax (RPGT).

All abovementioned regulations were mandated to come into effect on Jan 1.

Where DIBS is concerned, developers say that they have stopped offering the scheme to customers in compliance with the new ruling.

However, on the regulation to reduce mortgage refinancing tenure, sources say that banks are still waiting for further BNM directives and are therefore still accepting loan applications based on the old guideline.

As at press time, the Association of Banks in Malaysia was not available for comment.

Meanwhile, Wong Wei Sum, analyst at Maybank Investment Bank pointed out that banks are still pricing their mortgage loans based on gross pricing instead of net pricing.

“To my surprise, despite the BNM mandate of stricter loan-to-value ratios since Nov 2013 — that all mortgage lending should be based on net pricing — banks are currently still pricing their mortgage loans based on gross pricing,” she added.

Like Yam, Wong also believed that the new floor price of RM1 million for foreign property buyers is unlikely to be effective in curbing property speculation.

“Many things are not clear at the moment — we have good regulations in place to control property speculation by foreigners, but it’s meaningless if they are not executed well.

“Where property speculation is concerned, I doubt that the new ruling of higher floor price will affect foreign purchases significantly in the Iskandar region,” she said, adding that the ruling will merely affect near-term sentiment.

“The real problem I see in Iskandar Malaysia is more on the huge incoming supply especially with the entry of China-based developers that adopt ‘fast-turnaround’ strategy and launch everything in one go,” she said, citing Country Garden’s development in Danga Bay, Johor as an example.

This article first appeared in The Edge Financial Daily, on January 13, 2014.


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