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Property Market Report 2013: Cooling measures result in lower property transactions in 2013

KUALA LUMPUR: Cooling measures to arrest rising property prices in the country had an effect on the number of transactions conducted last year, but they did not affect the value of these transactions.

Deputy Finance Minister Datuk Ahmad Maslan, launching the Property Market report 2013 yesterday, said there was a drop in transactions to 381,130 in 2013 from 427,520 a year earlier. However, the value was higher at RM152.37 billion against RM142.84 billion previously.

Bank Negara Malaysia (BNM) imposed a number of cooling measures last year to arrest rising property prices. Among the measures were the increase in real property gains tax (RPGT) to 30% for properties disposed of within three years, and raising the value of properties that foreigners are allowed to buy from RM500,000 to RM1 million.

Ahmad said the implementation of the Goods and Services Tax (GST) in April next year is not expected to result in a steep increase in property prices as buying and selling of properties will not be subject to the GST.

The GST, announced by Prime Minister Datuk Seri Najib Tun Razak during the Budget 2014 presentation last October, will be implemented from April 1, 2015 and fixed at 6%.

It has been reported that government officials project a 1.8% increase in Consumer Price Index (CPI) in the first year of the GST implementation. “But this is going to be one-off,” said Ahmad, adding that the CPI is expected to come down later.

“It’s safe to say that the increase in property prices would be between 0% and 1.8%. The disability to claim input tax credit among developers is not the reason for developers to increase property prices because all this while they have not been able to claim input tax credit,” he added.

Meanwhile, Ahmad said the property market moved by 8.1% in the first quarter of last year (1Q), 4.4% in Q2, 0.3% in Q3 and 4.1% in Q4.

The residential sub-sector continued to spearhead property market activity, taking up a 64.6% share. Prevailing low interest rate environment, with the base lending rate of commercial banks sustained at 6.53%, continued to support the domestic property market.

“BNM’s pre-emptive strategies to preserve household sector resilience through the application of 70% loan-to-value ratio on third housing loan onwards, as well as guidelines on responsible funding, had gradually impacted the housing market,” the minister said.

Housing approvals reduced substantially by 22.5% compared to an expansion of 47.4% last year. Total loans disbursed for the purchase of residential properties, however, increased to RM74.4 billion from RM64.10 billion in 2012.

“In terms of residential market activity, the number of transactions contracted by 9.7% but value wise, a 6.3% expansion was recorded,” Ahmad said.

The commercial sub-sector’s performance was subdued, with lower transactions at 34,298 worth RM35.56 billion. The activity of the industrial sub-sector was in tandem with manufacturing activities, with transactions dropping further by 15.7% from 4.7% in 2012.

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In tandem with the dreary agricultural environment, property transactions in the agriculture sub-sector contracted by 12.4% in 2013 to 80,679. Similarly, the value of transactions decreased by 7% from RM14.29 billion to RM13.28 billion.

Among the states, Johor and Perlis saw increased property activities, rising by 7.1% and 5.9% respectively. The Federal Territory of Putrajaya registered a contraction of 39.4%, followed by Kuala Lumpur (-33.2%), Kelantan (-24.6%), Penang (-21.4%), Sabah (-17.4%) and Selangor (-15.1%).

Kedah, Negri Sembilan, Malacca, Terengganu and Pahang recorded a drop of 8.6%, 5%, 3.4%, 3.7% and 2.3% respectively.



This article first appeared in The Edge Financial Daily, on April 23, 2014.

 

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