Rehda hopes no changes to housing sector laws

KUALA LUMPUR: The Real Estate and Housing Developers' Association Malaysia (Rehda) hopes the government will not make changes to the current laws regulating the housing industry in the upcoming budget.

"There are rumours of raising the real property gains tax (RPGT), reviewing stamp duty and using net salary as a gauge of affordability for housing loans. These are not good signals and not giving confidence to the buyers market," Rehda president Datuk Seri Michael Yam told The Edge Financial Daily.

He said as far as he remembers in the past 30 years, the British has not made any change in the property industry in terms of legislation.

"It is totally free market. That gives a lot of confidence to the people," he said, adding that the government should not tinker too much with legislation to control the industry when it is free market that it is trying to promote.

Yam also hopes the government will not raise the RPGT. "Is it to collect more tax or is it to reduce speculation? I think in both instances it was not effective.

"What other countries are doing to kill the speculative market is actually by way of stamp duty. God forbid, I am not even suggesting that because it will kill our property industry," he said.

Under Budget 2010, the government re-imposed the RPGT effective Jan 1, 2010, which was fixed at 5% on the gains from the disposal of properties acquired within five years.

On whether there is a need for the government to impose measures to cool down the property market, Yam said 95% of the country's property market is still rather sleepy. He said two years ago the hotspot was the KLCC area, but now there are units for auction.

While he remains upbeat about property prices in the Mont'Kiara area, the situation is not what it used to be.

"I will be lucky to make 20% on my original selling price. Yields now in terms of rental are just about 5% to 6%. There were times four to five years ago when it was 8% to 12% because many expatriates were coming in and there was inadequate supply," lamented Yam, adding that it is the land cost that has gone up.

On housing loans to be calculated based on net income, Yam said it would merely mean that people would have to lower their property purchase target.

"Instead of paying RM500,000 for a house, they would buy a RM400,000 property.

"But one must remember that planning for developments takes time and now that the developer has approval for the RM500,000 houses, the (current) demand is for RM400,000.

"You will now have a shrinkage in the market and whatever that are available now will go up in price," he said.

Yam also hopes the government will review the mandatory low-cost housing policy as there are many government schemes available and the role should be reverted back to the government and implemented via its agencies i.e. Syarikat Perumahan Negara Bhd (SPNB) and the state economic development corporations (SEDCs).

"Low-cost is really not something that people want. There is a stigma to it. Even the cheapest car is twice the cost of a low-cost unit.

"We have built more than a million (low-cost) units, which is 25% of the total housing stock. And these units are built from subsidies by someone else, to some extent by the developer and largely by buyers of the higher (priced) units.

"That loading has been put on the higher cost units. The inefficiency is already there," he said.

Yam also said the RM500,000 threshold rule on foreigners wishing to purchase property in Malaysia, which is applicable throughout the country, should be reviewed.

He said that price would enable one to buy a bigger property in states outside the Klang Valley, which is not what most foreign buyers are looking for.

"The ceiling has got its imperfection. We have to come out with another set of rules," said Yam, adding that it would be more prudent to look at threshold in a geographical instead of blanket manner.

To this end, Rehda has proposed that a three-tier pricing threshold approach be adopted according to state and degree of urbanisation of the related property; RM500,000 price threshold for highly urbanised areas (Kuala Lumpur), RM250,000 price threshold for urbanised areas (Selangor, Melaka, Negeri Sembilan, Johor, Penang) and RM150,000 price threshold for less urbanised areas (Perlis, Kedah, Perak, Pahang, Kelantan, Terengganu).

Rehda believes this method would be a more practical and efficient way of promoting foreign investment in Malaysian properties without compromising the interests of local buyers.

For Budget 2012, Rehda would also like to see the government to extend the price limit of the "Skim Perumahan Pertamaku" to RM350,000 for the Klang Valley.

"There is very limited supply of houses within the RM220,000 price bracket in most urban areas, where there is a huge market for first-time house buyers due to a high urbanisation rate.

"In tandem with the review of the price limit to RM350,000, the salary limit of not more than RM3,000 should also be reviewed," said the association.

Rehda would also like exemption of construction contracts from ad valorem duty, said Yam.

In 2009, the finance ministry had issued a Stamp Duty Remission Order to defer the imposition of 0.5% ad valorem stamp duty on service agreement until Jan 1, 2011 and that construction contracts executed beginning Sept 15, 2009 until Dec 31, 2010 are taxable at a stamp duty rate of RM50.

In December 2010, the finance ministry decided that with effect from Jan 1, 2011, all service agreements will be subjected to a 0.1% ad valorem stamp duty. The earlier proposed rate was at 0.5%.

"We are saying this should be reviewed as it adds to costs. The deferment has helped the industry grow and contribute positively to the economy," said Yam, adding that Rehda is proposing that construction contracts be treated as outside the scope of the "services" covered under Item 22 of the First Schedule of the Stamp Act 1949, and the stamp duty for construction contract be reverted to RM50.

Rehda had also suggested that the bumiputera quota be standardised across all states and should not exceed 30%.

It proposed an implementation of a standardised, structured and transparent bumiputera quota release mechanism and no imposition of new conditions on titles for bumiputera units as it will only create restriction in interest on the property and be viewed by the market as unpreferred property.