Malaysia Real Estate

[Royce]

The Government will impose 5% RPGT as anticipated coming Jan 2010 as a New Year present to curb speculation. Wonder what will the effect be on the current property prices and the market across the board?

[/b]

[tritonian]

But did they mentioned how this 5% calculated. Say just a straight line method ie you buy the property for 400k and sell it off at 600K, that 200K is subjected to 5% so that is 10k additional cost of sales or lost. If 100k gain, its only 5k. Seriously if you gain 200k, what is 10k? Even if they have excemption say after 5yrs owning no RPGT, putting that 190k on measly FD, you gain 6k+ interest per annum. In less than 2 yrs, your RPGT cost is recovered instead of waiting for 5 yrs.

And what else tie to it? Applicable to all houses one own or only 2nd transaction onward? Any excemption say after 3-5 yrs of ownership etc etc.

Hard to say.. but assuming all other variables remain the same (easy access to loan and low loan cost etc), may see some slower (very minute) transaction and some level of demand drop (very minute again).

At the end I say its prolly a fizzy drink effect, lots of gasses at first (reaction) but nothing will come out of it. So prolly no effect at all if any.

[sichang88]

5% is not a lot but also surely an amount to consider to pay on top of agent/broker fee. House prices will be higher as everyone must factor this cost to the sale. When we buy we pay stamp duty, when we sell we pay tax. Govt is very smart, just collect money.
_________________
simon.
Be smart, invest wisely for your future....

[tploh]

5% is A LOT !

So, assume property appreciate 7% per year, this RGPT will wipe out all your profit for those bought many years property, not to mention other costs such as stamp duty, legal fees, agent, maintenance, interest charges, etc.

Only those sales upon VP may still make some money.



Worse still, according to REHDA and Deloitte's "smart Alex", the RPGT is progressive up to 30%, and now span even after 5 years.

.://..bernama.com/bernama/v5/newsbusiness.php?id=449312

.://..theedgeproperty.com/news-a-views/449-budget-2010rehda-concerned-about-re-imposition-of-real-property-gains-tax.html

So, property price can only go up to cover the costs from 2010 onwards

[tritonian]

Ah.....it's about the fine print or any other condition tie to it. The details show that it really meant to curb speculation by getting big tax on first 4 yrs. But keeping rpgt on 5 th years onward showing that the govt wanting easy rev n this is new prior 2007 suspension.
This new details will surely drive up higher selling price n lesser transaction. Definitely counterproductive.

[tploh]

[tritonian]

[spr]

Saturday October 24, 2009
Property gains tax makes comeback
Reports by YAP LENG KUEN, ANITA GABRIEL, ERROL OH, JAGDEV SINGH SIDHU, ANGIE NG, RISEN JAYASEELAN, HANIM ADNAN, THEAN LEE CHENG, DALJIT DHESI, IZWAN IDRIS, FINTAN NG, YEOW POOI LING, YVONNE TAN, LEONG HUNG YEE, SHARIDAN M. ALI, EILEEN HEE, EUGENE MAHAL


THE Government has proposed to reimpose real property gains tax (RPGT) for gains arising from property disposal.

Based on the Finance Bill, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond will still be subject to 5% tax.

The latest measure, which will come into effect in January next year, has been described as “a knock-out punch” by Deloitte Malaysia country tax leader, Ronnie Lim.

“It was merely four short sentences in the 2010 Budget speech. However, that short reference to RPGT carried a knock-out punch,” Lim said in a statement yesterday.

He pointed out that from the speech itself, many would have thought that a low rate of tax of 5% would apply to most gains arising from disposals of real property.

“Be prepared for a shock – this is not the case and the highest rate of RPGT will be 30%,” he said.

Most rates of RPGT from January 2010 will be restored to those prevailing immediately before its suspension in April 2007.

Lim said one notable difference was that the exemption from tax for disposals after the fifth year of acquisition has been removed.

“Even where a property was purchased over 20 years ago, a gain on disposal from 2010 will attract 5% RPGT (without any indexation of acquisition price to reflect current purchasing power of the ringgit),” he said, adding that a flurry of property transactions could be expected soon.

Concurring with Lim, OCBC Bank Bhd director and chief executive officer Jeffrey Chew described the measure as a counter-productive move in efforts to encourage property investments among local and foreign investors, particularly to attract real estate investment trust investors.

“Furthermore, this would make Malaysia’s property market less attractive compared to other neighbouring countries in the region despite our property prices being among the lowest in the region,” Chew said.

However, Khong & Jaafar Sdn Bhd managing director Elvin Fernandez gave the thumbs up to the RPGT, saying “it shows that Malaysia, like other Asian countries, is not for unfettered speculation.”

“The RPGT is an anti-speculative tool, not a revenue earner for Government coffers,” he added.

To promote home ownership and enhance the people’s quality of life, the Government has also proposed a scheme to allow Employees Provident Fund (EPF) contributors to utilise their current and future savings in Account 2 for home purchase.

Meanwhile, to encourage green technology in the property sector, building owners obtaining Green Building Index (GBI) Certificates from Oct 24 until Dec 31 will be given income tax exemption equivalent to the additional capital expenditure in obtaining such certificates.

Those purchasing buildings with GBI certificates from developers will be given stamp duty exemption on instruments of transfer of ownership.

The exemption amount is equivalent to the additional cost incurred in obtaining the GBI certificates. This exemption is given to buyers who execute the sale and purchase agreement from Oct 24 until Dec 31, 2014.

And to promote rehabilitation of abandoned housing projects, the Government will consider extending appropriate financial assistance to rehabilitate low and medium-cost houses based on the existing project list.

An allocation of RM200mil will be provided under the housing and local government ministry.

Under the Government’s initiative to provide housing facilities for the low and middle-income groups, the National Housing Department will provide 74,000 low-cost houses to be rented in 2010.

[tploh]

[Daryl Teo]

[eijilee]

[zavier]

reinstate of rpgt first 2 years 30%, 3rd year 20%, 4th year 15%, 5th year and after 5% ...
this is worse than before where after 5th year no tax was imposed ..
however, i laud for the gov move .. this is a good news for homebuyers .. but not so much for investor but at least doesnt trigger the BBB mode which in the end many will still lose money .. overall, it is anti-flippers control .. i laud for such call

[ysmn]

for the edification of those without the experience. You buy a prop for 100k or someone dies leaving a property valued by govt at 100k when he dies. Let's say this date is 1 feb 2008.
You sell this property 1st Jan 2010.
Tax is 30% of the difference of the higher of selling price or govt valuation on selling date and 100k. Ie 30,000.
Let's say 1 jan 2008 is now 1 jan 1998.
Now because it's more than 5 years to disposal, you pay 5% ie 5,000.
If the govt valuation is lower than the price you sell, then price you sell is used to calculate.
If govt valuation is higher, then govt valuation is used.
This is a good policy in my opinion, and if it makes the high end prop market cooler, that would be good, as funds can be channeled to other investments.
_________________
Kind regards, ysmn

[Daryl Teo]

If that's the case, it would have decimated most profit margins for most investors who have just bought into the market at today's price pressures & is contradictory to the government's recent initiative to turn Msia into an international real estate powerhouse & a 180 degree turn about to promoting Msia as a real estate investors' playground.
_________________
Buy land, they're not making it anymore.
Mark Twain

[sichang88]

Damansara Utama - 1978 only about 100k
Damanra Jaya - 1983 only about 160k
Bandar Utama - 1992 only about 180k

Now, prices is about 550k to 650k

If these people dispose it next year, RPGT will calculate all the way back to 20+ to 30 years; all fees, receipts for renovation, etc will not be able to retrieve for RPGT deduction. How?
_________________
simon.
Be smart, invest wisely for your future....

[Daryl Teo]

Nobody saw this K.O punch coming that would signal the reversal of fortunes for many. It would have been kinder to impose a 5% blanket tax as a run off period before a full imposition. But this depends on which side of the fence you're looking over from.
_________________
Buy land, they're not making it anymore.
Mark Twain

[Daryl Teo]

Saturday October 24, 2009
Property gains tax makes comeback
Reports by YAP LENG KUEN, ANITA GABRIEL, ERROL OH, JAGDEV SINGH SIDHU, ANGIE NG, RISEN JAYASEELAN, HANIM ADNAN, THEAN LEE CHENG, DALJIT DHESI, IZWAN IDRIS, FINTAN NG, YEOW POOI LING, YVONNE TAN, LEONG HUNG YEE, SHARIDAN M. ALI, EILEEN HEE, EUGENE MAHAL

THE Government has proposed to reimpose real property gains tax (RPGT) for gains arising from property disposal.

Based on the Finance Bill, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond will still be subject to 5% tax.

The latest measure, which will come into effect in January next year, has been described as “a knock-out punch” by Deloitte Malaysia country tax leader, Ronnie Lim.

“It was merely four short sentences in the 2010 Budget speech. However, that short reference to RPGT carried a knock-out punch,” Lim said in a statement yesterday.

He pointed out that from the speech itself, many would have thought that a low rate of tax of 5% would apply to most gains arising from disposals of real property.

“Be prepared for a shock – this is not the case and the highest rate of RPGT will be 30%,” he said.

Most rates of RPGT from January 2010 will be restored to those prevailing immediately before its suspension in April 2007.

Lim said one notable difference was that the exemption from tax for disposals after the fifth year of acquisition has been removed.

“Even where a property was purchased over 20 years ago, a gain on disposal from 2010 will attract 5% RPGT (without any indexation of acquisition price to reflect current purchasing power of the ringgit),” he said, adding that a flurry of property transactions could be expected soon.

Concurring with Lim, OCBC Bank Bhd director and chief executive officer Jeffrey Chew described the measure as a counter-productive move in efforts to encourage property investments among local and foreign investors, particularly to attract real estate investment trust investors.

“Furthermore, this would make Malaysia’s property market less attractive compared to other neighbouring countries in the region despite our property prices being among the lowest in the region,” Chew said.

However, Khong & Jaafar Sdn Bhd managing director Elvin Fernandez gave the thumbs up to the RPGT, saying “it shows that Malaysia, like other Asian countries, is not for unfettered speculation.”

“The RPGT is an anti-speculative tool, not a revenue earner for Government coffers,” he added.

To promote home ownership and enhance the people’s quality of life, the Government has also proposed a scheme to allow Employees Provident Fund (EPF) contributors to utilise their current and future savings in Account 2 for home purchase.

Full article from The Star:
..biz.thestar.com.my/news/story.asp?file=/2009/10/24/business/4970584&sec=business
_________________
Buy land, they're not making it anymore.
Mark Twain

[ysmn]

[assaji]

If you look at Appendix 15, ( see .://.../viewtopic.php?t=9672&postdays=0&postorder=asc&start=50) it clearly says:

Proposal:
it is proposed that tax at a fixed rate of 5% be imposed on gains from the disposal of real property with collection mechanism...

under (ii) it says:
exemption up to RM10,000 or 10% of the gains whichever is higher.

so if you make RM100k, your tax is 5% of RM90k regardless when you sell the property.

[ysmn]

if disposal date is this year, then seller won't have to pay rpgt. Dispsal date is date of m.o.t, for landed and properties with strata titles issued. If strata title has not been issued, then it would be s&p date.
_________________
Kind regards, ysmn

[justcar]

[tritonian]

[ysmn]

if it is going to be applicable regardless of number of years, I hope it is a flat 5% on nett profit - 10,000.
I hope The Star is wrong about the 30% reducing over 5 years to 5%.
Actually I think it should be just 5% of profit. But 1st 10% profit not to be taxed.
So far none of my expert friends have been able to give me a firm answer on ?% tax.
_________________
Kind regards, ysmn

[sichang88]

[justcar]