With the aim of maintaining real estate prices at a reasonable level and to rein in any property speculation, the government is considering the use of tighter fiscal policies that have met with a mixed response from industry players.
Speaking on the sidelines of the 15th National Housing and Property Summit, held in Petaling Jaya on August 28, Chor Chee Heung, the minister of housing and local government, said there was a strong need for better government policies to maintain reasonable and affordable property prices, and to ensure sustainability in the real estate sector as Malaysian property prices steadily increase.
“The government has to mitigate excessive investment and speculative activity in the property market so as to prevent a property bubble,” said Chor. “To ensure sustainable housing development, all parties – including the state government, developers and government-linked companies – must keep abreast of real demand and the affordability level of locals for housing, especially in the Klang Valley.”
One of the tools the government has at its disposal to cool the real estate market is the Real Property Gain Tax (RPGT). As of January 1, charges under the RPGT were set at 10% on profits for real estate owned for two years or less and 2% for those owned between two and five years, with no tax on gains for properties sold after that term. Previously, a 5% tax was imposed if a property was sold within five years, with no tax levied on the capital gains if the sale was made following five years of ownership.
The tax on capital gains from property sales has undergone several adjustments in recent years. Prior to 2007, when the tax rate was cut to 5%, it reached as high as 30% for sales conducted within the first two years of ownership.
Jeffrey Cheah, the chairman of Sunway, a local property developer, said it was important for the government and the real estate industry to work together, adding that it was vital the government did not implement drastic measures that could slow down the property market.
“The government should not increase the RPGT. I also hope it will not further restrict lending to the property sector or introduce new measures that will make it more difficult for home buyers to purchase properties,” Cheah said at the end of August.
Unlike some in the industry, who are concerned that Malaysia’s real estate sector is overheating, Cheah said he was confident that no bubble was emerging. “Our property prices are still affordable compared with neighbouring cities in the region,” he said.
Another organisation to urge caution is the Real Estate and Housing Developers Association (REHDA), which said that the capital gains tax on property should either be left untouched or be lowered to its former level.
“Under the current market conditions, such as the softening market, early signs of better growth of the economy, and the uncertainties of the US and eurozone economies, we urge the government not to interfere with the existing policies, which are business friendly,” REHDA said in a statement in The Malaysian Star on August 21.
The Malaysian Developers’ Association (MDC) also spoke out against any increase in the RPGT or in stamp duty – another policy option available for use by the government – stating that much of the rise in property prices could be attributed to higher materials costs, rather than speculation.
“Increases in basic building materials, which are major components of construction, land and compliance costs, will ultimately lead to higher selling prices of homes,” the MDC said in a statement issued in early August.
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