Penang Property | Malaysia Real Estate Investment | Budget 2014 Malaysia | RPGT and its cousin Stamp Duty

The dust has settled...almost. Now that we're digesting on the Budget 2014 announcement. One of the talkabout is RPGT(Real Property Gains Tax) and to much lesser extent Stamp Duty. 

Budget 2014 is said to contain six amendments to Real Property Gains Tax Act and two amendments to Stamp Act.

It has been highlighted in Malaysia's media that RPGT is to be increased with effect from 1-Jan-2014. The structure quantum of increase has been varied based on the following:

1-3rd year: 30%

4th year: 20%

5th year: 15

6th year: No Tax

(see table below, RPGT rates)

Prior to this the RPGT is pegged as:

1-2nd year: 15%

3-5th year: 10% 

6th year: No Tax

Foreigner's RPGT:

1-5th year: 30%

6th year onwards: 5%

This will hurt developers in promoting the project aboard since the exit plan with this new scheme requires foreigner to pay 30% flat RPGT for first five year.

The mechanism of 2014 RPGT rates is said to curb speculation of would be investors or flippers. It's used as step with measues to slow down the steep rise in properties prices due to false demand and excessive speculation fuelled by easy mortgages and previous low tax.  On the subsale of 70% of total transacted properties, the price might be increased due to scarcity of supply with developer been slowed down due to sale and thus will slowdown nation development. The 2014 RPGT is likely to dampen speculation but it's unlikely to stop house prices from escalating. 

Limiting of foreign buyers to buy property above 1 million due to their superior exchange rate. This new limit ruling doesn't really applies to Penang as Penang state requirement for foreigner to purchase condominium is above 1 million ringgit and for foreigner to buy landed property it has to be above 2 million ringgit. Foreigner under #MM2H programme in Penang will be able to purchase at lower than 1 million ringgit for condo and 2 million ringgit for landed property respectively.

Not much news been said about Stamp Duty which has two amendments. At the moment, stamp duty chargeable on the Sale and Purchase Agreements is RM10.00 each. In addition, the stamp duty chargeable on a memorandum of transfer(MOT) is based on property transacted value, with stamp duty of 1% for the first RM100,000.00, 2% for the next RM400,000.00 and 3% for amounts  exceeding RM500,000.00 .

DIBS has been removed. It was with understanding that developers offering DIBS had actually marked up prices by about 5% to cover the interest they paid when the properties were under construction.

#GST(Goods and Services Tax) of 6% to be implemented on 1st April 2015, which is 17 months to go.

This article has been written by VULCAN INT'L Real Estate Research Institute http://www.vulcanresearch.blogspot.com for VULCAN INTERNATIONAL Real Estate Investors Club http://www.vulcaninternational.blogspot.com .

VulcanInternational could be contacted at +6 016 451 1321 .

You're welcome to write your constructive comment below.

Malaysia Real Estate | Budget 2014 Malaysia Conundrum | What is there for real estate?

Scenario: Number of my investors are asking me on whether should they proceed with purchase of new development or sub-sale properties at the moment? 

My answer to them is why not wait for the budget 2014 to be announced first before you take any action(afterall is only one week to go) so that you've a clearer pictures on how property market going on then.

By next Friday, 25-Oct-2013 Malaysian will again vis-a-vis the 2014 budget (you can follow via #Bajet2014) that will be tabled. It has been quite a number for speculations of what are going to announce then. As from the perspective of Malaysia's real estate sector the following might be affected:

(1) #DIBS (Developer Interest Bearing Scheme): As we're awared our neighbour(Singapore) has banned on DIBS since 2009. The Malaysian government might follow the same path.

(2) #RPGT (Real Property Gains Tax): There has been talked around that RPGT will be increased from current of 15%(for first two year upon signing of SPA) and 10%(from 3rd to 5th-year upon signing of SPA) to 30% and 15% respectively. Reason behind this move is that the RPGT can be effectively use to curb speculation on property by flipper or investor that looking for short term gains.

(3) #Stamp Duty: As been mentioned the current scale of Stamp Duty for property transaction will be increased from the current of 1%(up to RM100,000.00 purchase price) and 2%(from between RM100,000.00 and RM500,000.00 purchase price) and 3%(RM500,000.00 and above). The quantum of increase will be reveal then.

(4) #GST (Goods and Services Tax): Currently real estate agents are charging 6% GST for their services. It has not been implemented in all sector of industries. With this budget there might be a chance to implement across other industries. At present, we're paying a sales tax of 10% and 6% in service tax(as charge by McDonald Restaurant outlets).

(5) #LTV(Loan-To-Value): Reducing loan-to-value cap for a second property would affect genuine upgraders, who may find it challenging to pay a higher downpayment while waiting to sell their existing properties. This could reduce supply to the secondary market.

PS: Rising #RPGT and #Stamp Duty could risk pushing house prices higher as sellers would tend to pass the increemental costs to buyers and also delay disposal leading to even tighter supply. Developers will also hold back launches in view of weaker sentiment. This could reduce supply to the primary market.

This article has been written by VULCAN INT'L Real Estate Research Institute http://www.vulcanresearch.blogspot.com for VULCAN INTERNATIONAL Real Estate Investors Club http://www.vulcaninternational.blogspot.com .

VulcanInternational could be contacted at +6 016 451 1321 .

You're welcome to write your constructive comment below.

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