Excessive speculative buying of properties due to the availability of various flexible home loan packages is not a major concern in Malaysia, industry players and analysts said.

“Given that many of the buyers were first-time home owners or upgraders, the company was not overly concerned about speculative buying,” SP Setia Bhd chief executive officer Tan Sri Liew Kee Sin told StarBiz.

He was referring to the developer’s Setia 5/95 home loan package which ended in July last year.

“The group believed that there were still buyers out there who were holding back then due to the excessive negativity caused by the financial meltdown in early 2009,” he said.

The 5/95 scheme is where a buyer makes a 5% downpayment and signs the sale and purchase agreement.

Loans need to be secured but the servicing only starts when the property is ready.

The 10/90 property financing scheme is where a buyer pays 10% deposit with the mortgage repayment starting only upon completion of the property.

On top of these two schemes, some developers also offer deferred mortgage payment package for one to two years.

There are concerns that excessive speculative home buying will result in the “supply” coming back to flood the market if house prices start to come down, and affect sales of new houses coming into the market.

A property analyst with a local research house said speculation in properties was not excessive in Malaysia now.

“It is because somehow we do not attract foreign investors that much although our property prices are cheaper than in some other countries in Asia,” she said.

She added that speculative buying was more apparent in Singapore and Hong Kong.

The analyst noted that even when the 5/95 property financing scheme was introduced early last year, the property index only increased by 3% for the first half of 2009.

“Speculative buying in Malaysia depends on the location and market segment.

“Property investments here are usually slanted towards the high-end segment,” she said.

PPC International Sdn Bhd executive director said Thiruselvam Arumugam said the real property gains tax (RPGT) of 5%, implemented on Jan 1, would help to mitigate speculative buying of properties.

“The RPGT forms some sort of control for speculative buyers.

“It promotes healthy increase in property prices compared with ‘artificial’ increase due to speculative factors,” he said.

fr:starproperty.my/PropertyScene/TheStarOnlineHighlightBox/1416/0/0

The amendment to the real property gains tax (RPGT), which will be reimposed next year at 5% but now applicable only to transactions involving properties sold within five years from their purchase, is “a perfect Christmas gift” which will lift the local property market, analysts said.

Prime Minister Datuk Seri Najib Tun Razak announced the amendment to the RPGT on Wednesday, where the 5% tax would now only be imposed on properties sold within five years of the date of purchase.

The Government had previously wanted to impose the RPGT across the board, irrespective of the number of years of ownership, as announced in Budget 2010.

The premier had said the decision would cause the Government to lose about RM200mil in revenue, but the move was made following appeals from the Federation of Chinese Associations of Malaysia (Hua Zong) and the business sector.

The Government wanted to see stronger growth in the property sector next year in making the amendment, according to Najib.

Kenanga Research said the move to limit the RPGT to the five-year ownership ruling was definitely good news, adding that it would spare non-speculators from being penalised.

It noted that this would allow those holding properties for more than five years to sell their homes and recognise 100% of the capital gains.

“In turn, this spurs genuine property activities, which are supported by the country’s fundamentals, as opposed to speculative activities,” the research house said in a report.

Analyst Mervin Chow of OSK Research agrees that the amendment to the RPGT has ensured a much fairer policy as the 11th hour change in policy will benefit long-term property investors.

“(The amendment to the RPGT) is reflective of the main objective of having the RPGT in the first place, which is to rein in excessive speculation in the property sector,” he said.

ECM Libra Investment Research said the move was a “perfect Christmas gift for the property sector.”

“This will provide a much needed relief for the property sector as it sends an affirmative signal that the Government will adopt an accommodative stance to support growth in the property sector,” it said.

With the relaxation of the RPGT, ECM said buying interest might pick up, especially among those looking to upgrade their property ownship.

Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Ng Seing Liong said the property market would benefit from the amendment, and that it would have “a very significant stimulating effect” on property investments by both foreign and local investors.

“This can be acknowledged by the fact that the market reacted positively to the RPGT waiver in 2007 where increased sales and enquires were recorded,” Bernama quoted Ng as saying.

Propery player Naza TTDI also supported the amendment to the RPGT.

“With this new RPGT measure, we are confident the market will respond positively and this will help propel Malaysia’s property market among the other countries in the region,” Bernard Yong, a senior marketing manager with Naza TTDI, told StarBiz in an email reply.

Deloitte Malaysia country tax leader Ronnie Lim said the Government had done the right thing in imposing the RGPT only on properties sold within five years from the date of purchase.

“Prices of some property development companies’ shares have risen as the market showed its approval,” he noted in a statement.

But not everyone is excited about the RPGT amendment, with Regroup Associates Sdn Bhd executive director Paul Khong saying if there were any impact at all, it would be quite nominal. He noted that the move would basically encourage long-term investments in the sector.

“The RPGT has already served its original purpose of curbing speculation by holding to a five-year period. This is a long time and many short-term investors will continue to shy away from the market accordingly or weigh this into their purchase consideration,” he told StarBiz in an email reply.

The re-imposition of the RPGT has resulted in “the Malaysian property sector becoming slightly less attractive regionally as investors still have much choice locations to invest their money,” Khong said.

He reckoned that investors, especially foreign investors, would like to see a longer term and more consistent property policy, adding that recent policy changes pertaining to the property sector were short term and too sudden.

“Ever since Budget 2010 was announced, some property owners had been working feverishly to dispose of properties before Jan 1, 2010, the date when (the original) RPGT would be re-activated with tax levied on gains on disposals irrespective of the period of ownership,” he said.

A property buyer, who declined to be named, agreed, saying he had reaped the benefit of the RPGT before it was amended, as sellers were willing to sell at lower prices on the assumption that the RPGT would be implemented in full.

“I managed to buy an old aparment for RM160,000 although the market price was RM180,000 because the seller wanted to sell it fast, before the reimposition of the (original) RPGT on Jan 1,” he said.

from:starproperty.my/PropertyScene/TheStarOnlineHighlightBox/1154/0/0

Najib announces RPGT reversal
————————————

Datuk Seri Najib Razak announced tonight a reversal of his government’s decision to reintroduce real property gains tax (RPGT) on January 1 for all transactions, amid concerns that it would hit long-standing homeowners and foreign investors.

Instead, the government has now decided the five per cent RPGT would only apply to property sold within five years of purchase.

The five per cent tax, which was announced under Budget 2010 in October, is normally imposed to curb speculation but due to its flat structure does not differentiate between homeowners who have been holding a property for 20 years or those who are flipping properties within one or two years for a profit.

The property sector was taken by surprise by the announcement and had expressed worries that it would have sent a message to potential investors that the government has not been consistent in its policymaking.

An exemption on the RPGT was given in 2007 by the then-Tun Abdullah Ahmad Badawi administration in order to boost the property development industry.

Its removal two plus years later with little warning could have heightened the feeling of uncertainty among investors.

But speaking at a dinner with the federation of Chinese Associations Malaysia tonight, Najib allayed fears from the business sector, many of whom are from the Chinese community.

He said the decision to backtrack on the implementation of the RPGT will likely cost the government RM200 million in lost revenue.

Apart from this, Najib also announced that the hospitality industry will enjoy a 60 per cent reinvestment allowance from the government, to be handed out to hotels undertaking investments for renovation and refurnishing.

He said that in line with this new policy, the government will extend the investment allowance for 15 years.

The announcements were made following requests made by the Federation of Chinese Associations for the government to help the property sector.

“I hope the Chinese community will respond to the announcements accordingly,” he said.

Najib also said that he hoped to see the Chinese reciprocate his gesture by helping him realise his “1 Malaysia” concept.

from:themalaysianinsider.com/index.php/malaysia/47494-najib-announces-rpgt-reversal-