KL property rule 'could backfire'

Barring foreigners from buying homes costing less than RM1m may hurt sales: Real estate body

Published on Oct 27, 2013

Petaling Jaya - The doubling of the minimum value of a property for foreign buyers to RM1 million (S$392,000) could hurt developers' sales and have a detrimental effect on investors, the Real Estate and Housing Developers' Association (Rehda) of Malaysia has said.

The measure was one of those announced last Friday by Prime Minister Najib Razak as part of the 2014 Budget to cool a surging property market.

Previously, foreigners were allowed to buy properties worth RM500,000 and above.

Rehda president Michael Yam pointed out that many urban areas outside Klang Valley, Penang and Johor Baru have a very limited supply of properties worth more than RM500,000, while those costing RM1 million were almost non-existent.

He said the threshold increase announced in the Budget would also restrict developments of smaller units such as studio or one-bedroom apartments, as the prices might not go beyond RM1 million.

"This measure is also contrary to one of the 10th Malaysia Plan's aspirations of providing better incentives to foreign talent and the Malaysia My Second Home programmes," he said.

Malaysia My Second Home is a government programme which allows foreigners to stay in Malaysia on a renewable 10-year multiple-entry visa.

Datuk Seri Yam also said that a flat rate of 30 per cent real property gains tax (RPGT) for six years, applicable to properties owned by foreigners, would hurt developers when they promote their properties abroad.

"It may send the wrong signal to foreign investors with regard to our property investment and promotion policies," he said.

The move was aimed at speculators, but Mr Yam said, "in reality, the presence of speculators in the market is insignificant".

Instead, he attributed escalating housing prices to rising construction costs and insufficient homes, especially in urban areas.

He added that delays in selling property would only further reduce the market supply and increase home prices.

Developers in the Medini region in Iskandar, however, would be at an advantage as the zone is exempt from price caps and bumiputra quotas.

Malaysian property prices have risen by about a third in the past three years, with even bigger rises in hot spots such as parts of southern Johor state.

Other property measures in the Budget include prohibiting developers from implementing projects that have features of the Developer Interest Bearing Scheme (DIBS), to prevent developers from incorporating loan interest rates in housing prices during the construction period.

Financial institutions are also prohibited from providing final funding for projects involved in the DIBS.

Mr Yam said the removal of the DIBS would put pressure on genuine buyers, including first-time as well as bumiputra buyers.

The DIBS had allowed purchasers to pay a deposit and nothing else until they collect the keys to their units, as developers bear the loan interest during the construction period.

But while developers were sounding the alarm, Malaysian home buyers were singing a different tune.

The New Straits Times in Malaysia quoted National House Buyers Association secretary-general Chang Kim Loong as saying that the RPGT was an "excellent mathematical formula" to curb speculation.

"We have consistently called for government intervention to prevent a homeless generation of young adult Malaysians from emerging, especially in urban and suburban areas, who, if not for wild speculation, would be able to buy their own houses," he said.

He similarly welcomed the RM1 million minimum, saying that it could prevent artificially inflated prices.

The Star/Asia News Network, Reuters