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Thread: Malaysia Budget 2014 - How does it impact you?

  1. #1
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    Default Malaysia Budget 2014 - How does it impact you?

    Malaysian Budget 2014 and Impact to Property Investing in Malaysia

    Hi everyone,

    The Malaysian 2014 Budget announcement was made today 25th October 2013. There are several property market cooling measures in the new budget. Here we would like to highlight these cooling measures and the impact. All new measures are effective 1st Jan 2014 unless specifically mentioned.

    1. Increase in Real Property Gain Tax (RPGT)

    From 1 Jan 2014 RPGT %
    Msian
    1st to 3rd year of disposal 30%
    3rd to 4th year of disposal 20%
    5th year of disposal 15%
    After 5 years 0%

    Companies
    1st to 3rd year of disposal 30%
    3rd to 4th year of disposal 20%
    5th year of disposal 15%
    After 5 years 5%

    Foreigner
    1st to 5th year 30%
    After 5 years 5%

    Generally there is an increase across the board. The biggest impact are to foreigners who now will be required to hold the property minimum of 5 years to avoid the 30% RPGT. After 5 years, the impact of 5% RPGT as it will only be a small amount and should not be a problem. For new launches, speculators who are looking to flip directly at completion will have to pay a 30% RPGT and this would reduce their profits as most projects would complete in 2-4 years and still within 30% RPGT timeframe.

    Do take note that RPGT timeframe is calculated from the date the Sales & Purchase agreement is signed. We expect this to deter the hardcore speculators, though those with some holding power will probably see this as a minor irritant.

    2. Threshold for foreigner property purchases increased to RM1million from RM500,000

    The first thing to take note is that Medini in Iskandar Malaysia is probably not affected by this ruling as there are no price restrictions there in the first place. We are waiting to get full confirmation on this fact but it is likely to be the case. What does this mean? Medini will boom as foreign buying will now flock to this location. It will also concentrate foreign purchases in Medini and create a more vibrant market there.

    Other beneficiaries of this measure will be gated guarded landed property price at RM1million at above. A buyer with a RM1million budget is more likely now to buy a gated guarded landed property versus a condominium due to the better value for money.

    Buyers who are holding property at the RM500,000-750,000 price range and expecting to sell to foreigners will have a hard time now. This is especially for condominium units where at those price ranges, locals are more likely to buy landed. Here, the product that you are holding is key.

    The impact to property prices is yet to be seen. I expect among the options developer will consider is to go up the value chain such as offering better quality finishing, furniture packages, rental schemes in order to justify the RM1million price tag. Otherwise the products will now be more tailored for the local market and we may see foreign buying move heavily into Medini instead.

    If you are a foreigner looking to buy a property below RM1million, you still have a chance to do so before 1st January 2014.

    3. Developer Interest Bearing Scheme (DIBS) is now banned

    This measure was put in place to kill property speculators. But this measure also has a side effect to all first time house buyers as they now will have to service interest for the property they bought on top of the rents they are paying on the property they are living in today.

    The removal of DIBS also means that developers do not need to price in this cost anymore. We may see new launch prices staying flat as a result and developers use this savings to offset the higher cost of construction. This will likely achieve the desired effect of stabilizing the prices, but potentially this could be for a short timeframe of the next 6-9 months only. If new launches in 2014 come in at attractive prices and good product offering, the price stabilization might only be temporary. Hardcore speculators again will be deterred by this measure though buyers with some holding power may use this opportunity to pick up good choice and well priced units in the next year.
    If you have an existing loan with DIBS, it will not be affected as it is already ongoing. If you have a loan application with DIBS pending, please get it approved and signed before 1st Jan 2014 to lock in this benefit.

    4. Introduction of 6% Goods and Services Tax (GST)

    Introduction of GST is a necessary measure for the Malaysian government to resolve one of its biggest economic concerns, which is to eliminate the budget deficit. GST allows the government to increase the tax base (increase revenues) and is a more fair tax versus the existing Sales and Service Tax (SST) which will be abolished. However do take note that GST implementation date is targeted for 1st April 2015.

    GST implementation might also mean that commercial property purchases are subject to GST, and companies will now have to plan for GST registration. More clarity on this will be provided in the coming months once the tax accountants sort out the new rulings.

    The Malaysian government will also start reducing subsidies such as sugar (effective immediately) and a structured approach to subsidy reduction in other goods such as petrol in the years to come.

    Personal income tax will also be reduced between 1-3% and corporate income tax reduced between 1-2%. This is in line with GST implementation which usually results in reduction in income tax.

    All these initiatives are good in that the government is finally taking concrete steps to re-structure the tax base and ensure the government finances are in good shape and avoid fiscal problems that have hit other emerging economies recently like Indonesia and India. Ratings agencies/ analysts should see these initiatives as good news and should put Malaysia in favourable position moving forward.

    Cheers www.alphamarketingsg.com

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    Quote Originally Posted by chess_gal View Post
    Malaysian Budget 2014 and Impact to Property Investing in Malaysia

    Hi everyone,

    The Malaysian 2014 Budget announcement was made today 25th October 2013. There are several property market cooling measures in the new budget. Here we would like to highlight these cooling measures and the impact. All new measures are effective 1st Jan 2014 unless specifically mentioned.

    1. Increase in Real Property Gain Tax (RPGT)

    From 1 Jan 2014 RPGT %
    Msian
    1st to 3rd year of disposal 30%
    3rd to 4th year of disposal 20%
    5th year of disposal 15%
    After 5 years 0%

    Companies
    1st to 3rd year of disposal 30%
    3rd to 4th year of disposal 20%
    5th year of disposal 15%
    After 5 years 5%

    Foreigner
    1st to 5th year 30%
    After 5 years 5%

    Generally there is an increase across the board. The biggest impact are to foreigners who now will be required to hold the property minimum of 5 years to avoid the 30% RPGT. After 5 years, the impact of 5% RPGT as it will only be a small amount and should not be a problem. For new launches, speculators who are looking to flip directly at completion will have to pay a 30% RPGT and this would reduce their profits as most projects would complete in 2-4 years and still within 30% RPGT timeframe.

    Do take note that RPGT timeframe is calculated from the date the Sales & Purchase agreement is signed. We expect this to deter the hardcore speculators, though those with some holding power will probably see this as a minor irritant.

    2. Threshold for foreigner property purchases increased to RM1million from RM500,000

    The first thing to take note is that Medini in Iskandar Malaysia is probably not affected by this ruling as there are no price restrictions there in the first place. We are waiting to get full confirmation on this fact but it is likely to be the case. What does this mean? Medini will boom as foreign buying will now flock to this location. It will also concentrate foreign purchases in Medini and create a more vibrant market there.

    Other beneficiaries of this measure will be gated guarded landed property price at RM1million at above. A buyer with a RM1million budget is more likely now to buy a gated guarded landed property versus a condominium due to the better value for money.

    Buyers who are holding property at the RM500,000-750,000 price range and expecting to sell to foreigners will have a hard time now. This is especially for condominium units where at those price ranges, locals are more likely to buy landed. Here, the product that you are holding is key.

    The impact to property prices is yet to be seen. I expect among the options developer will consider is to go up the value chain such as offering better quality finishing, furniture packages, rental schemes in order to justify the RM1million price tag. Otherwise the products will now be more tailored for the local market and we may see foreign buying move heavily into Medini instead.

    If you are a foreigner looking to buy a property below RM1million, you still have a chance to do so before 1st January 2014.

    3. Developer Interest Bearing Scheme (DIBS) is now banned

    This measure was put in place to kill property speculators. But this measure also has a side effect to all first time house buyers as they now will have to service interest for the property they bought on top of the rents they are paying on the property they are living in today.

    The removal of DIBS also means that developers do not need to price in this cost anymore. We may see new launch prices staying flat as a result and developers use this savings to offset the higher cost of construction. This will likely achieve the desired effect of stabilizing the prices, but potentially this could be for a short timeframe of the next 6-9 months only. If new launches in 2014 come in at attractive prices and good product offering, the price stabilization might only be temporary. Hardcore speculators again will be deterred by this measure though buyers with some holding power may use this opportunity to pick up good choice and well priced units in the next year.
    If you have an existing loan with DIBS, it will not be affected as it is already ongoing. If you have a loan application with DIBS pending, please get it approved and signed before 1st Jan 2014 to lock in this benefit.

    4. Introduction of 6% Goods and Services Tax (GST)

    Introduction of GST is a necessary measure for the Malaysian government to resolve one of its biggest economic concerns, which is to eliminate the budget deficit. GST allows the government to increase the tax base (increase revenues) and is a more fair tax versus the existing Sales and Service Tax (SST) which will be abolished. However do take note that GST implementation date is targeted for 1st April 2015.

    GST implementation might also mean that commercial property purchases are subject to GST, and companies will now have to plan for GST registration. More clarity on this will be provided in the coming months once the tax accountants sort out the new rulings.

    The Malaysian government will also start reducing subsidies such as sugar (effective immediately) and a structured approach to subsidy reduction in other goods such as petrol in the years to come.

    Personal income tax will also be reduced between 1-3% and corporate income tax reduced between 1-2%. This is in line with GST implementation which usually results in reduction in income tax.

    All these initiatives are good in that the government is finally taking concrete steps to re-structure the tax base and ensure the government finances are in good shape and avoid fiscal problems that have hit other emerging economies recently like Indonesia and India. Ratings agencies/ analysts should see these initiatives as good news and should put Malaysia in favourable position moving forward.

    Cheers www.alphamarketingsg.com
    Like that not so good for SIN foreigners (aka singkaponan) liao in Malaysia ...

    But for malaysian PR in Sinkieland still the best of both world ...

  3. #3
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    Like Tat, I will be more bullish on Singapore property market, wen rich Singaporeans have less alternative, they will Cheong local property market....can't be Cheong sgx penny stocks can get burnt to death, right!

  4. #4
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    Different quantum, different target mkt. 1m rm is just 400k sgd. can buy what?

  5. #5
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    Quote Originally Posted by newbie11 View Post
    Different quantum, different target mkt. 1m rm is just 400k sgd. can buy what?
    Can pay the downpayment of an OCR project in Singapore.... Safer to leave it in Malaysia

  6. #6
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    Just spoke to a Malaysian colleague. Advice is to not touch any property there due to uncertainties attributable to flip flopping of policies, state of the economy and political situation.

  7. #7
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    Quote Originally Posted by desfrie View Post
    Just spoke to a Malaysian colleague. Advice is to not touch any property there due to uncertainties attributable to flip flopping of policies, state of the economy and political situation.
    No offense, but surely there r many malaysians who think can buy,

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    Quote Originally Posted by desfrie View Post
    Just spoke to a Malaysian colleague. Advice is to not touch any property there due to uncertainties attributable to flip flopping of policies, state of the economy and political situation.
    One malaysian colleague...wow ....must be a very knowledgeable authority in property....is it? wahahahahahahahaha

  9. #9
    OCR properties going to crash!

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    Go do a survey of the Malaysians, majority earn how much?
    How much are they willing to pay for a property?
    Will they buy properties to invest/rent out?
    Then may be we will have the answer?

    My understanding is:
    - Malaysians generally won't pay more than RM500k for a property.
    - Malaysians think their properties rental market very bad, not worth buying for investment.

    Those foreigners of Malaysia who bought properties between RM500k to RM1m is now being screwed by the changes in Malaysia's law! They can now only sell to Malaysians who will try to chop their carrot head because they know nobody will pay higher price for their properties! (only foreigners will pay RM1m or more for a Malaysia property, most Malaysians don't!).


    Quote Originally Posted by Photogguy View Post
    One malaysian colleague...wow ....must be a very knowledgeable authority in property....is it? wahahahahahahahaha
    Last edited by teddybear; 31st October 2013 at 08:10 AM.

  10. #10
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    Quote Originally Posted by teddybear View Post
    My understanding is:
    - Malaysians generally won't pay more than RM500k for a property.
    Actually, that's not true at all. There are hardly any NEW double storey houses below RM 500k in JB, KL, Penang. I read that there was overnight queue for a new double storey terrace launch in JB, priced around RM 550K. So RM 550K is seen as an incredible bargain!

    In fact, when you do a search for NEW double storey houses on iproperty.com.my, you will be hard pressed to find anything below RM 500K in JB, KL, Penang.

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