Real Property Gains Tax when the property is disposed
– From Budget 2014 on 25 October 2013
( No actual date of implemention yet – likely 1/1/14)
|Citizen||Non citizen (foreigners)||COMPANIES|
|Disposal from :-0-3 years – 30%4th year – 20%5th year – 15%6th year & above – 0%
| Disposal from:0 – 5 years – 30%
6th year & above – 5%
|Disposal from:0 – 3 years – 30%4th year – 20%5th year – 15%6th year & above – 5%|
(2) minimum price of property that can be purchased by foreigners increase from RM500,000 to RM1,000,000.
(3) Developers not allowed to offer Developer Interest Bearing Scheme (DIBS) during construction.
(4) Sales tax and service tax to be abolished, to be replaced by Goods and Services Tax(GST) at 6% effective April 1, 2015.
(5) Corporate income tax rate to be reduced by 1 percentage point from 25% to 24%. Date of enforcement not stated;
(6) Income tax rate for SMEs (company with paid up capital below 2.5 Million) to be reduced by 1 percentage point from 20% to 19% from year of assessment 2016
(7) Individual incometax to be reduced by 1% – 3%
(8) Current maximum tax rate at 26% to be reduced to 24 %, 24.5% and 25%. To be effective from 2015
(9) Chargeable income subject to maximum rate from exceeding RM100,000 to exceeding RM400,000.
Although developers could witness an easing in sentiment in the near-term, the effect on them would not be as great compared to property investors who will take on much of the burden.
Bernard Ching, Head of Research at Alliance Research, noted that the impact would be neutral for property developers, since the RPGT will only affect non-genuine buyers and speculators.
“Since the RPGT is not an upfront tax, it would not be a deterrent to owner-occupiers and long-term investors,” he said.
“If there were any selldown on selected property stocks, I would treat it as an opportunity to accumulate. The earnings of developers are still supported by strong unbilled sales, and right now, I don’t think that demand would soften that much.”
Meanwhile, a Public Investment Research analyst believe that an RPGT hike could help curb excessive speculation in the longer term.
Another analyst remained bullish on the property sector in light of the potential increase of the RPGT. However, he said his view will take a negative stance if the government would release more tightening lending guidelines.
Notably, the government in June imposed a maximum tenure of 10 years for personal loans repayment, while property loans had a maximum tenure of 35 years, down from 45 years previously.
From the standpoint of direct property investors into Iskandar Malaysia, it is a positive move to prevent the formation of a bubble and to ensure the medium to long term sustainability of the property market in relation to its supply and demand curve. The knee jerk reaction could be the the emergence of fire sales in the next 2 months, prior to 1 Jan 2014 for sellers who want a quick exit in order to avoid the hike to 30% of RPGT. Properties from RM850,000 onwards would trend towards RM1 million in the next few quarters so that foreigners can buy them whereas properties below RM800,000 may experience a smaller market as foreigners are unable to purchase them anymore.
Houses in Horizon Hill and East Ledang could be the beneficiaries of these trend while the owners of Nusa Sentral, Nusa Idaman and Bukit Indah terrace houses would cry foul as the foreign markets are being priced out to purchase in these locations. The favourite asset category from now would seem to be landed cluster semi house and superlink houses where prices at the present market is above RM1 million.
Notwithstanding the greatest beneficiaries of this Budget would the properties located in the special economic zone of the Medini, where RPGT are waived and the foreigner cap of RM500,000 previously and now at RM1 million is not applicable in Medini. Medini is also slated to be the Central Business District of Nusajaya, the current hottest zone B of the famous Iskandar Malaysia project, where the goal is to develop this zone into a Metroplis over the next 10 years, started since 2007, with several catalytic projects completed like the Legoland water themed park, the Educity, the BioXCell in SiLC and the Pinewood Movie Studios! The Ascendas Tech Park, Avira Wellness Resort, Motorsport City and the China Wholesale Mall are the next few catalytic projects that were confirmed that would propel the City of Nusajaya into greater heights!
Both the Medini zone and the Puteri Harbour, where there is no bumi quota, where foreigners would have no restictions to buy, would be the most exciting places to invest in the years ahead, regionally and globally…..