POLICY
7
120
Starting this year onwards, the real property gains tax (RPGT) for residential property disposed within first two years from the date of purchase has been increased by 5% to 15% and from 5% to 10% for disposal between the third and fifth year. These new rates were tabled in the parliament during the Budget 2013 announcements in last October 2012 by Prime Minister Datuk Seri Mohd Najib Razak. Basically,RPGT is a tax structure for investors who wish to dispose their property and gain profit out of it. RPGT may apply upon disposal of second property or subsequent property disposed. The tax that will be paid to Inland Revenue Board (IRB) is calculated based on net profit or the price difference between purchase and selling price. Plus, investors who are eligible under the RPGT is no longer required to pay income tax.
2004 = 100
96.85
100
95.73
80 60 40
Overall: Avg. price / transaction
RM500,001 and above: Avg. price / transaction
Note: e = estimates
f
(15%) 2013f
(10%) 2012e
(10%) 2011
“
Legend:
(5%) 2010
RPGT
(5%) 2009
20 0
Year 2013 will be continuously a challenging year for most property investors in Malaysia. Since last year we have seen many improvised guidelines imposed by Bank Negara Malaysia (BNM) to rein property speculation such as loan-to-value ratio at 70% for third and subsequent property purchased and loan processing based on net income instead of gross income previously.
125.85
(0%) 2008
by Hazrul Izwan
136.35
140
(30%) 2007
impact of real property gain tax (RPGT) on Malaysian property market
152.74
160
(30%) 2006
OF MIND An analyst’s views on the
172.08
(30%) 2005
STATE
Index 180
(30%) 2004
CHANGING THE
Figure 5: Malaysian House Price Index by Segment, 2004 - 2013f
Below RM500,000: Avg. price / transaction
= forecast
Source: NAPIC, MPI Research
Malaysia is preferred as a
second home to foreigners rather than a playground for short-term speculators
One key takeaway point for investors is that RPGT was imposed by the government is a policy purely to fight against excessive speculation as well as to curb price overheating in order to encourage investors to own a house and stay in Malaysia. As Malaysian property market is suitable for medium to longterm investors as it takes at least five to seven years in order to reach maturity stage. Not many people know the good thing about Malaysian RPGT because its sound negative in the eye of investors. In fact, RPGT will give a better tax-relief option for investors instead of being taxed under income tax where the rate is much higher. Moving forward, it is safe to say that the new RPGT rate of 15% for the first two years will not have much impact on property prices especially for RM500,000 and below housing segment.
Within the analysis, the 30% rate caused a severe impact only for the RM500,001 and above housing segment by more than 20% decline in average price per transaction in 2007. Hence, this segment is more receptive to RPGT while below RM500,000 housing segment is forecasted will have a moderate impact on property purchase due to the bulk of the purchasers As a conclusion, RPGT is still a “liability” Since the announcement, we have heard are transacted by locals. for investors. House buyers who wish mixed reaction from the industry players to dispose their property should take mainly developers and estate agents as However, factors such as increasing note of the new RPGT that takes effect well as investors. What I agree the most demand for own occupancy, less supply on January 1, 2013. By having such is the increment will not have significant of affordable homes ranging between regulatory measures, Malaysia wanted impact to the property market especially RM250,000 to RM400,000 in certain to be recognised as a second home to to property prices. The impact is viewed areas near central business districts foreigners rather than a playground for as a “mild” cooling measure and most (CBDs) further support this segment to short-term speculators. likely to have similar form of impact with be irresponsive to RPGT and continuously the previous increment. keep contributing to price hike too.