KOMTAR — arguably Penang’s best known landmark — will be revitalised to become one of the top tourism draws in the state.

PROPERTY consultants and analysts described the proposed new real property gains tax (RPGT) regime and the removal of the developers interest bearing scheme (DIBS) as both timely and much needed in view of the speculation in the property market of late.

All of them agree that the overall budget for the property sector is good and are of the view that the the new RPGT which imposes a 30% tax on gains within the first three years of disposal upon the signing of the sale and purchase agreement coupled with the removal of DIBS will help curb speculation.

The new RPGT, effective Jan 1, 2014, targets individuals and companies. It is a more stringent regime and has more bite than the previous regime.

Says BIMB property sector analyst Law Mei Chi: “Many have expected the RPGT. The impact will be on the secondary market and may slow down transactions. What is good from the budget vis-a-vis the property sector is the removal of DIBS.

“However, the increase in the RPGT might discourage some speculators but the strong holding power (of buyers) due to the low interest rate environment will provide a buffer for speculators to hold a property longer before disposing of it.

“The removal of DIBS may affect many high-end developers.”

Another analyst who declined to be named said he was “pleased” with the propertymeasures in the sense that they were “lower than expected”. “At least there was no reduction in the loan-to-value (LTV) ratio to 60% or a rise in stamp duties,” he explained.

As for the removal of DIBS, he said he was not at all worried about that impacting developers negatively, as “they (developers) can still circumvent (the removal) with rebates.”

Meanwhile, the Association of Valuers, Property Managers, Estate Agents & PropertyConsultants in the Private Sector Malaysia (PEPS) publicity chairman James Wongsaid the new regime was a more effective anti-speculation tool. The previous regime involved a 15% tax in the first two years of disposal.

“Property is a long-term investment and this new regime actually promotes long-term investment among investors and, at the same time, also helps to prevent excessive speculation,” Wong said.

“Government revenue will also increase. In 2011, the revenue received from RPGT was RM1.24bil and this involved a tax of 10% for the first two years.

“In 2012, RPGT revenue is estimated to be between RM1.5mil and RM2bil. This increase will help to bring more revenue to the government,” Wong said.

Wong said the 5% tax on companies and non-citizens was also significant as it involved disposal from the sixth and subsequent years.

“This will stamp bulk buying by foreigners with speculative intentions. However, it will also affect Iskandar Malaysia, if there is excessive speculation there but on a longer time, it will bring confidence into that market. In the interim, there may be a slight slowdown in sales but in six months to a year, it will self-correct.”

Source: StarProperty.my

(Prime Minister’s speech on property sector)

Goods and Services Tax (GST)

Sale, purchase and rental of residential properties as well as selected financial services are exempted from GST.

Increasing Home Ownership

The recent sharp increase in the prices of houses has affected the ability of the rakyat to purchase houses. In addition, speculative activities have an impact on house prices and can adversely affect the real estate market in the long term.

To increase the ability of the rakyat to buy a house and ensure stable house prices, as well as to control excessive speculative activities, the Government will implement the following steps :

Review Real Property Gains Tax (RPGT).

For gains on properties disposed within the holding period of up to three years, RPGT rate is increased to 30%, whereas for disposals within the holding period up to four and five years, the rates are increased to 20% and 15%, respectively. For disposals made in the sixth and subsequent years, no RPGT is imposed on citizens, whereas companies are taxed at 5%.

For non-citizens, RPGT is imposed at 30% on the gains from properties disposed within the holding period of up to 5 years and for disposals in the sixth and subsequent years, RPGT is imposed at 5%.

Minimum Price For Foreigners

Increase the minimum price of property that can be purchased by foreigners from RM500,000 to RM1,000,000;

Price Transparency

Increase transparency in property sales price, where property developers will have to display detailed sales price including all benefits and incentives offered to buyers such as exemption of legal fees, stamp duty, sales agreements, cash rebates and free gifts; and

Developer Interest Bearing Scheme (DIBS)

Prohibit developers from implementing projects that have features of Developer Interest Bearing Scheme (DIBS), to prevent developers from incorporating interest rates on loans in house prices during the construction period. Therefore, financial institutions are prohibited from providing final funding for projects involved in the DIBS scheme.

To further increase access to home ownership at affordable prices, an estimated 223,000 units of new houses will be built by the Government and the private sector in 2014. The Government will allocate RM578mil to the National Housing Department (JPN) for the implementation of Program Perumahan Rakyat which involves the construction of 16,473 housing units. In addition, JPN will construct 600 units for Program Perumahan Rakyat Disewa and Perumahan Rakyat Bersepadu with an allocation of RM146mil.

PR1MA will provide 80,000 housing units with an allocation of RM1bil. The sales price of PR1MA houses are 20% lower than market prices. Meanwhile, SPNB will build 26,122 units of affordable houses, comprising 15,122 units of affordable houses, 3,000 units Rumah Idaman Rakyat and 8,000 units of Rumah Mesra Rakyat. The Government will introduce a new category of Rumah Mesra Rakyat, with sales price between RM45,000 and RM65,000 for which the Government will provide a subsidy between RM15,000 to RM20,000 per unit.

The Government will also introduce the Private Affordable Ownership Housing Scheme (MyHome) as a step to encourage the private sector to build more low and medium-cost houses. The scheme provides a subsidy of RM30,000 to the private developers for each unit built. Among the criteria for the scheme are:

• Build at least 20% low-cost houses and 20% medium-cost houses in a housing project;
• The maximum price of low-cost houses is RM45,000 and medium-cost houses is RM170,000;
• The minimum built-up area of low-cost houses is 800 square feet and the medium-cost houses, 1,000 square feet, with a minimum of 3 bedrooms and 2 bathrooms;
• Provide parking, surau, hall and recreational park; and
• Open to first-time buyers with a monthly household income of RM3,000 for low-cost houses and a maximum of RM6,000 for medium-cost houses.

Preference will be given to developers who build low and medium-cost houses in areas with high demand and limited to 10,000 units in 2014. The scheme is for housing projects approved effective from 1 January 2014 with an allocation of RM300mil under the supervision of Ministry of Urban Wellbeing, Housing and Local Government.

Currently, PR1MA housing projects, housing in newly opened areas and 1Malaysia Civil Servants’ Housing Programme are eligible to apply for grants at 10% of the project cost, from the Facilitation Fund. For 2014, the Government will provide a total of RM4bil to the Facilitation Fund as an initiative to promote private, high-strategic impact projects.

Of this, I propose that RM1bil is allocated to the Housing Facilitation Fund under Public Private Partnership Unit (UKAS). Developers who receive this grant must abide by the terms and conditions as well as the sales prices which are set by the Government.

The Government will also carry out a refurbishment program and improve comfort and beautify government-owned low-cost housing. Among the measures to be implemented include lift maintenance, repainting the house, cleaning up drains and landfill space and repair playgrounds.

To this end, a sum of RM100mil will be provided to 1Malaysia Maintenance Fund under the Ministry of Urban Well-being, Housing and Local Government. The Government will also allocate RM82mil to rehabilitate 20 abandoned housing projects involving 8,197 houses.

To further strengthen the real estate market and increase opportunities for the rakyat to own houses, the Government will implement a more effective and comprehensive approach. In this regard, I am pleased to propose the establishment of the National Housing Council to develop strategies and action plans in a holistic manner; coordinate legal aspects and property price mechanism; and ensure provision of homes in a more efficient and expeditious manner. The Council members will comprise Federal Agencies, State Governments, the National Housing Department, PR1MA, SPNB and the private sector.

Source: StarProperty.my

It is not fair to compare property prices in Penang with those in Singapore and Hong Kong, says CA Lim & Co’s principal Lim Chien Aun.

“No doubt among the cheapest in the region, Penang, however, is not a financial centre like Singapore and Hong Kong, where there is substantial expatriate population to support high-end properties.

“Furthermore the foreign participation in the local property market is less than 8%,” Lim said, on the frequent comparison of property prices in Penang with Hong Kong and Singapore.

On the speculative nature of the Penang property market, Lim said as the return-on-investment (ROI) was not attractive in Penang, most investors buy properties for capital appreciation reasons and not for rental yields.

“In other words, the Penang property market is very speculative in nature,” he added.

In view of the high pricing of residential properties in Penang, the sub-sales market has now become important, said Raine & Horne Malaysia director Michael Geh.

He said more people were going after secondary property because of the pricing which ranged between RM72,000 and RM350,000.

Geh said strategically located affordable apartments with built-up areas of 700sq ft to over 800sq ft such as the Serina Bay in Sungai Pinang were now selling for RM350,000, compared to RM130,000 in 2005.

“Some apartment projects like the Symphony Park in Jelutong and Ocean View in Sungai Pinang have appreciated respectively to RM400,000 and RM380,000, compared to RM130,000 and RM150,000 when they were first sold in 2000 and 2001, due to their strategic locations,” he said.

The Ocean View units have built-up areas of 870sq ft, while the Symphony Park units are 730sq ft.

“On the island, the sub-sales properties are found largely in the south-west district and in Seberang Prai,” said Geh.

“The problem, however, is with the limited sub-sales supply, as there will be many who are also unwilling to sell at the sub-sales price.

“There are also no reasons for them to sell. If they were to give up their homes below the market price, how are they going to take up another home?”

Ideal Property Sdn Bhd chief executive officer Datuk Alex Ooi said the group planned to develop 2,000 units of affordable properties priced around RM200,000, RM300,000 and RM400,000 in Bayan Lepas next year.

“These will take three years to increase. We will plan more of such affordable homes in the near future on the island,” he said.

Penang Town and Country Planning and Housing committee chairman Jagdeep Singh Deo said the state government planned to deliver eight affordable projects comprising 20,000 housing units, three on the island and five in Seberang Prai.

“These properties will be priced between RM72,000 and RM400,000.

“On the island, the location for the projects are in Jalan S.P. Chelliah, Teluk Kumbar and Jelutong.

“In Seberang Prai, the sites for the projects are Kampung Jawa Butter-worth, Ampang Jajar, off Jalan Be-rapit, Bukit Juru and Batu Kawan,” Jagdeep said.

In 2012, according to the National Property Information Centre (Napic), total transactions of residential properties in Penang fell by 23% to 23,266 from 30,674 in 2011, while the total value of transactions was down 7.5% to RM7bil from RM7.7bil in 2011.

Source: StarProperty.my

The Malaysian Institute of Economic Research’s Q3 residential property survey saw its residential property index (RPI) fall to the lowest level in four quarters but still staying above the 100-point demarcation level at 118 points.

It said this suggested confidence in property remained, but was trending downwards and implied cautiousness in the months ahead.

“The latest reading is pulled down primarily by builders’ expectations of production and sales for the near term. Their assessment of present conditions is also generally less encouraging than in the previous quarter, except for current production,” MIER’s survey report said.

However, MIER said sales continued to hold their own in the quarter.

It said 41% of respondents described their sales as satisfactory and 38% as good, with just 21% responding negatively.

While demand for bungalows has slowed down, landed properties have generally remained popular. Double-storey houses are cited as the best-selling type, with 52% of respondents confirming this, while 31% cited single-storey houses and 7% condominiums.

More houses were constructed in Q3.

“About 31% of correspondents built more homes in Q3, the highest proportion tabulated in nine quarters, representing a whopping 72% jump quarter-on-quarter,” MIER revealed.

It said while this may be due to the current drawdown in new unsold units, people were also probably buying ahead of expectations of a hike in interest rate. However, new bookings slipped for two quarters in a row, with just 47% respondents reporting more new bookings compared to 50% in Q2.

Property remained expensive, even though fewer respondents increased prices in Q3 (56%) than in Q2 (57%) or in 3Q12 (63%). According to MIER, prices are likely to remain about the same in the coming months.

The survey also showed that while home loan applications had gone up, approvals were down, following the recent cap on loan tenure by Bank Negara from 45 years to 35 years.

Meanwhile, job prospects in the property sector, while still holding their own in the quarter, are showing signs of moderating.

“Not only is there a bigger majority of those who have retained their present staff, those who hired more are also smaller in number – with 86% and 11% being polled respectively, compared to 61% and 39% in 2Q13,” MIER said.

In this quarter, only 3% of respondents have retrenched employees compared to 9% last year, but payroll did not budge much with 69% saying they did not make any adjustment to employee salaries in the quarter, against 25% who did.

“Builders are bracing for a more cautious outlook in the near term. Not only are they adjusting their sales forecast lower, they are also less optimistic about their selling prices – preferring to maintain existing prices for now.

MIER said concerns over the limited supply of foreign construction workers and the recent hike in fuel prices may have weighed on builders’ cost of construction. Unless this hiccup was addressed soon, supply of new residential properties will likely be subdued in the near term.

Source: StarProperty.my