Support for increase in real property gains tax

PETALING JAYA: Property executives are in favour of an increase in the real property gains tax (RPGT), saying the move would help temper excessive speculation in a market that saw average house prices gallop by double-digits last year.

Industry participants who spoke to StarBiz argued that while some measure of speculation was necessary for a healthy market, it had, in recent times, become unreasonable.

“This is evident in certain locations. But any cooling measures should be implemented carefully. We don’t want to kill off the whole industry,” said Foo Gee Jen, managing director of CH Williams Talhar Wong Sdn Bhd, a property consultancy.

He suggested that the Government raise the first tax bracket for RPGT to three years from two currently, and the tax rate to 25% from 15%. These policies needed to be targeted at specific individuals rather than across the board, affecting, for instance, those who had committed to multiple transactions within a given time, Foo said.

The Government might also consider putting the brakes on the developer interest-bearing scheme (DIBS) and other rebates to house buyers, which have served to artificially inflate prices, he added.

DIBS, a popular easy financing package offered by property developers in joint-promotion activities with banks, was banned in Singapore two years ago.

Under the scheme, buyers need not fork out much for their downpayment, as the developer supposedly absorbs the initial interest. This is until the buyer takes possession of the property.

A high number of buyers enter this scheme with the intention of flipping the property when they gain possession of it. This scenario fuels speculation.

The Government is mulling the possibility of increasing RPGT to tame runaway house prices.

The availability of various rebates, valuer Elvin Fernandez said, had also led to much of the speculation and demand in the primary market.

An analyst with a non-bank backed research house told StarBiz that any fresh cooling measures should be selective so as not to harm the real demand for homes.

“The point is to weed out the flippers,” she said. Although talk of further policy tightening would likely weigh on sentiment for property stocks, their longer-term sales and earnings remained sound, given that speculators probably comprised only 5% to 6% of total bank loans, the analyst said.

In a note yesterday, CIMB Research said it saw a “very high chance” that the RPGT would be expanded when Malaysia’s budget is tabled in October, in line with the trend over the past two years.

“There is a possibility that other measures to curb speculation may be imposed as well, such as restrictions to the DIBS. These measures would help dampen property speculation, at least temporarily.

“However, the Government would have to strike a fine balance between lowering speculative activities and excessive tightening, as the key problem in the sector is not overly strong demand, but the lack of supply.

“Moves to curb speculation could inadvertently lead to even slower supply growth, which would exacerbate the demand-supply imbalance over the longer term,” the brokerage cautioned.

Support for increase in real property gains tax