Budget 2019: RPGT hike could discourage foreign property buyers, says CBRE|WTW

PETALING JAYA (Nov 2): The government’s move to increase the Real Property Gains Tax (RPGT) rate might send the wrong signal to the market, which is already “very soft” at the moment, and discourage foreign investments in the country, according to CBRE|WTW managing director Foo Gee Jen.

In Budget 2019, the government has proposed that the RPGT rates be revised for the disposal of properties or shares in property holding companies in the sixth year as follows: for companies and foreigners, the rate shall be increased from 5% to 10%; and for Malaysian individuals, the rate shall be increased from 0% to 5%.

“The 5% hike in RPGT will have minimal impact on the market but it would probably discourage [foreign investors] a little bit because suddenly the spirit of having the tax to curb speculation is no longer consistent,” said Foo, who is also the immediate past president of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS).

“Speculation must be defined when you buy and sell a property in a certain timeframe. But given the tax now, even if you sell the property 100 years later, you still need to pay the tax. So I think the government is not really sending a right signal,” he told EdgeProp.my.

“That is one way for them to increase the tax [base] and you can’t blame them in a way, due to our debt position, but they have to be more prudent in doing it,” he opined.

Overall, Foo said there were not enough measures to address the property overhang issue in the country, despite several measures introduced in Budget 2019 such as the discount of up to 10% by the Real Estate and Housing Developers’ Association and the stamp duty waiver for first-time buyers of houses priced between RM300,000 and RM1 million for a six month period, may provide some breathing room within the property overhang situation.

He believes the six-month stamp duty exemption should be open to everyone in order to effectively solve the overhang situation.

“Let’s be frank, these overhang properties are not the best of all the properties available, otherwise they won’t be an overhang property. And you would not want to load these less desirable properties to first time home buyers. Instead, you should let the people with a bit more money to take a bit of risk, so it should be open to all,” he explained.

On the government working with Rehda to address the property overhang situation, Foo said: “That feels like déjà vu to me, as it reminds me of the 1997 and 1998 period when the government initiated the Malaysia Property Expo (Mapex) and it looks like a Mapex 2.0 to me. But the good thing is, our economy is not as bad as then although the overhang situation is worse,” he said.

Nevertheless, he lauds the government’s effort to continue to address the needs of the B40 income group and first time home buyers in Budget 2019.