Budget2014 – Debate
Increase RPGT immediately
September 30, 2013
Speculation, buildings costs and foreign ownership are factors that need to be addressed urgently if the government is serious in curbing price escalation of properties.
PETALING JAYA: The issue of price hike of houses can be resolved and the government must therefore take immediate measures to control property prices.
PAS research centre executive director Dzulkefly Ahmad said that ‘cooling measures’ have to be put in place to resolve the issue.
“We need appropriate measures and not extreme measures so that the medicine will not kill the patient,” said Dzulkefly.
He opined that either the real property gains tax (RPGT) be reinstated to its original rates or the threshold widened to three years instead of the current two years.
“Before the RPGT in 1976, we had a land speculation tax of 50% for disposal within two years. Thereafter, Malaysia had a RPGT rate of 30% for the disposal of property within two years.
“But in 2003 things changed and it was reduced to zero. When the government realised its mistake, it gradually raised the tax rate to 15% for disposals within two years.
“We have now to reinstate the RPGT and widen it to three years to curb speculative buyers. This rather than the goods and services tax (GST) should be immediately put in place as it does not affect the lower income group,” he said.
Dzulkefly also pushed for the foreign property ownership threshold to be increased further.
“Raising of the foreign property ownership threshold from RM250,000 to RM500,000 in January 2010 was arguably a contributing factor in ‘artificial’ price increase in many properties throughout the country
“The threshold should be increased a lot higher as not to affect price escalation,” he said.
Cost an issue
The former parliamentarian also said that the supply (development) must be addressed to keep houses affordable.
“With perceived shortage, prices will escalate. The government must be responsible in supplying affordable homes,” he said.
He further stressed that the issue of the cost of building houses must also be looked into.
“Surely it is important to address the issue of monopoly especially in both steel and cement. Dismantle monopoly by ending the need of the import permit (AP).
“This is a mature industry that does not need to be protected because as supply increases, the price drops. The price of steel is exorbitant as compared to the global price due to monopoly.
“Reduce the cost of steel and cement and execute the suggested measures and we should see prices in the property market stabilising,” said Dzulkefly.
The PAS central working committee member also said that the Developers Interest Bearing Scheme (DIBS) must be abolished as it is a “popular easy financing scheme”.
“Some critics say it encourages speculators and not genuine home buyers because clearly, the costs are already factored into the selling price.
“With no mandatory 10% required to be paid up-front, speculators with minimum capital outlay have been buying almost everything that have been launched over the last two years. The primary aim of these speculators would be to flip or sell upon completion,” he said.
PPR not the answer
Parti Sosialis Malaysia (PSM) national treasurer A Sivarajan also stressed that the RPGT should be increased to reduce speculation.
“This is quite an effective way to control speculative activities. More effective policies are needed to clearly target speculators,” he said.
He added that the government must also seriously look into supplying more affordable housing based on the average income of the working middle class.
He added that the government needs to build affordable houses that people can directly buy.
“Also, if the government builds low-cost houses, it must be near a public transport system so that they can take the mass rapid transit (MRT), for example, to commute.
“The government must also ensure that all land banks near MRTs do not get picked up by commercial players,” he said.
He also said that the government should stop building transit houses like the People’s Housing Programme (PPR).
“Building more transit houses is not going to solve the problem as it is not a permanent solution. Those living in the PPR end up renting for ages,” he said.
Barjoyai Bardai of Universiti Tun Abdul Razak’s Graduate Business School also said that people should opt for Musharakah Mutanaqisah (declining partnership) instead.
Musharakah Mutanaqisah is a syariah compliant financing facility offered for new and existing corporate and commercial customers for asset acquisitions and refinancing such as landed properties, plant and machinery, vessels and commercial vehicles.
“The potential owner will come in as a tenant and pay rental. Slowly, he will buy the share of the house and in 15 to 20 years, he can buy all the shares and become the sole owner,” he said.
Barjoyai added that creating affordable houses should be the government’s main objective.
“A particular scheme should be created to ensure price of houses to be affordable.
Unless we create special houses that will be built on Malay reserve land, price of houses cannot be reduced,” he said.