I WORK in the real estate industry and would like to comment on the budget proposals for 2020 and the attendant responses from politicians gleaned from media reports.
Two salient proposals in Budget 2020 will impact on the real estate industry – the re-jigging of the real property gains tax (RPGT) base year to 2013 and reduction of the minimum threshold for foreign purchasers to RM600,000.
Many are aware of the fact that our economy is not in the best of health, more so the real estate sector. Promises have remained just that. No major stimulus nor robust measures have been introduced and nothing has been tangibly felt across the board.
Really, it is in dire need of fresh direction, not least capital. Attend some of the property exhibitions with fancy alphabet soup initiatives like Rent to Own (RTO) and Home Ownership Campaign (HOC), and you will feel the miserable vibes. Imposition of the 5% RPGT last year was like twisting the dagger in the flesh.
A textbook lesson on RPGT will teach that it is used as a cooling measure and its imposition is only needed when the real estate industry is heating up. Quite the contrary, it was introduced when the industry had been seemingly in the doldrums since 2015.
To say that it was to address runaway prices so that more Malaysians can afford to own a home is akin to using a spade to clean up a coffee spill. It is just not the right instrument. To address the affordable homes issue, the government needs to roll up its sleeves and exercise its social responsibility – find the money and build houses for the rakyat, full stop. Do not expect the profit-driven private sector to take over your responsibilities.
In the long run, market forces will influence the RPGT to be factored into the sale price, and this inevitably pushes the price higher by 5% or more. This itself has the opposite effect to its intention. The lesson was not learned despite criticism of the imposition of the goods and services tax, which pushed prices higher since 2015.
Also, the RPGT was restrospective in effect – from year 2000 and now to 2013. Blow away the smoke, Finance Minister, and pray tell us poor rakyat the rationale to re-jig the base year? Why the 13 years’ difference? Why not from May 2018? More importantly, one year has elapsed and those who disposed of their property in the past year are out of pocket by 5%.
On the matter of reducing the minimum threshold for foreign purchasers to RM600,000, it seems the government has been caught unawares. I don’t even need to mention the Opposition having reservations related to sovereignty, and so on. In this day and age, is it so difficult to communicate with the various ministries to better co-ordinate implementation to reap the most benefit from such a proposal?
While foreign capital is sorely needed, the long-term effect of such a measure will serve to crowd out Malaysians and make housing even more unaffordable in the longer term, exacerbating an already gangrenous housing situation. Foreigners will have no emotional response except where there is money to be made; that is their only take-away from this proposal.
A bigger chunk of the cheaper real estate in the market will be subject to speculation and, subsequently, RPGT being factored in at a minimum of 10% (foreigner bracket).
It is paradoxical – even comical – that RPGT was imposed while foreigners are allowed to purchase cheaper homes only for them to speculate and squeeze out Malaysians.
So how do we achieve housing objectives for ALL Malaysians?
It has been plastered all over the foreign media that the youths in Hong Kong now are disillusioned mainly because of housing issues. It is hoped that our government would make more efforts to address the housing issue so that all Malaysians can proudly claim to own their own property. Our country needs foreigners who have capital, be it hard currency or talent. Do not sell it out by lowering the threshold. otherwise, it’s a case of dumb and dumber.
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