Property Price Gains Slowing Down In Malaysia, Say Industry Experts

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Published on Wednesday, 19 February 2014 16:20

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PIC: The Malay MailKUALA LUMPUR: Malaysian property prices are beginning to cool as Putrajaya's moves to curb speculation start to work, according to industry experts.

Real estate specialists quoted by the South China Morning Post attributed the recent trend to the hike in property gains tax and other cooling measures announced last year.

The government also doubled the price floor for foreigners purchasing property in the country to RM1 million, and banned the continued use of the Developer Interest Bearing Scheme (DIBS), which allowed buyers to purchase new property without having to make any progressive payments over the course of construction.

“The days of being able to buy a property without putting any money down and, in two years, selling it for a 30 per cent profit - those days are absolutely over,” Malaysian Institute of Estate Agents president Siva Shanker was quoted as saying by the Hong Kong-based daily.

“As the market continues to mature in Malaysia, I think we will see less of these sporadic spurts of growth, and more steady, quiet growth,” he added.

Last October, Prime Minister Datuk Seri Najib Razak introduced stricter RPGT (real property gains tax) rules in his 2014 Budget in a bid to clamp down on rampant property speculation that has seen prices shoot up by an average of 12 per cent in 2012, according to data compiled by the National Property Information Centre (Napic).

Under the new RPGT rules, owners who dispose of their residential properties in the first three years will be charged 30 per cent of the transaction value, with RPGT rates going down to 20 per cent in the fourth year and 15 per cent in the fifth.

The government also banned developers from using the DIBS, to prevent them from incorporating interest rates on loans in house prices during the construction period.

Nicholas Holt, Knight Frank's Asia-Pacific head of research, told the daily that the RPGT “will dampen demand to some extent”, but noted that other factors such as rising inflation and an expected hike in interest rates will bear down on the property market and possibly lead to some correction.

Siva, however, said that the tightening measures are good for the sector's long-term prospects, as the spike in property prices over the past few years was “no good for anybody”.

“Literally without taking your wallet out, you bought a property, paid nothing until completion and - because the market was rising so fast - as soon as it was completed, you could flip it for a 20 to 30 per cent deal and walk away with money you made out of thin air.

“The fundamentals cannot hold that sort of growth. If we'd carried on at that level, the market was going to crash - inevitably, the proverbial bubble would burst,” he said, though he added that this opens up opportunities in the secondary market.

Knight Frank's executive director, Judy Ong Mei-chen, said that while they expect the overall transaction volume to decrease, growth is still possible in certain “hot spots” due to factors ranging from limited supply, scarcity of land and sustained localised demand from owner-occupiers and upgraders.

“[Malaysia] remains as an attractive investment destination in the region due to its stable property market and relative lower housing prices that continue to offer reasonable returns,” she said.