The announcement of the removal of real property gains tax has not come as a bolt out of the blue. Rumours of its demise had been circulating for some time. Nevertheless, what it lacked in the element of surprise was more than made up for in eager anticipation that its long-awaited abolition on April 1 will give a much-needed shot in the arm to the sluggish property market. Property counters on the local bourse were the earliest gainers from the announcement; with their share prices surged. The termination of the tax is timely. While it is suitable in curbing unbridled speculation in an overheated market, it is an inappropriate instrument when the market is in need of a dose of speculative activity to give it a boost. Apart from some segments, the property market has undoubtedly been lackluster. The volume of transactions has declines and many houses, apartments, condominiums and apartments lie empty and unsold. Now that they no longer have to pay 30% in taxes when they sell within two years of the purchase (five years in the case of foreign buyers) or wait five years for the tax period to end, more investors could be expected to enter the property market. The high-end property market in particular looks set to benefit from the increase in foreign buyers.
Malaysia has been relaxing the rules on foreign ownership of property. Foreigners no longer have to seek approval from the Foreign Investment Committee to buy residential or commercial property worth more than RM250,000. There are also no longer conditions on usage or the number of properties they ca purchase. They can rent, lease and trade in them. Bank Negara also announced the removal of the limit to the number of residential or commercial property loans that foreigners can take. With real estate in this country being much cheaper than most other places in the region, the liberalization of the rules and the abolition of the real property gains tax will go a long way towards drawing foreign investors into the property market.
Sustaining buyer interest, however, will depend on more than pronouncements of policy. It is said that land offices take as long as 153 days to approve real estate transfers. In other countries, it takes only 14 days. Such bureaucratic bottlenecks should not be allowed to tie up transfers of property and approvals of transactions. This perennial bugbear of red tape must be addressed if the property market is to see better days.
- Source: New Straits Times (Saturday, 24th March 2007) -