With three major policies detailed in the 2014 Budget set to be put into effect between January 2014 and April 2015, the property market is set to deal with an array of changes. The biggest and arguably most discussed, policy is the increase of the Real Property Gainers Tax (RPGT) from 15% for two years to a whopping 30% for a period of three years. The banning of the Developer Interest Bearing Scheme (DIBS) and Goods & Services Tax (GST) are also set in place. We take a look at both sides of the coin before its looming implementation.
Doubling the RPGT
At a glance it may seem that the RPGT will hit first-time home buyers the most, but a closer look will reveal that property ‘flippers’ will be the ones who feel the pinch most. Increasing the rate of 15% for two years to 30% for three years effectively removes the convenience of buying and selling properties for a quick profit. Disposals after four years and five years will be increased to 20% and 15% respectively. This increase – one of two policies by the government to curb property speculation – has been received with mixed reactions.
President of the Real Estate & Housing Developers Association (REHDA), Datuk Seri Michael Yam, predicts that the potential delay in the disposal of properties will take a toll on supplies in the market, which in turn will increase its costs.
Dato’ Abdul Rahim Rahman, Founder and Executive Chairman of Rahim & Co, international property consultants, however said that the increase in RPGT may reduce speculative element in the market and will slow down the property market but it would not have a profound effect to the extent of ‘heavily dampening the market’.
The Sales & Service Tax (SST), come 15th April 2015, will be replaced by the 6% GST. The Royal Malaysian Customs Department’s website states that the difference between the SST and GST are:
i) The SST is imposed only when goods are manufactured or imported, meaning that tax is only imposed at those levels.
ii) The GST is imposed on goods and services at every production and distribution stage in the supply chain, including importation of goods and services. This tax applies when services are provided to the consumer.
In a press conference after the tabling of the budget, Prime Minister Datuk Seri Najib Razak said, “The government believes that this is the best time to implement GST as the inflation rate is low and contained.”