The Penang state government is now proposing a levy of 3 per cent on the transacted price of property purchases above RM1 million by foreigners – but will that be enough to cool speculation?
I suspect that 3 per cent is not going to be enough to make a dent on speculation. At least 10 per cent would be more like it.
And the speculation is not just by foreigners but locals as well – for all sorts of reasons (such as low bank interest rates and as a hedge against inflation).
This proposal comes on the heels of the federal government’s decision to raise Real Property Gains Tax to 30 per cent for disposals in the first three years.
In May 2011, a daily reported that Penang was considering a policy to impose a special charge on super-condo projects through the state’s two municipal councils, MPPP and MPSP. Relevant exco members were directed to look into this. Revenue from the special charge would be used to cross-subsidise low-cost housing development in Penang. I am not sure why that idea was never implemented.
The state government now says there is no property overhang or glut in Penang, pointing out that the state has the lowest unsold units in the country. But how many of the units sold are empty or not owner-occupied i.e. how many of them were bought purely for speculative purposes, whether by locals or foreigners?
This is a statement by the Chief Minister:
Penang State Government To Get Public Feedback On A Proposed Levy Of 3% On The Transacted Price Of Property In Penang By Foreigners In 2014.
The Penang state government welcomes the 2014 Federal Budget’s proposal of limiting the purchases of property by foreigners to RM1 million and above to cool down property speculation so that houses remain affordable for middle-income earners. This RM1 million limit announced by Prime Minister Datuk Seri Najib Tun Razak on purchases of properties by foreigners is nothing new to Penang as Penang had implemented this ruling much earlier in 1 July 2012.
Foreigners are only allowed to purchase properties above RM 1 million whereas for landed property on Penang island the limit is RM2 million and above. The Penang state government is proposing additional steps to curb any foreign speculation of property by imposing a levy of 3% on the transacted price of property in Penang by foreigners beginning 2014. Penang State Exco for housing Jagdeep Singh will hold public consultations by engaging with the stakeholders from REHDA Penang to the Housebuyers Association.
Based the second quarter of 2013, Penang had amongst the lowest property overhang for unsold shops, residential and industrial units in the country. Property overhang is defined as property that remains unsold 9 months after the sales launch. There were only 40 shop units valued at RM 17.11 million unsold, 163 residential units unsold at RM 63.4 million and only 25 industrial lots unsold at RM6.34 million in the second quarter of 2013.(see graph below)
Total Number and Value of Overhang by Sectors as at 2Q2013
WP Kuala Lumpur
Other cities that may suffer a glut of office space, but Penang is not facing this problem and may even face a shortage. The low property overhang in shops in Malaysia highlights the growing success of building up Penang and fulfilling KPMG’s predictions as one of the 31 future global Business Process Outsourcing(BPO) hubs in the world.
The efforts started 2 years ago by the Penang state government in focusing on the services sector,as they employ almost 100% local workers with high paying jobs, is beginning to show results. By leveraging on the existing advantages of Penang as a world-class manufacturing sector, has helped to catalyze the growth of the IT and services industry in Penang.
In order not to affect the industrial development as well as efforts at convergence of the manufacturing, services and public sector there will be exemptions provided for those involved in these sectors. The proposed foreigners’ levy shall apply only to properties that are residential, commercial or agricultural in nature. However appeals will be entertained if the foreign buyers are working here for an extended period, contributes towards Penang’s industrical development or efforts to be a BPO hub or possesses unique skills required by Malaysia and Penang.
Lim Guan Eng