Penang mulls 3% levy on property transactions by foreigners to cool speculation

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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

STATE

RESIDENTIAL

SHOPS

INDUSTRY

UNITS

VALUE

(RM MIL)

UNITS

VALUE

(RM MIL)

UNITS

VALUE

(RM MIL)

WP Kuala Lumpur

2,022

1,887.95

0

0

0

0

WP Putrajaya

0

0

0

0

0

0

WP Labuan

0

0

8

4.20

0

0

Selangor

2,479

1,444.71

328

80.07

47

9.99

Johor

3,573

679.20

1,864

427.56

150

74.18

Penang

163

63.40

40

17.11

25

6.34

Perak

891

160.50

387

117.81

17

8.25

Negeri Sembilan

2,023

297.80

583

132.08

14

4.31

Melaka

872

201.16

455

91.60

151

47.55

Kedah

1,347

138.47

135

31.07

0

0

Pahang

286

57.21

169

95.79

20

4.04

Terengganu

32

8.49

0

0

0

0

Kelantan

98

12.74

70

49.00

0

0

Perlis

37

5.07

0

0

0

0

Sabah

218

138.56

186

76.33

36

19.06

Sarawak

35

103.19

187

73.58

15

6.72

Total

14,576

5,198

4,412

1,202.19

475

180.44

 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

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maxwell

the term locals is a very general term. to avoid plunging into sensitive issues, it is best to leave locals to how people want to interpret it.
locals means non-foreigners ….

it simply means non-foreigners are speculators. as to their profession, the business they are into,….identities….i think it is safe to say they come from all walks of life….

Yang

Rajraman666, Yes you are absolutely right.

Yang.

Who are the speculators? Locals. They team up to buy. Wrong, the real speculators is the developers, LGE and the govt. LGE has been giving too much leeway to the developers in the haste to get development. Take for example 1 project in Thean Teik highway and also the KBP. In a haste for the developer to develop the abandon project in Thean Teik he give in so much to this developers so much so that they are flouting the S & P rules. The abandoned project was supposed to be a LMC at 72k and buyer for the units… Read more »

Janice

Locals teamed up to buy properties?
Yes! CONsultants … teaming up to speculate properties!

Watching from the Hills

Free for all – to speculate & make a killing.
Penanglang, wake up to this helplessness of bo hoot state gomen.
All talk but no action. Blame, blame, blame the ostrich!

Billy cduk

Penang Island have scarce land for building new homes especially if they are landed properties. Prices for landed will forever keep going up and up. As for high rises, there shall be competition as many developers try to match each others new found per square foot (psf) selling price level. Right now, it is not shocking to hear RM1,000-RM1,500 psf selling prices for apartments to luxurious lifestyle condominiums. Ironically, selling price psf for landed properties are much lower than apartments or condominiums. Whatever levy imposed is regressive as witty developers will repackage them as rebates or upgraded finishes. It is… Read more »

maxwell

See the report in Star Oct 24 Metro North cover story on the oversupply of high-end properties.
The same story appeared in the Central Edition on Oct 25.
Data from NAPIC is extensively use

maxwell

The foreign participation in the Penang property market is less than 5%. I think this has been reported by several valuers and even CM has admitted this. So how is this levy going to deter foreigners from buying when there is already very low foreign participation. Why debate then on a measure that will not have much of an impact on anything? Foreigners do not buy properties in Penang because there is no return on investment. The Japanese don’t buy properties here; they rent. The Chinese from China prefers Iskandar because it is close to Singapore. There are some Europeans… Read more »

Yang

Jagdeep Singh is a hypocrite. He is not fit to be a housing exco. What is the difference if 3% is cap or not. After all how many local can buy condo or houses from the developer as they are price so way up at a minimum of 800k. Can you find a new apartment at 200k – 300k being built. And the idiot Jagdeep is not asking these developer to build these these type of houses or 72k but instead allowed the developers to build 72k and sold at 200 – 400k.. So you see there is really no… Read more »

rajraman666

Yang,
That’s about Political Trader selling their saliva.Don’t believe in Politician promise.They just sell a commodity call “LIES”.We should run our own life whether it’s UMNO or Pakatan.
.
rajraman. ABU is good but looks likes becoming a cult movement .Their supporter (criticise) you if don’t agree a bit to their terms but their leader of ABU is a reluctant Politician.He will spend his entire life for politics but won’t stand as political candidate. I was (criticised) there and my defense is deleted.

rajraman666

All sold out by developer but after completion at least 50% on secondary market.

rajraman. The lost generation of new home owner at mercy of Developer,Speculator and hopeless Government who dare not to touch the untouchable robbers of the next generation.

Happy Deepavali Anil and to all Malaysian.

co-ordinator foreign spouses support group

This is going to put a strain on Malaysians married to foreign spouses. It will mean that they cannot purchase their home jointly with this new ruling and puts a strain on middle and lower income families!!

bigjoe99

The idea of driving away speculator with property taxes while in theory sounds good is actually almost always political rather than actually successful as a policy. The truth is like capital control, separating the speculators and long term property holder is hardly black and white. Truth is everyone who buys a house is also a speculator since no one buys a house and don’t care the property price don’t go up. They need it to go up firstly to pay the interest on the loan and secondly its a savings plan and thirdly otherwise it means it better just to… Read more »

looes74

I have been thinking of the Robin Hood Tax. Not sure Anil Netto would be supportive of this idea

SamG

As I have said it before & I will say it again, with MUD (Management Under Developers) the 3% will sink into the mud of Gurney Drive…
If the CM had put in the 3% for High end Condos as planned earlier, that money could have been put to good use to provide aid for the poor to have better housing.

Plain Truth

An additional 3% on a RM1m property simply increases the cost of purchase to RM1.03m. For a rich foreigner, an additional RM30k is peanuts. A far more effective method will be to raise the floor price, say to RM1.3m.

tk tan

hi! Anil, 3% is far too little. .a mil at 3% rpgt ,is akin to one high end golf set ,after rm currency exchage to the foreign buyers ! they are speculators out to make from / at the expense of us, locals,penangnites . u will ask me then ,Anil, what is ideal to , help locals penangnite,since our rte. hon .cm ,shall ask for feedback too. 1) to curb ” speculators ” ,( in strongly worded ), both locals & foreigners , cm shud levy at > 15% . and plus the fed govt, 30% , i gurantee u,… Read more »

Fake Malaysia News

Perhaps they fear if they charge more than 3% speculation tax, it might kill the golden goose of property investment?? At least this way they can raise some revenue but so long as interest rates are low, financing is easily available, and you can leverage 90% of the property price it probably wont slow down.

looes74

Oh people may just run away. I am not implying that I am not supportive with Anil’s idea but better strategise first. You can blame LGE for blurting out like that