Real property gains tax hike likely in Budget 2014

The local property sector may only see a real property gains tax (RPGT) increase in Budget 2014, according to a report by Kenanga Research.

It said it was expecting the tax rate to increase to 30% from 15% for properties sold within two years and 15% from 10% for properties sold within three to four years.

It said the 10% rate would remain unchanged for properties sold in the fifth year and zero RPGT for properties sold in the sixth year onwards.

“We believe this has been largely been discounted and priced-in somewhat, but we do expect some slight knee-jerk reactions for a couple of weeks post announcement,” it said. Budget 2014 will be tabled on Oct 25.

Kenanga Research also said the market could experience “panic buying” by investors next year if the goods and services tax (GST) was implemented in 2015.

“Experience from other countries had seen such trends in anticipation of future cost push inflations on asset prices.

“This will benefit 2014 sales of developers as financing terms for the primary market is more favourable compared with that of the secondary market.

“We do expect developers to front-load their launches in 2014 on the back of higher demand, which will be a big booster to future earnings,” it said.

On the Johor property market, Kenanga said the restriction on foreigners from buying secondary properties from locals would be good for the rental market and new launches.

On the the 4% to 5% tax rate of the sales price of all properties, it said was unlikely to slow down demand from foreigners, especially Singaporeans, as properties in Singapore are three times to five times more expensive than Johor.

On another note, Kenanga said it did not expect the build-then-sell (BTS) model to be implemented in Malaysia.

“The Malaysian economy is not ready for a BTS model as many smaller developers will not be able to cope with such a model while larger developers with strong financial positions will likely price-in premiums of selling BTS properties.” - By The Star

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