THERE have been numerous comments, discussions and suggestions on the subject of residential property speculation, and the unjustified increase in the price of properties for the past couple of years.
In my opinion, just the imposition of heavy Real Property Gains Tax (RPGT) is not going to nip the problem in the bud. What is required are measures which should be a disincentive to speculators which will not make it worth their while to speculate.
Imposition of RPGT from the first year onwards for those buying a second property may or may not deter an increase in property speculation, because the speculator’s profits from managing their investment will still be large even after retention and final disposal of the property after the RPGT.
What should be done is to create a situation to eradicate such large profits and leave the speculators with only such level of profits that will make it not worthwhile to engage in this mode of profiteering.
I suggest that there should not be any RPGT in the first year of purchase. The tax should be rigidly imposed from the second year onwards at the rate of 30% or more, with the same rate being imposed continuously for five years.
A potential speculator would seemingly be happy with this move of exemption in the first year, but will it be worthwhile for him to buy, when he has to also bear payment of several charges such as those for the Sales and Purchase Agreement, legal and stamp fees, and other charges?
I doubt whether the appreciation in price will be that much within one year to leave him his desired profit after deductions. He knows that selling off the property in subsequent years would mean further destruction of his profits by RPGT.
Also, there is no guarantee for the speculator that the price of the property would appreciate according to his design in the subsequent years, to give him substantial gain.
But he can be sure that RPGT is going to erode his profit if he does not sell off his property in the first year itself; the chances are he will be inclined to sell in the first year and make whatever he can.
Selling in the first year (for speculators) would result in houses in the market remaining at reasonably appreciated and affordable.
The three-fold weapon of first year charges and fees, no RPGT in the first year as an incentive to sell, and the imposition of high RPGT from the second year onwards will help house prices to be affordable.
The Government’s efforts have so far not produced the desired results, and the public are probably fed up with suggestions from several quarters. Why not rigidly implement the proposal above?
There have been talks and fears that high RPGT will lead to more expensive houses.
Even if true, who will be the people mainly affected by this move? It may or may not be the housing developers, but it will definitely be the speculator whose profit will be eroded.
The genuine housebuyers have nothing to fear, because their first investment is very likely for their own use.
The question of reselling does not arise in their case as they will continue to own it for several years, and RPGT – or no RPGT – will not bother them. It is the regular buyers and sellers (speculators) who will feel the pain of the RPGT.
For them the only way out will be to get rid of their property in the first year itself at the prevailing prices in order to take advantage of the RPGT waiver in the first year.
This privilege should apply to all buyers, whether for the first, second or subsequent properties.
It is better if the authorities can finetune the above measures to stifle speculators.
Let us give the speculators a chance to be happy with their game of speculation. The situation cannot possibly be worse than it is now.
BY: RAM, Kuala Lumpur
Source: The Star