Raising the real property gains tax (RPGT) and stamp duty could risk pushing house prices higher, according to HwangDBS Vickers Research.
This is because sellers would try to pass on incremental costs to buyers and delay disposal, leading to even tighter supply.
“We understand the Government needs to be seen to be actively reining in property speculation, but we do not advocate raising real RPGT, which has had a relatively short-lived impact in the past and could push house prices higher as sellers may pass on the incremental costs to buyers.
“It could also spur sellers to postpone disposal and developers to hold back launches in view of weaker sentiment, leading to even tighter supply in the market,” said the research house in a report yesterday.
Currently, RPGT is charged at 15% for disposal within two years and 10% for disposal within three to five years (compared with 5% to 30% prior to Budget 2010).
HwangDBS Vickers also noted that while raising stamp duty may have a bigger impact, sellers would also try to pass on the incremental costs to buyers.
“Any hike would not only affect new projects but also those under construction, especially strata-titled and projects under the master title which have yet to be transferred.”
The research house added that first and second home-buyers should be spared from any tightening measures, which would be in line with the Government’s aim to promote home ownership.
“Reducing the loan-to-value cap for a second property would affect genuine upgraders, who may find it challenging to pay a higher down-payment while waiting to sell their existing properties.
“This could reduce supply in both the secondary and primary markets, as developers may also delay launches due to poorer take-up.”
HwangDBS Vickers added that the Government should encourage the development of more international-class condominiums, such as those in KLCC and Bukit Bintang, to attract more foreigners.
“While other countries in the region are restricting foreigners from buying properties, Malaysia should conversely open up, as foreigners currently made up less than 5% of transaction volume (albeit rising marginally based on the Malaysia My Second Home applications).
“Property can be a new engine of growth for Malaysia in view of Iskandar Malaysia’s potential to leverage on Singapore and Greater Kuala Lumpur’s significance within the Economic Transformation Programme (which is targeting to attract 100 multi-national companies to set up operational headquarters in KL).”
HwangDBS Vickers also said that the potential introduction of the goods and services tax by 2015 could lead to lower personal and corporate tax rates.
“This should improve Malaysia’s competitiveness in attracting foreign direct investments and talent, along with stemming Malaysia’s brain drain and rising investments overseas by local corporates.”