Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on September 24, 2018 - September 30, 2018

ANECDOTAL evidence suggests that homeownership – particularly among young adults – is in decline, not just here in Malaysia but also around the world. In many countries, it has become a hot political issue.

There are many probable reasons behind this phenomenon, including shift in lifestyle choice (preference to rent perhaps due to job mobility). But certainly homeownership affordability is a key issue as house prices soared from Sydney to Hong Kong, London and Vancouver.

Foreigners (especially the influx of Chinese money) are often blamed, as they are perceived to be snapping up houses by outbidding and pushing prices beyond the reach of locals. In response, governments have put in place measures to control foreign purchases and runaway prices.

Malaysia lifted the minimum price threshold for foreigners from RM500,000 to RM1 million, first mooted in 2009 and which came into effect 2014. Ostensibly, this would encourage developers to focus on building cheaper houses for locals.

However, statistics appear to suggest otherwise. Since 2009, there was a noticeable increase in new launches for properties above the RM1 million threshold, from 3-4% of total new launches in 2008-2009 to as high as 10-11% in 2013-2015. (Though the number has since fallen back in 2016-2017 on the back of lackluster market conditions and rising unsold stock).

Worse, the building of these luxury projects may have inadvertently inflated prices in surrounding areas and making properties even more unaffordable, contrary to the government’s intentions.    

Aside from Malaysia’s absolute price threshold policy, some countries have introduced outright restrictions on foreigners – on purchase for certain types of properties (for instance, landed properties) and locations as well as on resale within specified timeframe or to certain groups of buyers only, etc.

However, we believe surcharge taxes such as stamp duty are more effective means to clamp down on foreign buying for speculative purposes, as opposed to those who legitimately want to make Malaysia their homes.  

Surcharge tax translates into a premium paid over the market price. This would discourage speculative buying by slicing into potential capital gains from subsequent flipping of the property. Curbing excessive speculation should, in turn, prevent unnatural price inflation for the entire market.

In Hong Kong (home to one of the world’s least affordable residential properties), foreigners are subject to additional 15% stamp duty and up to 30% in total. Canadian cities, Vancouver and Toronto have slapped taxes of 15-20% on foreigners.

Singapore recently raised its additional buyer stamp duty (on top of regular buyer stamp duty) to 20% for foreigners. Incidentally, Singapore’s additional stamp duty also applies to 2nd, 3rd and subsequent properties for both citizens and permanent residents.  

 

 

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