Investors may shift to stocks with rise in RPGT

The planned rise in the Real Property Gains Tax (RPGT) to curb speculative activities on properties and avoid a property bubble could return investors to the stock market, say analysts.

Under the 2013 Budget, the government has proposed a review of the RPGT. Effective January 1 2013, RPGT will be imposed on profits for the disposal of properties within two years of buying at 15 per cent, and 10 per cent for those sold in the third to fifth year.

The idea of raising the RPGT is to discourage people from buying and selling houses for quick profit. RPGT is also another government's source of revenue.

Properties held longer than five years are not subject to RPGT. Also, disposals of properties between husband and wife, parents and children, grandparents and grandchildren are exempted from RPGT.

"I don't think the move to increase RPGT rate would dampen the market. In absolute terms, it is not large enough to discourage people from speculating in properties," said OSK Investment equity capital market head Gan Kim Khoon.

"However, we believe property investors will put off buying houses for a while and invest in the stock market as the property market has softened," Gan told Business Times.

Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum said the rise in RPGT rate was within expectation and it will have less physical impact on developers as the construction period for new projects usually takes two to three years.

Leong also lauded the government's efforts in increasing housing affordability and reducing the cost of property ownership.

"There is strong demand for serviced apartments from 500 square feet and landed properties below RM1 million. The 50 per cent stamp duty exemption for first-time purchase of homes under RM400,000 will help to reduce the cost of purchasing a house by up to RM3,500," he said.

Master Builders Association Malaysia (MBAM) is, however, disappointed with the increase in RPGT rate for properties sold within a period of two years and after three years.

"We feel that the financial measures imposed by Bank Negara Malaysia to curb property market speculation is sufficient as it is," said MBAM president Matthew Tee in a statement.

By Business Times