Companies factor in freebies into the cost of the property
DEVELOPERS often offer sales gimmicks and marketing ploys like free legal fees, rebates, air-conditioners and furniture. Budget 2014, however, seems to make it a requirement that developers be transparent about their property prices.
The adage “There’s no such thing as a free lunch” rings true in this instance. While developers are quick to advertise various blandishments such as “free legal fees/stamp duty, etc”, such freebies are always factored into the property price. These freebies should be translated into cash incentives to be deducted from the purchase price of the property, as otherwise, it becomes meaningless to offer these gimmicks, which are usually recovered in the form of substandard materials. Here, we again thank our Prime Minister for announcing that developers, when offering their products, should disclose the value of the freebies to the buyers. Such transparency is a move in the right direction so that buyers would know what they are letting themselves in for. The enforcers of the law should be able to count on the Urban Wellbeing,
Housing and Local Government ministry to do its job to ensure that there is strict compliance and observance.
Whilst such a requirement will not deter speculation, it will hopefully educate house buyers on what makes up their final property price and not to be misled by developers advertising such freebies.
The National House Buyers Association (HBA) reiterates its call on the Government to take additional measures to stem the steep rise in property prices. There are basically two ways to reduce speculation: increasing the entry cost and increasing the exit cost.
Whilst Budget 2014 has increased the exit cost in the form of the higher real property gains tax or RPGT, more measures are needed to increase the entry cost to further reduce speculation.
The current stamp duty payable for the transfer of properties is based on the value of the property. This does not deter speculators, as the stamp duty payable is the same, regardless of the number of properties already held or bought.
The Government’s current low stamp duty regime has been misused by property speculators to accumulate multiple properties, driving up these prices by creating false demand and denying genuine buyers the opportunity to buy such properties.
It is every Malaysian’s wish to buy at least one property in their lifetime for their own dwelling, and perhaps an additional piece of property as a long-term investment or to fund their children’s education.
Hence,HBA has proposed that the current scale stamp duty remains the same for the first two properties bought, but is increased to a flat rate based on the property price for the third and subsequent properties to discourage speculative buying.
(See table for a comparison between the current stamp duty and the stamp duty proposed by HBA.)
With the same scaled stamp duty payable regardless of the previous number of properties held, speculators are not deterred from buying multiple properties.
Even for properties costing RM600,000, the stamp duty payable is only 2% of the value of the property.
The HBA-proposed stamp duty would not cause any disruption to genuine house buyers who can only afford two properties in their lifetime (one for their dwelling and one for long-term investment).
On the other hand, property speculators would be discouraged as the stamp duty greatly increases their entry cost.
RPGT will not lead to higher property prices
Certain parties with vested interest are claiming that the revised RPGT rate would lead to higher property prices, as speculators would definitely factor in the RPGT into their property prices, only for the subsequent buyer to end up paying the RPGT indirectly.
Such statements only confirm that speculators are indeed responsible for driving up property prices.
If indeed the speculators factor in the additional 20% to 30% RPGT into their property prices, then it would make the property prices unattractive to the next buyer.
Financial Institutions may be unwilling to finance such exorbitantly overpriced properties, as such institutions have their own market intelligence to determine the fair value of such properties.
RPGT will lead to an orderly property sector
The aspiration of every rakyat is to own a roof over their heads and shelter their young rather than making money from properties. Hence, having the RPGT in place would deter speculators, and eventually lead to a more orderly property sector driven by market demand and not speculative forces.
Therefore, HBA supports the Government’s RPGT proposal and urges the public to support such a move to curb the current excessive speculation in the property sector.
HBA strongly believes that the cost of a roof over one’s head should not be left to market forces. The repercussions whereby a large section of society is deprived of affordable housing is serious and far-reaching. The present property price increase does not commensurate with the present rise in wages. The affordability of house ownership is becoming an elusive dream to the present generation. Controlling the upward spiral of property costs is not in the interest of housing developers. In fact, they certainly favour it. Therefore, it would be totally unrealistic to expect any developer to be interested in bringing down property prices.
CHANG KIM LOONG is the honorary secretary-general of the National House Buyers Association (www.hba.org.my), a non-profit, non-governmental organisation (NGO) manned by volunteers. He is also an NGO councillor at the Subang Jaya Municipal Council.