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My Thoughts On Budget 2014: Real Property Gains Tax

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KLCC ParkI see that the Finance/Prime Minister Datuk Seri Najib Tun Razak has jacked up the Real Property Gains Tax (RPGT) to a new scale.

Beginning 1st Jan 2014, sellers will have to pay 30% of the gains if the holding period is within 3 years, 20% within 4 years and 15% within 5 years. If the holding period is over 6 years, individuals pay no RPGT while companies and foreigners will have to pay 5%. (If the holding period is within 5 years, foreigners will have to pay a flat 30%. Incidentally, the minimum property price for foreigners has shot up from RM500,000 previously to RM1 million now.)

The popular DIBS – Developer Interest Bearing Scheme – is also removed.

While these will hurt some people a little, all are actually excellent moves for the country as it will reduce speculation and stabilize property prices that have seen double digits annual growth in some areas.

As the three main reasons for the steep rise of prices are low interest rate, easy-to-obtain mortgages and low RPGT, raising the RPGT will help to curb the price rise.

Furthermore, as banks have already tightened up their lending criteria (on orders from Bank Negara), this latest step will take out the novice speculators (not you and I of course!) who have seen nothing but good times in the last five years.

Most likely impact?

There will probably be a rush to sell properties before the due date (1st Jan 2014), which may see a slight drop in prices on the secondary market.

Once the new year comes in, there will probably be a drop in transactions on the secondary market.

http://bit.ly/1gFU4le


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