Dealing with a looming crisis
WE refer to the letter “Reconsider proposal on stamp duty” (The Star, Sept 6).
Malaysia is facing an impending housing crisis and unless urgent and drastic measures are taken, a large segment of our population, from the lower to the middle income segment and especially the younger generation, will be unable to afford their own homes.
Khazanah Research Institute, a government-linked body, on Aug 25, 2015, released a report titled “Making Housing Affordable” showing that average house prices in Malaysia were more than four times the median income, which renders such properties “seriously unaffordable”.
There are a few reasons why Malaysia is going to face or is already in a housing crisis. These include the high demand for properties, rising cost of construction, stagnant wages and salaries, and urban migration.
Property prices have also been driven up in recent years due to excessive speculation.
According to Khazanah Research, the Malaysian all-house price had grown at a compounded annual growth rate (CAGR) of 3.1% from 2000 until 2009. However, between 2009 and 2014, it grew at a CAGR of 10.1%, which is almost three times more than the growth from 2000 to 2009. The period from 2009 to 2014 coincides with the period that the Government relaxed the real property gains tax (RPGT) and allowed the developer interest bearing scheme (DIBS) and various other zero entry cost schemes which resulted in excessive speculation which drove up property prices across the board.
Buying a property is the single largest purchase for the average citizen and the majority can only buy one property in their lifetime. A small minority might be able to buy an additional property for long-term investment.
Hence, in our humble opinion, it is equitable to pay a higher form of tax in the form of stamp duty for the third and subsequent property and this will not affect the majority of the population who can only afford to buy one or at the most two properties.
After all, the higher your income, the higher your personal income tax. This stamp duty is to fill the gap as purchasers of multiple properties pay the same tax as first time house buyers.
Further, the higher stamp duty proposed is based on a step-up basis; for the third property, the stamp duty is at 5% of the property value, the fourth property based on 7.5% of the property value and the fifth and subsequent property to be based on 10% of the property value.
Hence, the more properties one buys, the higher the additional tax payable. HBA is also of the opinion that the additional tax payable will only have a small impact for long term property investors, say those who hold for more than 10 years.
After all, what is paying up to 5% more for a property if one has held the property for more than 10-years; the additional cost is almost immaterial after such a long time period but the additional cost will be prohibitive for short term property investors.
To illustrate, assuming you bought a house for RM550,000 verses your neighbour who bought for RM500,000 in the same neighborhood; after say 15 years, you would agree that the additional RM50,000 that you paid due to stamp duty is already immaterial. Make no mistake: Malaysia is facing a housing crisis and if more than 50% of the population cannot afford to buy their own homes, this is a time bomb just waiting to explode.
HBA’s proposals are necessary to avert possible social problems when the housing crisis happens.
There are many other avenues to make money but there is a need to avoid making it hard on our younger population who could suffer the fate of a “homeless generation”.