Malaysia’s real estate market glitters brightly in the eyes of foreign buyers thanks to neighbour Singapore’s property cooling measures such as the Additional Buyer’s Stamp Duty (ABSD), Seller’s Stamp Duty (SSD) and the Total Debt Servicing Ratio (TDSR) framework.
According to Nicholas Holt, Knight Frank’s Research Director for Asia Pacific, Malaysia has certainly been the recipient of a lot of Singaporean money since the tighter cooling measures there.
“Singaporeans probably top the list in terms of overseas buyers in Malaysia, most notably in Iskandar, but also in Kuala Lumpur and Penang,” he noted.
UEM Sunrise Berhad also added that Singaporeans are the largest foreign buyer group in Malaysia, accounting for 70 percent of all overseas purchases.
According to CBRE Malaysia, in spite of the curbs, Malaysian properties are still cheaper than those in Singapore. As a matter of fact, a 1,000 sq ft condo in the city-state sells for US$800,000 (RM2.61 million) to US$960,000 (RM3.14 million), while a similar-sized flat in Kuala Lumpur goes for about U$374,000 (RM1.22 million).
Even luxury homes in Malaysia are more affordable. For instance, units at Horizon Hills, which is located amidst a golf course, are marketed online for just $270 psf compared to $503 psf for a four-bedroom HDB flat in Singapore’s central Bishan district.
However, this is a blessing and a curse for the ASEAN nation. In fact, the huge demand for Malaysian homes has made them so expensive that many locals can no longer afford a house in their native land.
To appease the people and to prevent a possible housing bubble, the Malaysian government introduced its very own property curbs, joining the trend in Singapore, China and Hong Kong.
Under Budget 2014, Prime Minister Najib raised the real property gains tax (RPGT) to 30 percent for buyers who will sell their home within five years from the time of purchase. He also doubled the minimum property price for foreigners from RM500,000 to RM1 million.
Specifically, the RM1 million price threshold took effect on 1 March for all federal administered territories – Labuan, Putrajaya and Kuala Lumpur. And Johor will soon follow in May. Penang is the only Malaysian state, where foreigners are subject to a RM1 million minimum price on the mainland and RM2 million if it is a landed property on the island.
In May, the state Johor government is also eyeing an additional two percent tariff for overseas buyers across all property segments, noted REHDA Johor Chairman Koh Moo Hing. Penang is also considering a three percent levy on foreign property buyers, added its Chief Minister Lim Guan Eng.
Aside from that, the government recently barred property developers from absorbing some of the mortgage interest owed by home buyers, or the so-called Developer Interest Bearing Scheme (DIBS).
However, the property cooling measures are expected to end the happy times of developers and home sales could fall further.
Leading developers, such as UEM, Mah Sing Group and UOA Development, are also expected to post weaker sales growth, added K&N Kenanga Holdings Bhd.
Nevertheless, there are some developers who believe that the challenging times will be short-lived, and good times may soon follow. The impact of the budget measures will be temporary.