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Real Property Gains Tax (RPGT) and the potential ‘push’ to the property market.

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Nope, no one has announced anything yet about RPGT. I recently gave my views to Focus Malaysia. (read here) Yeah, I think one major issue everyone has is with the 5% RPGT which is forever… So, how? Stop buying properties even for KL and Selangor where urbanisation is happening daily? Maybe slow down a bit with current COVID-19 but it will soon continue. People graduate and they will need to look for a job. Big cities are where most jobs are.

Speaking about RPGT, one recent suggestion to the government came from Federation of Malaysians Consumers Associations (FOMCA) President DATUK DR MARIMUTHU NADASON at the end of April 2020. His letter in full in nst.com.my here. He said, “Families forced to sell their homes have to pay real property gains tax (RPGT) ranging from 30 per cent for properties sold within the first year to 5 per cent for sale of properties after 5 years. This would be a tremendous burden to families. The 5 per cent RPGT for properties sold after 5 years was introduced by the previous government. It should be abolished.”

Let’s just say that I have no specific comments on his suggestion. However, following three things in my opinion are important for the property buyers and the property market. usually, when I share them during my talks, people would suddenly smile when they understood the ‘insignificance’ of the RPGT if their property really do have capital appreciation. They will get the 95% of the profits and just give away 5%…. Is that so bad?

First is that this RPGT should not be the deal-breaker to our decision. If the property we are buying is for our home sweet home, then current market as everyone has been saying is a buyers’ market. The interest rate is also at the lowest point in the last 10 years. Numbers wise, the savings from the interest rates for the next 5 years is more than enough to counter that potential 5% RPGT lah…

For example, the 5% RPGT is calculated based on profits from the sale yeah. So, if the profit is from the property sale is RM100,000 the actual applicable RPGT is just RM5,000. This RM5,000 divided into 5 years and 12 months = RM83 per month. Frankly, the savings from a reduction of 1% interest rate for a RM400,000 home is much higher than this RM83 yeah…

Second is that RPGT is not much BUT the sentiment it brings is pretty negative. The usual investors will know how to calculate lah but the new property buyers will be so worried since everyone says that no matter WHEN they sell the property, they will still get taxed. If this is your first time buying a property, you will also be worried lah. Some more someone mentioned 30% and you get even more worried… This is why a decision on the RPGT will have an impact on the property market. Maybe just for a while… to help the market to recover faster? Let’s see what happens.

Third would be the purpose of the introduction of RPGT, I am a supporter of it yeah. Due to the high % in the first few years, the speculators have lost their interest to speculate in the property market many years back. Just look at the transaction numbers since 2013… This is good for the market. Imagine if half of the market belonged to speculators, you think the property market will still be intact today? I know some say the property price may fall 70% mah… My views here.

Until we have some formal announcements, then only I will write lah. In the mean time, stay safe and stay at home unless you really have important things to do. With the current recovery rate, the next issue is the Malaysians who refuse to follow the CMCO rules… Especially those staying in Selangor. Come on….

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Next suggested article: Deja-vu in property market Malaysia?

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