When we sell a property, must we pay Real Property Gains Tax (RPGT)?

When we sell a property, must we pay Real Property Gains Tax (RPGT)?

Why is there a need for RPGT in the first place?

Basic idea behind RPGT is to ensure people do not do the buy and flip which used to be rampant for some time. At the time, everyone thought they are so clever because they can just buy and quickly flip since the market is so hot. Well, many of these smart flippers suddenly have to contend with RPGT. In other words, they can still do flipping but every flip they do now comes with a ‘cost’ in the form of RPGT. So, if they bought a place a year ago and they are now selling for an extra RM50,000 they will not get the full RM50,000 profit anymore. They will get RM50,000 profit minus the corresponding RPGT rate.

RPGT should not cover ALL transactions lah, just the profitable ones please

Then there was some interference from someone who pushed RPGT to cover ALL selling, no matter when we sell the property! Fortunately, this person is now gone from the Ministry and we have back a proper RPGT which seeks to ensure less speculation and yet still encourage property investment. This is because the tax is based on property gains. So, if we bought a property and we sell it at the same price for example, the RPGT rate does not apply. Yes, this is very different from some countries where as soon as you sell, even at a loss, you are still taxed! Go google for that country.

Below shows the table.

Holding for 5 years, price can increase meh?

This is a very good question. In fact if we look at the median property transaction prices, the chart is as below:

I drew an orange line to show the times when the transacted price was positive (means an increase) or the transacted price was negative (means a reduction). there were a few occasions, some quarters where the transactions showed a lower price overall. That was in Q4 2019, Q3 2020, Q3 2021 and most recently, Q4 2024. Apart from these 4 quarters, even if we look at just the years from 2015 onwards, prices inch upwards every quarter.

So, the answer to the question of whether property prices do go up is a Yes. It is not for all the properties but the number of Ups are higher than the number of Downs. So, if you bought a good property which has appreciated, congrats! If you bought a property which prices have stayed the same or even lower, let’s hope time will heal the wrong purchase (wrong reason, wrong price, wrong time…)

If my property price have gone up, I am happy to pay the RPGT

Picture this. The reason RPGT is around is to curb excessive speculation. Excessive speculation is because there are an increasing number of transactions and the prices are inching up too fast. So, if my property price is up because the market is positive as per anticipated, I would be very happy to pay the RPGT lah. If I sold for an extra RM100,000 from price I bought on the 3rd year, I would have to pay RM30,000 for RPGT. So, I have sold my house for a profit of RM70,000. Not bad at all. This is why if indeed I am profiting from this property, I am willing to pay the RPGT.

I do not want the property market to be flooded with many people who simply buy because they like to flip. I prefer that the government keep them out of the market. For the genuine buyers, I do not think everyone will be taxed at all since the holding could be longer than 6 years. We buy a place, we renovate, we stay a few years and when we want to sell until the day it was sold, I think we could have exceeded 6 years too.

Happy Investing yeah.

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