Friday, 29 June 2012

Property purchase thresholds - foreign buyers.

It has now been confirmed that from 1 July 2012 the minimum property purchase threshold for foreigners wishing to buy in Penang will be RM 1m for condos and RM 2m for landed property.

There is good news for MM2H visa holders in that the minimum threshold for them is RM 500K, although visa holders will be limited to owning two properties at any one time, likely to prevent abuse of this exemption by anyone wishing to buy and sell multiple properties for profit.

Hopefully the new thresholds will curb property speculation to a degree and help reduce spiralling property costs making properties more affordable for locals.  The MM2H exemption is a great bonus and provides yet a further incentive for applying if your aim is to buy in Penang.

5 comments:

  1. I don't think raising the minimums so dramatically is a good strategy. I do agree with taking steps to curb the bubble.

    It is very good they include an exemption for MM2H. This will also push up MM2H applications I imagine. In fact it may do so fairly dramatically (from Singapore especially).

    Better options
    1) increase the downpayment required for buying (for foreigners) and maybe even Malaysians. Even on pre-built stuff (don't let people put 1% down...)
    2) increase the tax on real estate profits - do something like 15% in 1 year, 10% in 2 years, 8% in 3 years... Discourage flipping, speculation...
    3) increase taxes on investment property
    4) cap foreign ownership level - this is not a great idea but beats the huge increase in minimum prices
    5) add a foreign owned supplemental property tax (so make foreigners pay twice the tax Malaysian's do - or something)
    6) even something like an extra 20% tax on any sale where the return is greater than 20% annually for any foreign owners... Again not a great idea but better than this.
    7) even adding a special foreigner tax of 10% on any property between 500,000 and 900,000 (probably would be better to make it 10% from 500-650, 9% 650-... or some graduated thing...).

    Limiting MM2H to 2 properties seems fine to me.

    I don't mind increasing the minimum a sensible amount as long as that is spelled out long in advance (years of planning). so 550 in 2014, 600 in 2015, 650 in 2017 or something

    I wonder about small Real Estate Investment Trusts. Any time the government puts up restrictions it creates incentives for efforts to deal with them and still achieve investment goals (the efforts usually amount to a bunch of waste - activity contributing little to economic development). So if rich Chinese can't buy RE directly what about Malaysian REIT buying 5 condos and renting them and selling the REIT stock to 5 Chinese?

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  2. I suppose everyone will have a view on these changes but it's largely academic now. I'm sure a wide range of options was considered before these changes were introduced and what has been implemented will have been done with the interests of Penang, its nationals and foreigners alike.

    There are always options, whether the ones you list would be better I'm not sure and given that it IS largely academic now I think little about it. That said, there are always implications with changes, implications which cannot be thought through properly unless people have the full picture. Cause and effect etc. Most people will not have that full picture and neither will they be aware of other initiatives which might impact on decisions taken today.

    Hopefully these changes will bring about the desired effect for the benefit of Penang.

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  3. Well I an happy that I bought my property when I did, because I would not have been able to afford the new minimum. When you buy property here you still have to spend a fortune to renovate it to be able to live in it. I am sure many more people will rent after July 1 instead of forking down the extra money. This should cool down the property speculation. I still wonder when the bubble will burst though. It's bound to happen.

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  4. Watertown wanderer is exactly right. I am now renting Whereas I was previously in the market to buy. Being as I Plan to spend Melbourne winters here renting is an affordable long term Option with no ongoing costs.

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  5. I think for holders of MM2H though this has changed little, especially given property prices here over the last couple of years. Up until this change the threshold for MM2H holders was RM 250K. It is now RM 500K (for a condo). BUT, while it may have been lower before, finding any property at that kind of price would have been a challenge IMO. For a completed property I doubt you would have been able to get anything that suited for under 500K and even that would be tough. So a 500k limit I suspect would not prevent an MM2H holder from being able to buy as you'd likely need to spend more than that anyway.

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