Johor property tax not a problem dated June 8.
http://biz.thestar.com.my/news/story.asp?file=/2013/6/8/business/13215293&sec=business
IT was a bit of a surprise.
Everyone would have been excused for thinking just what will be done next to increase sales of properties in Johor to foreign buyers. Nobody expected Mentri Besar Datuk Seri Mohamed Khaled Nordin to announce that higher taxes will be imposed on properties owned by foreigners.
Reaction to a potential property tax hike was swift.
Some said it will be disastrous. Others said no problem as foreigners owned less than 5% of property in the state.
Well that really depends on where the concentration of that 5% is.
As it stands, a lot of property in Iskandar Malaysia is being snapped up by foreign buyers, in particular Singaporeans.
The location is right. It's just north of the republic and Singaporeans will be able to own a luxurious house in Iskandar for a fraction of what it will cost in their home country. Designs of homes are modern, land is in abundant and its living in a house few can only dream of in Singapore.
Any proposed hike in state property taxes should come in either assessment or quit rent, and the thinking behind it is that those higher charges should reflect the current market price of those properties.
There has been a big jump in property prices in Iskandar Malaysia. Prices of new launches are said to have approached RM1,000 a sq ft and that is the price many prime areas of Kuala Lumpur are seeing today.
I don't think a small increase in assessment or quit rent is going to stop a foreigner from buying property in Iskandar when the price of property keeps going up. The money they might stand to make from capital appreciation of their property would more than compensate for any small rise in state property taxes.
For the state, it's extra money and it was careful to say new property charges will not apply to Malaysians.
The differentiation between taxes on locals and foreigners is not something new. In fact, Singapore has increasingly made it costlier for foreigners to own property on the island.
But that has not deterred foreigners from buying property there. In fact, Malaysians and other foreign nationals continue to snap up high end properties there, albeit at a slower pace, despite the introduction of new measures.
Maybe the imposition of new taxes on foreign purchases should be a start. Escalating property prices will only infuriate Malaysians who desire to own a home. Seeing prices go out of reach will frustrate genuine homebuyers, and is increasingly becoming a political issue here as it already is in Singapore.
Maybe the state, or even the Government, should consider doing what other countries in the region have done.
Although foreigners can buy properties in Singapore, its limited to condominiums. Want to buy landed property in Singapore? You have almost no chance of doing so.
You can also forget buying freehold landed property in Indonesia and have the title in your name. You have to use a nominee.
Restrictions also apply in Thailand although there are ways around it through setting up of a company. Foreigners also cannot directly own land in the Philippines.
If those countries are protective of their land, I wonder if Malaysia should do the same?
For a start, maybe the floor price of foreign onwership of land in Malaysia should be raised. The current minimum price of RM500,000 basically means foreigners can buy just about any house they want to.
To be effective, the floor price should be raised to RM1mil. Maybe there should be a consideration of higher minimum prices if the size of the house or lot is larger.
> Business editor (Features) Jagdev Singh Sidhu feels the prices of new homes are already too high in Malaysia.