28 September 2014

No wider impact from Selangor move

  28 September 2014

After the hue and cry among developers and property consultants over the Selangor state government’s move to raise the threshold for foreign buyers to RM2mil, the next question is, will this cascade to other states?

Not likely, say property consultants.

Earlier this month, Selangor doubled the price cap of properties that foreigners are permitted to buy from RM1mil to RM2mil for residentials in most districts. Foreigners can only buy strata and landed strata properties.

It divided the state into three zones and also raised the price of commercial and industrial properties for all three zones to RM3mil.

There were no such differentiation previously. Selangor, incidentally, has one of the highest transaction volume in ringgit terms.

A check with property consultants in Penang, Johor and Kuala Lumpur shows that Selangor’s move – seen as a measure to protect the state’s property market and house owners – is unlikely to be followed by other states.

Penang-based property consultant Michael Geh, senior partner of Raine & Horne, says Penang “initiated” the anti-speculation move two years ago when it raised the purchase price of landed units from RM1mil to RM2mil. The cap for condominium units is RM1mil.

Last December, the Penang state government imposed a 3% approval fee for foreigners, in addition to the existing ceiling price of not less than RM2mil for landed properties and RM1mil for stratified ones on the island, and RM1mil for both landed and stratified properties on the mainland.

“Penang is not a speculative play among foreigners, with their transactions only accounting for about 3% of Penang’s total transactions in ringgit terms. It is more the locals who are buying and flipping,” says Geh.

If international buyers comprise 10% to 15%, he will be “alarmed”, says Geh. There are some purchases by Singaporeans but this is because they have families here.

The Penang market is healthy based on optimum employment and a high percentage of domestic buyers, he says.

As for foreign developers foraging for land on the island and mainland Seberang Prai, Geh says both locations are on their radar.

Over in Johor, Cheston International managing director Steven Ng says it is unlikely for the state to have curbs.

The current cap is RM1mil with no distinction between the different sub-segments. Foreigners are allowed to buy landed as well as strata-properties. They are, however, barred from buying agriculture and Malay reserved land, says Ng.

In addition to the RM1mil cap, foreigners have to pay a processing/approval fee of RM10,000 or 2% of the market value of the property, which ever is higher, he says. In Medini, there is no bumiputra quota and developers can sell the entire block to foreigners.

On the state of the current Johor market, a source from Johor, who declined to be named, says it is “in a bit of a confusion at the moment”.

“There are two issues here.

“Foreign developers have created a glut in high-rise units. This glut has resulted in Singapore developers holding back their launches. They will have to drop prices if they were to go ahead with the launch,” he says.

“Launches are priced between RM800 and RM1,200 per sq ft now.

“However, to sell at RM1,000 per sq ft and above is a challenge unless it is in a very prime area.

“Secondly, this confused state resulted from a lack of rules. Even when there are rules, there is a lack of enforcement,” the source says.

This has resulted in developers taking “a wait-and-see attitude” with CapitaLand Ltd becoming the latest to postpone the launch of its first phase in Danga Bay township. Singapore-based CapitaLand is South-East Asia’s largest developer. Landed housing, however, is not expected to be an issue, the source says. This should benefit the UEM Sunrise group which is expected to launch their landed units.

Kuala Lumpur-based property consultants and developers say the move by Selangor is “fair”, although there are differing views. It came about after consultations with the Real Estate and Housing Developers’ Association (Rehda) – who resisted the move – and the National House Buyers Association (HBA) about three months ago, a source says.

Says Mak Foo Wi, a project director with Alzac Viva Sdn Bhd: “Right now, Petaling Jaya’s SS2 prices are just below RM1mil. The authorities probably expect prices to trend upwards but before that happens, it raises the cap to RM2mil.”

Suntrack Development Sdn Bhd project director James KK Tan says while he understands the state government’s noble intention, “such restrictions eradicate almost all classes of properties (residential, commercial and industrial) and almost all of the price range of properties available for foreigners.”

He says it affects property sales across the board which include new property and those in the sub-sale market and adds the number of foreign buyers in Selangor is insignificant.

A property consultant who requested anonymity says if one were to make rules based on the significance of foreigner buyers, Selangor will forever have a lax policy.

“Selangor’s property sector is significant. The border between Kuala Lumpur and Selangor is difficult to distinguish. Bandar Utama has a Petaling Jaya address whereas Taman Tun Dr Ismail is a Kuala Lumpur address. Also, foreign developers have gone into Semenyih. The state has noted these events.

“The anomaly is that Kuala Lumpur is retaining its RM1mil cap for foreigners, he says. So let’s wait for the upcoming budget,” he says.

Certain foreign developers are taking their money out of their country and going into other countries. This is an issue for a small country like Malaysia. In conclusion, the market should not be affected by these new rules set by the state government.



Thanks for reading No wider impact from Selangor move

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