Will Property Price Drop After Budget 2014?

As widely expected, Budget 2014 will address the escalating property price, and RPGT and DIBS will be the target.

True enough, RPGT has been increased to maximum 30% and DIBS has been prohibited. Apart from these, minimum price of property that can be purchased by foreigners is increased from RM500k to RM1 million.

As expected as well, all the major property developers share prices collapse today.

Are the measures in Budget 2014 very effective in curbing the problem?

I don't think so.

For RPGT, if you gain from property bought and sold within 5 years, you pay maximum 30% tax. You still have 70% net profit, which is not bad at all.

No DIBS, so what? How much is the loan interest buyers pay during construction of new property in 2-3 years? Not much actually as it is charged according to the progress billings. 

Property developers can give rebate to compensate for the DIBS, and it is even better as it can reduce downpayment substantially. Rebate is not prohibited right? 

Lets say if I buy a RM500k condominium. I get a 90% loan and need to pay RM50k as downpayment to developer. Developer can give rebate RM30k, which means I only need to fork out RM20k instead of RM50k.

As for the foreigners RM1 million limit, I think it's good and serve its purpose better. Foreigners buy property in Malaysia because it is dirt cheap to them. So, this measure may more or less affect high-end property sales especially in Iskandar region as there are quite a lot of Singaporean investors I guess.

What is more useful is a step taken few years ago whereby bank can only loan up to 70% for residential property buyers with more than 2 residential properties. I think this has stopped a lot of small fish property investors like me from buying more. For the big fish, they will be happy as less people will fight with them for a unit. So rich become richer...

But anyway, generally, investors and speculators will be more cautious in their investment, as they may sense that the property cycle may turn the other way round soon.

Personally I don't think the property price will drop, but it will stabilize or increase in a slower pace.

New RPGT 2012

Latest Real property Gain Tax 2012.

If someone flip a new development project within one year, he still can gain 90% from the net profit, not bad really. Personally I think this is not going to stop property speculators from "frying" up the property price. Perhaps it should be 1st year tax 80%, 2nd year 60%, 3rd year 40%, 4th year 20% & 5th year 10%.

As for the 70% loan margin for the third residential property and onwards, IMO it does cool down the market a little bit. This measure will hinder the average-income or new property investor from being successful. However, for those big players, this should be a good news for them as less competition in buying properties. What they have are lots of money.

The rich will become richer.... the poor is hard to get a breakthrough. This is life.