Budget 2014: Property Sector Hit Hard by RPGT and DIBS ruling

As widely expected, property sector would be one of the hardest hit sector in view of the proposed cooling measures to be imposed. Out of the 3 tightening rules forecast by Finance Malaysia, 2 already Bingo! (Read our previous articles regarding property sector "3 Tighter Rules for Property Sector?" and "3 Critical Factors to watch out by Year End")

These cooling measures announced highlighting that government will not hesitate to curb property speculations and to ensure a affordable property prices. Of course, property developers will be the one screaming painfully.

The 3 Key Measures:

1. Higher Real Property Gains Tax (RPGT)
   This was the 3rd consecutive year government raised RPGT. Even said so, it was just reinstated back to its original rates since 2007. The different this time compared to previous rounds was different set of rates to be imposed on different categories of buyers as shown below:
   
   
   
   
   
   
   
2. Banning DIBS
   As predicted by us previously, DIBS was deemed to be one of the key motivating factor for speculators, thus pushing up property prices to current level. By banning DIBS, it will effectively diminished the speculative interest as the cost of investment increase with interest payment during construction period. It's good to genuine and first-time house buyers.
   
   
3. Higher minimum Purchased Price for Foreigners
   To minimized influx of hot money shoring up local property prices, government raised the minimum purchased price to above RM1mil from RM500k per unit. However, this doesn't impact the market much because most properties purchased by foreigners are above RM1mil. Nevertheless, foreigners' favorite investment hotspot, such as Iskandar or KLCC or Mont Kiara area would be affected.

Would this be the end of property up-cycle?