Johor plans new tax on foreigners buying property

Johor, whose Iskandar region has been a hot favourite with Singaporean investors, plans to impose a tax of 4 to 5 per cent on foreigners who buy property in the state to curb speculative fervour, but analysts say demand from Singapore has already been slowing in recent months amid an increasingly uncertain external environment.

Mr Ku Swee Yong, Chief Executive Officer of Singapore-based consultancy International Property Advisor, said: “Interest in the last few months has been subdued, as banks in Malaysia became more cautious about lending.”

“One year ago, banks there would lend you 90 per cent of the price, but now, it is at most 80 per cent. Even at 80 per cent, the banks are very careful about the developers’ price setting, especially if the borrower already has outstanding loans.”

“Meanwhile, the wealth effect and the feel-good factor in Singapore have diminished, as seen from the HDB resale market,” he added.

Johor’s State Housing and Local Government Committee Chairman Abdul Latiff Bandi said yesterday that the new tax would likely be implemented by the year-end or early next year, in a bid to control property prices and foreign ownership, the New Straits Times reported. The levy would apply to both commercial and residential properties. Under the current policy, foreigners fork out a one-off payment of RM10,000 (S$3,910), regardless of the value of the property.

The state government will also look into barring Malaysians who purchased property from selling their units to foreigners. Mr Latiff said developers usually allocated 40 per cent of the units to bumiputras, 30 per cent to other Malaysians and the remainder to foreigners, the New Straits Times reported.

“Local buyers will not be able to transfer ownership of their units to foreigners once the 30 per cent quota (for foreigners) has been filled. These are just some of the steps that the state government will be introducing to safeguard the interests of locals,” he said.

The move also comes ahead of potential new measures by the government, such as raising the property gains tax, in the coming Budget on Oct 25 to rein in housing prices.

Singaporeans have been buying homes in Johor, especially in Iskandar, a 2,200-square kilometre zone three times the size of Singapore, spurred partly by nine rounds of cooling measures in the Republic since 2009, and also because of the much cheaper property prices and cost of living across the Causeway. Singaporeans account for 74 per cent of foreign home buyers in Nusajaya in Iskandar, according to UEM Sunrise, the master developer of the township.

“The new tax will have a dampening effect, but not much. Because a lot of the demand has been satiated, there are not as many Singaporean buyers as before still actively looking in the market,” said Ms Christine Li, Head of Consultancy and Research at property firm OrangeTee.

She noted that the Danga Bay mixed-use waterfront project in Iskandar, offering about 10,000 homes, is almost sold out after its soft launch in May. By pricing the units as low as S$250 per square foot, developer Country Garden has enjoyed a wildly successful first foray outside its home market of China.

Source : Today – 9 Oct 2013

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