D-Day for foreigners eyeing Johor property; Foreign buyers of residential property in Malaysia’s Johor state have until April 30 if they want to dodge new property measures there such as higher levies

D-Day for foreigners eyeing Johor property

Saturday, Feb 22, 2014

Anita Gabriel

The Straits Times

Foreign buyers of residential property in Malaysia’s Johor state have until April 30 if they want to dodge new property measures there such as higher levies.

The cut-off date – April 30 – is contained in a Feb 10 circular from Johor’s Land and Mineral Office obtained by The Straits Times.

The new rules will also apply in Iskandar, a hot hunting ground for many Singaporean real estate investors, who make up some 70 per cent of overseas buyers in the booming growth corridor that is three times the size of Singapore.

News of the cut-off date, coupled with the strong Singdollar – now trading at about RM2.61 – could spur fresh buying by Singaporeans across the Causeway.

In short, investors need to ink a sales and purchase agreement by April 30 and submit it to the state’s land department by May 29 to avoid the new measures.

An official announcement is expected soon. The changes include a higher pricing threshold, which limits foreigners to only properties worth RM1 million (S$382,000) and above.

This means foreigners can still scoop up properties with the current minimum RM500,000 price.

Foreign buyers of Johor properties who get the documents signed and sealed before May 1 will also escape the sting of a higher levy of 2 per cent.

According to the document, a 2 per cent levy or RM20,000, whichever is higher, will be imposed on property purchases by foreigners.

The new rate is almost double the current RM10,000 fee foreigners pay to buy properties there.

This is probably the first indication that the higher levy – widely speculated since late last year – will soon be enforced on properties bought by foreigners.

“There has been so much noise and confusion over the new rules. It makes our life easier now that we’ve finally got something in writing to better explain to our buyers,” said an executive from a major Malaysian developer with big projects in Iskandar.

But some ambiguity persists and this appears to be frustrating developers.

“We are still not sure which projects exactly will be exempt from this new rule. Earlier, we were told that as long as we received approvals from the state on our building plans, our projects would be exempt from the new rules,” said the executive, referring to the higher pricing bar for overseas buyers.

The recent circular makes no mention of this, which continues to leave many developers baffled.

“Do we push ahead with our plans to catch the May window or do we need to tweak the design of our units and price them at RM1 million and above to woo foreign buyers? We are still not sure and the state has not been consistent on this,” said another top executive with a firm that has a mega high-end project in Iskandar.

The new measures, announced last October, aim to stem the sharp spikes in property prices in several hot zones in the country, partly led by feverish buying among foreigners.

The Malaysian government also raised the capital gains tax for non-citizens to 30 per cent for properties sold within five years of purchase and 5 per cent in the sixth and subsequent years.

Since the moves were announced late last year, property developers say Singaporeans, who were previously snapping up properties in the state owing to the sweet prospects of close proximity and higher property prices at home, have now adopted a wait-and-see attitude.

As a result, some property projects have suffered a significant drop in sales.

That has not stopped the dizzying pace of building. Malaysia’s The Star newspaper reported recently that Johor’s property landscape is being flooded with a massive wave of fresh supply that may prove to be unsustainable.

The numbers are eye-popping.

Latest data indicates that the number of new homes being built in the near future adds up to some 42 per cent of the current stock of 702,101 in the state.

“The curbs come in handy. There is excessive building in the state and some developers are also building smaller units at high prices. This could lead to a serious bubble of speculation,” said an analyst.