The proposed implementation of a vacancy tax is ineffective to solve the country's overhang issues, and it may further dampen the property market, says the Malaysian Institute of Professional Estate Agents and Consultants (MIPEAC).
MIPEAC president Francis Loh said it is rather untimely that the Housing and Local Government Ministry wants to impose the tax on developers that fail to sell their properties within a specified time, given the current weak property market that is further impacted by the Covid-19 pandemic.
A vacancy tax in other countries refers to a levy on units that have been sold and not occupied.
In Canada, Australia, China, France and Singapore, the tax was imposed with the objective of making more housing available to the public and curb speculation during boom times, especially by foreign buyers.
Singapore also introduced the tax on developers for unsold units held two years after the Temporary Occupation Permit.
"The property market and situation in those countries are different from Malaysia and we do not have the same problems. Malaysia needs more foreign investment, so a vacancy tax will be counter-productive," Loh said in a statement.
Loh said bankers and investment research analysts are forecasting the potential implementation of vacancy tax to have a negative impact on the overall property market.
"The overall property prices are expected to fall as developers may re-price their existing stocks and lower the selling price for new launches. We can expect there will be more competition in the property market, comprising the primary, secondary, and rental segments. In addition, buyers may delay purchases to 2021 in anticipation of a potential fire sale by developers following the vacancy tax.
"We urge the government to relook at the decision. Apart from the unsold units from developers, there are also other contributors to the current supply glut in the market such as unreleased Bumiputera lots, low-cost housing in undesirable locations and PR1MA homes," he said.
Loh said a proper study is necessary to have a detailed picture of the distribution and causes of the overhang units in Malaysia.
"The situation is the culmination of various factors and circumstances, internally and externally," he said.
According to the National Property Information Centre (NAPIC), the total completed unsold property value stood at RM42 billion (55,999 units) in the first quarter of 2020. Of the total amount, it comprises RM19 billion residential units, RM15 billion serviced apartments, RM5 billion shops, RM2 billion industrial properties, and RM1 billion small office, home office units (SOHO).
Loh said the NAPIC data largely reflects that although Malaysians need affordably priced houses, the bulk of these, including low-cost units, are located in unfavourable areas that are remote and not so accessible.
He said developers that are unable to sell their properties would already be bearing the interest and holding costs.
Further, the financial burden from unsold stocks is already a form of 'penalty' on developers that make the wrong decisions in land-banking, pricing, or product offering, he said.
"The overhang is largely due to both affordability issues and pricing. Even then, with lower property prices, can people afford to buy? Lower property prices will disrupt the banking system and reduce the ability of banks to make loans going forward. Since more Malaysians are home-owners and their properties are mortgaged, they will become a poorer lot if housing prices fall," commented Loh.
