Making sense of the new levy hike

The new state levy hike for foreigners will come into effect as of January 2014.

The new state levy hike for foreigners will come into effect as of January 2014.


Last week, the state of Johor announced that it will be increasing the state levy for foreigners from the current flat rate of RM10,000 to between 4 to 5 per cent of the property price from 2014 onwards.

The new levy was announced by the State Executive Councillor for Housing and Local Government Datuk Abdul Latiff Bandi based on a property value.

This is quite a hefty increase as foreigners will need to pay almost double than what they are currently paying from next year onwards.

For example, for an RM500,000 property, you will need to pay RM25,000 (based on 5 per cent) in levy in 2014 compared to RM10,000 currently.

Experts are divided on the new levy hikes.

Some say it will have very little impact on Singaporeans buying in Johor.

“This move has been in the pipeline for a while. Long term property investors will not be impacted by these additional costs,” Gerard Kho, country manager for PropertyGuru Malaysia was reported as saying.

Others say foreigners are not to be blamed for the price spikes in Johor.

“The main reason for the increase in property prices is the strong demand for properties in the hot and strategic areas in Johor Bahru and the Iskandar Malaysia and not the foreigners,” the chairman of Real Estate and Housing Developers’ Association Malaysia, Johor branch, Koh Moo Hing told PropertyGuru Malaysia.

In my opinion, those who are looking to invest long-term in Iskandar Malaysia should continue to do invest as these measures will likely be temporary until a price correction takes place, similar to Singapore’s cooling measures.

Understandably, some of you are also trying to make sense of the market and what you should do next.

 

To proceed or not?

While some of you may be sitting on the sidelines and not sure what to make of the market, this short window period actually presents a very good opportunity to take action before the new levy kicks in.

In fact, there are still good deals in the market where Malaysian developers are offering attractive payment schemes.

One such developer is offering an 8 per cent rebate, Developers’ Interest Bearing Scheme (DIBS), absorption of the state levy and a staggered payment for the second 10 per cent payment.

This translates to an initial cash outlay of 2 per cent of the property value, no payment on the state levy, no interest paid during the construction period and a 36-months installment period for the second 10 per cent payment.

For an RM1,000,000 property, the initial cash payment works out to only RM20,000, which is affordable due to the strong Singapore dollar against the Malaysian ringgit.

This article was first published on Get It Right Iskandar and PropertyGuru

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