We may face a 'social crisis' if prices of properties continue to rise unabated. This is the first of a series of articles on the increasingly worrying trend.

THE National Housebuyers Association (HBA) put forth a compelling case to the government to address the spiralling cost of houses due to property speculation.

At a focus group meeting on July 17, themed "Providing Greater Access to Home Ownership" at the Ministry of Finance, the HBA detailed its earlier proposal to raise stamp duties and real property gains tax (RPGT) as measures to stop price speculation which has pushed property prices through the roof.

Available information indicates that it will cost at least RM1 million to purchase landed property in the heart of Petaling Jaya, while RM300,000 is the going rate for a modest two-room apartment with facilities.

HBA honorary secretary-general Chang Kim Loong told fz.com he was "hopeful" after the meeting which was chaired by Finance Minister II Datuk Seri Ahmad Husni Mohamad Hanadzlah and attended by other stakeholders such as the Real Estate and Housing Developers' Association (Rehda) and Syarikat Perumahan Negara Berhad.

"While the government imposed low stamp duty to encourage home ownership, speculators have taken advantage of these lower rates to accumulate multiple properties," Chang said.

While maintaining the current formula (1% for the first RM100,000) for the first two properties, the HBA wants those who are buying their third property to pay a 5% flat rate of the purchase price as stamp duty.

"For the fourth property, we propose a flat rate of 7.5% while a 10% flat rate is proposed for the fifth property they buy," Chang added.

He said the proposal does not penalise the majority of house buyers who buy one property as a home and another for long-term investment

"But it does penalise speculators who accumulate multiple properties and make it difficult for genuine home seekers to own a property," he said.

Chang reasoned that higher stamp duty for third and subsequent properties will mean increased revenue for the government which can be utilised to build affordable housing. "This will result in lower property prices since there will be a real demand for properties."

On RPGT, he said current rates are too low, where property disposed of within two years of acquisition is imposed a 15% RPGT; three-five years 10% and no RPGT is imposed on property disposed of after five years of acquisition.

There is a jarring loophole here, said Chang, explaining that property acquired directly from a developer takes two years to be completed, while sub-divided property takes three years.

"This means speculators who acquire multiple properties directly from the developer and flip upon completion only pay a meager 15% RPGT," said Chang.

For selling one's first two properties, the HBA proposed a 30% RPGT on property disposed of within two years; 20% for those disposed of between two and three years of purchase and so on, while no RPGT is imposed on property that is sold after five years of purchase.

However, for those who own a third and subsequent property, an RPGT of 30% is suggested for property disposed of within 10 years.

"Even former finance minister Tun Daim Zainuddin cautioned against the ever increasing  property prices. Malaysia will face a 'social crisis' if the majority of the lower and middle income do not have access to affordable housing," Chang added.

Following the meeting, Ahmad Husni said the government had already implemented a 70% loan-to-value ratio for third property but Chang said this was insufficient as it does not affect the entry level cost for speculators.

Tomorrow: Drastic policy changes needed