Homes across the Causeway may now cost more

As the property game evolves globally, each country is picking up on the unique quirks and preferences of buyers and investors, both local and foreign. And Governments are catching on quickly now, with implementations of new rulings and taxation systems occurring more regularly, which changes the landscape of real estates all across the globe.

UDA Heights in Johor Bahru.

UDA Heights in Johor Bahru.

Singaporeans have always been fond of investing in homes in the neighbouring Malaysian state, Johor Bahru, and for some time, the sharp contrast in prices have drawn numerous buyers across the border. But now, a new taxation scheme will see future foreign property investors paying more in taxes. Johor state is planning to put higher tax rates on 130,000 foreign home owners starting end of 2013. Perhaps this is a means for the Johor government to rein in skyrocketing property prices spurred by foreign home buyers, 90 per cent of which are Singaporeans, but while time will tell whether this will deter buyers in the long run, the short term gains for the state through higher property returns may be substantial.

This property tax however does not apply for lower-priced properties, but with the restrictions already put in place, most foreign buyers may have to fork out an increased amount of property tax. Current tax for Johor properties are at 0.14 per cent of the property value. For example, a RM500,000 home will cost the owners RM700 a year in property tax. Foreign buyers are only allowed to purchase properties of a minimum of RM500,000, up from RM250, 000 a couple of years ago. Early up-takers may have benefited, but prices now will have more than doubled.

There is an additional charge of RM10,000 for government consent and if you choose to let go of your property, you will be charged a Real Property Gains Tax (RPGT) set by the Federal Government. RPGT Is set at 15 per cent of the net profit from sales of the property, is the property is held for less than 2 years. For properties held between 2 and 5 years, a 10 per cent RPGT is charged. And if the property is held above 5 years, no RPGT is charged. In general, owners of Malaysian properties are charged 2 types of property taxes:

  • Assessment tax – This is based on the renal value of the property
  • Quit Rent – This is based on the land size of the property
Condominium for sale at Penang's Batu Ferringhi.

Condominium for sale at Penang’s Batu Ferringhi.

In Penang, another state where foreign buyers popularly choose to invest in, the price limits for foreign buyers stand at RM1 million. Property taxes vary from one municipality to another, thus if you are looking to invest in properties in Malaysia, it would be wise to engage the expertise of a property agent or agency.

Investment Advice from One of Singapore’s Most Successful Property Entrepreneurs

As I made my way up to the side of the front stage at the iProperty.com Expo to catch Dato Eric Cheng at the end of his very well-received one-hour seminar, I was impressed by his high energy level – pausing only long enough to take a quick sip of water from a nearby bottle, he gave us a friendly smile, and was ready immediately for the rolling camera.

Eric Cheng speaking at the iProperty.com Expo at Marina Bay Sands Convention Center

It should be no surprise then, to find out that Cheng is not a man who takes life slowly – after he founded ECG Realty in 2003, his company was entered into the Singapore Book of Records as the “Fastest Growing Real Estate Agency in Singapore”.

As one of Singapore’s Young Entrepreneur of the Year Award winners, Cheng certainly knows all about the cyclical nature of the property market:“After the implementation of the seller’s stamp duty measures, the market went flat. In my opinion, the first half of 2012 will not see much property market activities”.

However, he is optimistic on the later part of the year, adding: “Prices will stabilize in the 2nd half of 2012 and there will be a slight increase of property prices. He attributes this to the resilience of the domestic economy, because “Singapore will continue to be a property haven for investors”.

With the roots of his entrepreneurial career in property, Cheng has the following advice for those aspiring to join the ranks of real estate professionals and follow in his footsteps: “A real estate agent should not have an employee’s mindset as they command their own pay cheque – and is thus more of an entrepreneur.” Citing the high dropout rates in this field, he says: “On average, only 2 out of every 10 real estate agents remain in the industry in the long-run. This career path is not for the short-term, and the candidate must be willing to be hardworking, have focus, discipline, and have strong organization and service skills”.

Eric Cheng, Founder of the ECG Group of Companies

As the author of the best-selling book, “Get Rich Through Property Investment”, Cheng also has some valuable advice for those looking to invest in overseas property: “Location is very important. A first-time overseas investor should ensure that he is eligible to buy the property, meets the finance requirements and is able to sell it in the future.” He also points out the importance of external indicators: “Other factors to consider include the stability of the government in the country, the economy and property prices.”

As far as timing the market goes, Cheng believes that “there will never be a right time to invest in the overseas property market. The right time is when the investor has the right cash cow to make decisions”.

Cheng is also keeping a close eye on property markets close to home: “I believe that the undervalued overseas markets in Asia are Malaysia and Thailand.” Taking an experienced investor’s mindset, he says: “To the layman, rental yields are the most important. However, after following property trends, I consider capital gains to be more important”.

Even as an experienced businessman with the stomach for taking risks, Cheng knows that the key pillar to a successful investment strategy is in portfolio diversification, and has one valuable piece of advice for over-eager investors: “Make decisions. Never invest 100% into the property market”.