| Property Investment |
While growth in the manufacturing sector was driven by strong demand for electronic products and sustained economic growth in USA and Asia, the turnaround in the construction sector was due mainly to the implementation of several large infrastructure projects and new investments in residential sector, particularly low and medium-cost houses. Domestic demand continued to grow, driven by public and private sector spending which grew by 18.5% and 19.3% respectively. Private consumption increased at 15.6% under the strong influences of higher disposal incomes and the wealth effect amidst low interest regime. At the same time, measures introduced in the Budget 2000, which include a one percent personal income tax cut, higher tax relief, and a 10 percent salary increase for public sector workers also contributed to growth in domestic consumption.
Other indicators of the economy were equally encouraging. The Consumer Price Index (CPI) showed inflation at a low 1.6% in 2000 compared to the 2.8% last year. Unemployment rate declined slightly by 0.1 percentage point to 2.9% amidst a 2.1% increase in the demand for labour and a 2.0% expansion in labour supply. Malaysia's productivity was expected to be 4.2% in 2000 due to higher capacity utilisation boosted by potential increases in both domestic demand and exports, as well as productivity increases due to the information and communications technology (ICT) utilisation.
In the meantime, quarterly loans to the property sector started to pick up again in the first quarter of 2000 after a series of generally falling quarterly figures previously. Against this scenario, the quarterly figures show that as a percentage of the total loans, loans towards the property sector continued the trend of quarterly growths to hit 38.1% in September this year, thereby underlining the rising tribute to property sector's role in the economy. An important component to this increased share was the loans towards residential properties, which saw successive quarterly increases to reach 14.1% of total loans by the end of the same period. In effect, the increased share by residential property sector moved in tandem with the increased share in property loans. In the meantime, loans sold to Cagamas picked up continuously in amount during the year after the 8.4% falls recorded in the fourth quarter of 1999. Against this, the amount of loans towards the purchase of non-residential properties downtrended successively since the fourth quarter of 1998, except in second quarter of 2000 when it moved up slightly by 2.2% before dropping again in the following quarter.
Loans approved towards the purchase of residential properties have also moved positively in amount, particularly during the fourth quarter of 1999 and the second quarter of 2000, where 8.5% and 6.9% increases were noted; the former was most likely pushed by the two home ownership campaigns held toward the end of 1999. The high-cost category continued to form the largest proportion of loans for residential properties at almost half the share; in fact, this category's share of total loans continued to enlarge with each quarter before shrinking slightly again in the third quarter of 2000. For the low-cost residential despite the high volume, this category made up only 1.3% - 1.6% of total loans and 3.4% - 5.9% of residential property loans.
For the construction sector, in a repeat of 1999's cycle, loans to this sector picked up in the third quarter of this year after successive drops in the preceding three quarters. In the increase this time, the residential sector again recorded the largest percentage change at 2.5% although not as high as in previous year. Looking at year-on-year performance, loans for the construction sector had in fact dropped by a larger proportion (10.7%) this year than the drop in total loans (0.2%).
Overview Of The Property Market
While Bank Negara's policy on the RM250,000 cap for funding of development on new residential and shophouse units remained in force, specific policy measures were introduced through Budget 2001 to promote recovery in the property market. As a result of these measures, property buyers and sellers now enjoy lower costs of transactions on higher-priced properties through a lower ceiling rate of 3% for ad-valorem stamp duty on property transfers. To raise workers' housing standard, the government substantially raised its housing loan eligibility amounts and allowed public sector workers recourse to the resulting additional eligibility to upgrade to better properties. The Budget also set a new RM 797 million commitment towards the rehabilitation of abandoned hosing projects. To achieve streamlining of fund management in this area, the responsibility for coordinating and implementing all existing funds on low-cost housing is now centralised and vested in Syarikat Perumahan Negara.
Meanwhile, in further exercises to dispose of properties originally taken over to deal with non-performing loans (NPLs), Pengurusan Danaharta Nasional Berhad ("Danaharta") held three tender sales this year, in April, August and December. In this three exercises, Danaharta achieved 58.5%, 44.4% and 40.7% successes in number of properties sold, with a combined total of 264 properties sold (46.1) at the total consideration of RM469.9 million. While high interest was indicated on the tendered properties, a significant bulk of the actual sales were of lower-priced properties in the sectors of residential and agricultural; together, they made up almost 50% in volume but only 13.2% in total value transacted. A striking feature in this year's sale properties as evident from the high 22.3% and 25.4% contributed they respectively make to the total sales volume and value.
The year did not see activity on the scale of massive nationwide Home Ownership Campaigns organised in 1999. The Housing Developers Association fronted a lesser involvement this year, holding only a property exhibition towards the end of the year to help promote house sales in the central region. The exhibition did not confer to buyers the benefits of extensive discounts and incentives as offered by a home ownership campaign. Promotional initiatives of a similar nature were also seen embarked upon by some property-related firms and sales agents during the year.
Overall property transactions for 2000 indicate a market that appears to have firmed further since the last year's 21.4% and 23.3% pick-ups in total volume and value of transactions. The improvements, however, were more moderate this year at 6.3% and 20.0% respectively. This moderation resulted from the smaller activity movements noted at sector level where the most improved sector registered a relatively modest 11.3% gain compared to last year's 71.3%. A large part of the transaction improvements resulted from growth in the residential sector, which constituted the main bulk of the transaction volume; this sector recorded 8.8% and 18.3% rises in volume and value respectively this year. In all, the 2000 activity was still some way off the height achieved in the pre-crisis era (1997), with the 12.6% and 22.3% shortfalls in volume and value respectively. Of all the sectors, only the residential drew close to the 1997 levels of activity, trailing by a marginal 2.7% in volume and surpassing by 0.6% in value.
Against the scenario of an overall improvement, two sectors of the property market recorded some declines. The industrial sector suffered a 9.3% drop in transaction volume this year after a significant 71.3% jump last year. The agricultural sector also dropped, but by a negligible 0.6% after a larger (4.3%) fall last year. In terms of share, the share by the residential sector enlarged to 71.2% this year from 69.5% last year. This was at the expense of the agricultural, commercial and the industrial sectors, which saw reduced shares to 15.8%, 6.9% and 3.1% from 16.9%, 7.0% and 3.7% respectively.
A state-by-state analysis showed transaction improvements of 0.7% - 30.3% this year in the stated of the Federal territory of Kuala Lumpur, Selangor, Pulau Pinang, Negeri Sembilan, Perak, Melaka, Pahang, Terengganu and Sabah. Perak was particularly outstanding: following a 5.1% decline last year, the transaction volume rebounded strongly this year to notch the highest percentage increase nationwide, at 30.3%. Of the other states in the improve category, Pulau Pinang, Melaka and Pahang recorded higher percentage increases of 18.6%, 22.3% and 15.9% respectively this year than the 10.4%, 5.1% and 6.3% last year. Within the decline category, Kedah's 23.3% fall in transaction volume was the highest and in sharp contrast to the 94.3% jump achieved by the state last year. In the cases of Johor and Perlis, the 1.3% and 3.8% drops in transaction volume this year followed the respective positive 28.3% and 6.4% movements last year but for Kelantan, this year's drop was the third in succession since the economic crisis. Data on value per transaction implies price uplifts in the three property sectors led by the industrial and followed by the residential and agricultural, and a weakening in prices for the development land while the commercial sector remained stable. The 8.7% uptrend recorded for the residential sector was due to the generally rising average price trends noted in many stated, particularly in Johor, Selangor and Kedah. On the other hand, the substantial 121.5% rise registered for the industrial sector was influenced more by sales of large industrial properties in Kuala Lumpur, Selangor and Kedah. For development land, the drop in the nationwide average transaction value this year came on the heel of a positive movement last year and resulted mainly from the falling average values recorded for all the major status.
By price, properties priced at RM25,000 and below remained the most actively transacted despite their declining share of the transaction volume, to 17.1% this year from 21.4% last year. A decline in contribution was also noted in the RM25,000 - RM50,000 category. In other price categories, the shares picked up properties in the RM100,000 - RM150,000 category in particular enlarged their share to 14.9% this year after a slight contraction to 13.3% last year from 13.4% in 1998. The above pattern of analysis saw repetition in the residential sector. In the meantime, the share decline in the RM50,000 and below category was due to the decline in all sectors of the property market, and was particularly conspicuous in the industrial sector where the share of transaction volume shrank to 9.2% from 23.7%. It is also interesting to note the increase in share of transaction volume in the RM200,000 - RM1 million price range, to 16.1% this year from 14.9% last year and 14.1% in 1998. Again this increased share was contributed by the share increases in all sectors particularly the residential, which enlarged successively since 1998.
For full report, please refer to: Source:
Property Market Report 2000
Valuation and Property Services
Department Ministry of Finance Malaysia
The purchase of any property by foreigners/foreign owned companies requires the prior approval of the Foreign Investment Committee (FIC) pursuant to Section 433A of the National Land Code 1965, irrespective of the amount of the purchase price.
With effect from 22 April 1998 and under the new guideline dated 18th May 1998("1998 Guideline") all foreigners/foreign companies can purchase all types of property in Malaysia, costing more that Two Hundred and Fifty Thousand Ringgit (RM250,000). However, financing of the purchases must come from overseas.
As the absolute owner of all State land, the State Authority is empowered to dispose of the same to such grantees as it deems fit subject to payment of the necessary premiums, fees and rents and such conditions as it deems fit.
Generally, there are two types of land tenure in Malaysia, namely,
· freehold title which is a grant of land in perpetuity
· leasehold title which is the grant of land for a term not exceeding 99 years. This usually ranges between 30, 60 and 99 years which may depend on the category of land use i.e. agriculture, building or industrial.
The present policy for alienation is that grant of land will be for a term of years not exceeding 99 years only. Generally, grants in perpetuity are only possible if the State Authority is satisfied that there are special circumstances which render it appropriate to do so.
Generally, the ownership of buildings and land are not separate.
The State Authority may also grant Temporary Occupation License to occupy State land for certain restricted and permitted purposes for periods usually not exceeding one year (which can be renewed for a further year), unless for the purposes of extraction of rock materials for which terms of up to 5 years or more may be granted.
Contracts Act 1950
Control of Rent Act 1966
Housing Developers (Control And Licensing) Act 1966
Income Tax Act 1967
Land Acquisition Act 1976
Land Conservation Act 1960
National Land Code 1965
Real Property Gains Tax Act 1976
Special Relief Act 1950
Stamp Act 1949
Strata Titles Act 1985
Street, Drainage And Building Act 1974
Classification of Properties
Refers to a building or a contiguous space in part of a building for dwelling purposes. Residential units are categorised into detached houses, semi-detached houses, terrace houses, apartments and condominium units, cluster housing, townhouses, strata detached and strata semi-detached housing. Hostels, tenement houses and parsonages are excluded.
Condominium
A type of housing comprising a block or blocks of apartments generally with common recreational and other facilities to promote communal living. It is built in urban centres and caters to the middle and upper middle income groups and are popular with the growing number of graduates and young professionals. It is a strata-titled apartment built by the private sector and the running of the common facilities is vested in the Management Corporation (MC) elected amongst the owners. Monthly management fees collected from the owners is used to upkeep the facilities and provide a sinking fund for major repairs.
Office
Refers to space in a building or part of a building used or intended to be used for rendering service such as agency, commission, banking, administrative, legal, architectural, engineering and other professional services. Personal services listed under shops are excluded.
Shop
Refers to space in a building or part of a building used or intended to be used for carrying on of any trade where the primary purpose is the sale of goods by retail and the rendering of personal services such as tailoring, barber, photographic and medical services. This excludes restaurants and health centres.
Factory
Refers to space used or intended to be used for industrial purposes, comprising buildings or part of a building and their cartilages constructed or used for the manufacturing, altering, repairing, ornamenting, finishing, cleaning, washing, packing, canning, breaking-up or demolition of any article or its parts and the processing and treatment of minerals. Factory spaces is categorised into flatted factory space and non-flatted factory space.
Warehouse
Refers to covered space used or intended to be used as storage area for raw materials, semi-finished or finished goods.
Hotel Room
Refers to a building or part of building containing rooms specially designed and constructed or substantially adapted to be used to accommodate persons for the purpose of gain or profit, with provision for a bar and restaurant.
Measurement Definition
The floor area for a residential unit is its 'built-in' or 'built-up' area. Both terms are used interchangeably and are widely accepted to mean the gross floor area or usable living space, including areas beyond those covered by four walls and under a roof. Built-in or built-up area is defined as the floor area exclusively allocated to the unit including balconies, verandahs and personal lift lobbies but excluding common areas such as stairs, lift shafts, pipe ducts, common lobbies and communal toilets. It is measured from the outside of the exterior enclosing walls of the unit and the middle of the party walls between two units. It includes internal partitions and columns within the unit. Bay windows, yards, gardens, terraces, carports and the like are included in the measurement of area.
Non-residential Units
The floor area for non-domestic accommodation is its 'lettable floor area' defined as the area of all enclosed space of the unit measured from the centre of perimeter barrier and includes column areas. Any inclusion of common areas such as corridors space within the lettable area calculations, though rare, will in most cases be highlighted.
Property Tax
Property Tax is a tax on all immovable properties, including apartments/condominiums, houses, offices, factories and shops. It is payable half yearly in advance by the owner in the months of January and July each year. The property tax payable per year is computed based on a percentage (tax rate) of the Annual Value of the property. The property tax rate varies from 2% to 8% depending on the land use (residential, industrial, commercial or agriculture) and the city/town or district council which the property resides in. Annual Value is the estimated annual rent the property can fetch if it were rented out and is assessed by the collecting agency normally once every five years. Property tax is payable irrespective of whether a property is vacant or occupied. Owners may claim for a refund of the tax paid for the vacant period if a property is vacant for a continuous period of at least 30 days or a calendar month provided the property is fit for occupation and cannot be let at a reasonable rent despite efforts to do so, or the property is unfit for occupation and is undergoing repairs to render it fit for occupation.
Quit Rent
Quit rent is assessed on all landed properties and payable annually. It is collected by the city/town or district council and generally rated at 1-2 sen/sq.ft.
Real Property Gains Tax
Chargeable persons Every person whether or not resident in Malaysia is chargeable to Real Property Gains Tax (RPGT) in respect of any gains accruing on the disposal of real property in Malaysia.
Chargeable gains or losses
A chargeable gain arises if the disposal price exceeds the acquisition price and an allowable loss is incurred if the disposal price is less than the acquisition price. Allowable losses are available to be carried forward for relief against future RPGT liabilities.
Exemption from Real Property Gains Tax (RPGT)
-an amount of RM5,000 or 10% of the chargeable gain, whichever is greater accruing to an individual;
-a gain arising on disposal as a result of compulsory acquisition of property under the law;
-a gain accruing to the Government, State Government or a local authority;
-a gain accruing to an individual who is a citizen or permanent resident in respect of the disposal of one private residence;
-a gift made to the Government, State Government, local authority or approved charity;
- the transfer of assets for the purpose of asset securitisation.