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Johor mulls property tax on foreign buyers

They may have to pay 4 to 5 per cent of the property price as processing fee

FOREIGN buyers of Johor property will be required to fork out 4 to 5 per cent of the property price as processing fee under a new policy being considered to boost the state's revenue and maintain home affordability for locals.

State housing and local government committee chairman Abdul Latiff Bandi said that the new fee, expected to be implemented by year-end or early next year, will apply to all properties, including those purchased on the secondary market, according to local news reports.

Currently, a flat rate of RM10,000 (S$3,906) is levied on all properties acquired by foreigners.

Property players said that the 4 to 5 per cent levy referred to by Mr Latiff could be the tax which Menteri Besar Mohamed Khaled Nordin had mentioned in June when he alluded to higher tax rates being levied on foreign property owners, of which there are an estimated 130,000 in Johor.

R'ST Research director Ong Kah Seng said that the increase in processing fee was "within expectations and still at an affordable level (for most wealthy foreigners)", and hence unlikely to significantly dampen buying interest.

"Many are still open to purchasing a residential property in Johor for investments and future capital appreciation given Iskandar Malaysia is well on track to deliver its expected returns," he added.

Tanah Sutera Development general manager Steven Shum said that it was unclear if the proposed fee would be levied at the signing of the sales-and-purchase agreement or when the title is transferred, but observed that it would be fairer to buyers if not applied retrospectively.

KGV-Lambert Smith Hampton (Johor) director Samuel Tan Wee Cheng said that he preferred to wait until such proposals appear in "black and white" before reacting, given that similar plans have been floated in the past.

"They are testing the market to see the reaction," remarked Mr Shum.

Formerly the Johor branch chairman of the Real Estate & Housing Developers' Association, he pointed to another proposal for developers to fork out 7.5 per cent of a house price to the state for "quick release" of units allocated under bumiputra quotas to be sold to other buyers. (Except for exempted areas such as Medini, developers need to allocate 40 per cent of units in a development to bumiputras.)

He said that builders are against proposals that would lift prices, noting that while few would complain in a buoyant market, that could quickly change in a downturn.

Speculation has played a big part in home prices rocketing considerably over the past two to three years, in some cases by 100 per cent, he noted.

The state government is clearly concerned about the rapid acceleration of house prices, however, and is under pressure to keep a lid on it following robust demand brought about by the growth of Iskandar Malaysia.

Earlier this month, Mr Khaled said that Johor would continue to welcome foreign property buyers, but would ensure that locals are not deprived of home ownership.

He said that foreigners would no longer be allowed to buy real estate in the secondary market from locals nor accorded the right to purchase agriculture land.

But the minimum threshold for foreigners acquiring residential properties would be maintained at RM500,000 and not doubled to RM1 million.