New tax unlikely to hurt HK sales

THE Malaysian Government's recently introduced M$100,000 (HK$303,500) tax on the purchase of property by foreigners is not likely to affect the sale of such property to Hong Kong buyers, according to a leading overseas property exhibitor.

Alan Liu, regional business development director with Colliers Jardine which has marketed units in two luxury Malaysian developments in Hong Kong so far this year, said most of the Hong Kong buyers are citizens or permanent residents of Malaysia and expats.

'Very few are Hong Kong Chinese,' he said.

As a result, he said, the $100,000 tax doesn't apply to them.

In order to curb increased speculation in the Malaysian property market, the government has announced a package of measures, including forcing foreigners to purchase properties valued at more than $275,000.

The Ministry of Finance has also announced that it intends to impose a flat 30 per cent capital gains tax when an owner sells a property.

This will replace a sliding sales tax which ranged from five to 20 per cent.

Mr Liu said despite these measures, Colliers Jardine would continue to sell units in luxury Malaysian developments to Hong Kong buyers because expats and foreigners could afford the higher prices.

He said the $100,000 tax on a $1 million flat amounted to a 10 per cent charge while the same tax on a $250,000 unit was the equivalent of a 40 per cent charge.

So far this year, the local realty company has made units in the Sri Penaga luxury development in Kuala Lumpur available in Hong Kong.

Sale prices for the units ranged from $373,000 to $1.4 million.

A second project, called Gold Coast, sold at prices ranging from $372,000 to $720,000, he said.

Mr Liu thought it would be possible for foreign investors to get around the 30 per cent capital gains tax by setting up a company and buying the property through it.

'For tax purposes, they do not make a distinction between non-resident companies and a company run by citizens of Malaysia,' he said. 'The corporate tax rate is the same.' After holding the property for two years, it would be possible to sell it at the old capital gains tax, with a sliding scale of up to 20 per cent, as opposed to the new flat 30 per cent tax, he said.

Mr Liu said the government's push to have foreigners buy the more expensive properties was an attempt to get speculators out of the low-to-medium housing market, which the government wanted to reserve for Malaysians.

'There was a lot of speculation by Singaporeans and there was a frenzy of buying,' he said. 'The local people were finding it difficult to buy housing.'