NEW STRAITS TIMES. 17TH AUGUST: Bankers and investment research experts predict that the probable adoption of a vacancy tax will have a detrimental influence on the overall property market, according to feedback gathered by the National House Buyers Association (HBA).
“The country currently needs more foreign investments, and a vacancy tax will be counterproductive. In fact, a vacancy tax is expected to exacerbate the problem of housing affordability and availability in the country,” its secretary-general, Datuk Chang Kim Loong, told NST Property.
Chang reiterated that the HBA is not sympathetic to Malaysian property developers for the problem of overhanging properties, which they created by continuing to build properties that people could not afford to buy.
He said that levying a vacancy tax on developers, as proposed by the Khazanah Research Institute (KRI), on these unsold and empty completed properties will not solve the problem.
A vacancy tax, according to Chang, would merely raise the cost of new homes since developers would pass on the cost of any higher taxes to future launches.
He said that developers that have an excess of inventory must evaluate it in relation to their financial sheet, holding costs, opportunity costs, and future expectations.
KRI had urged the government to study the plan to levy a vacancy tax on unoccupied and unsold residential and commercial units, claiming that it would “help prevent an oversupply of products, such as high-priced high-rise units, which contribute to a property glut.”
According to the National Property Information Centre (NAPIC), the value of overhang properties in the residential sector was RM18.41 billion as of 2022, with 27,746 overhang units.
KRI also noted that vacancy taxes are levied in various major cities throughout the world, including Vancouver, Canada, and Melbourne, Australia.
According to Chang, Malaysia’s vacancy tax differed substantially from those in Canada and Australia.
He said that while Australia and Canada do levy a vacancy tax, the rationale and target group for such a tax differ from what is proposed in Malaysia.
The vacancy tax is enforced on end-owners of such properties who keep completed residences vacant for more than six months in Vancouver and Melbourne. The proceeds from such a vacancy tax will subsequently be used to fund new affordable housing initiatives.
Chang said that the purpose of imposing a vacancy tax in Vancouver or other such cities is to return empty or underutilised properties to useful economic production, such as long-term rental residences for individuals who live and work in the city.
This is because land or property is a precious resource, and by leaving such a resource unutilised, another individual has been denied the use of such a scarce resource, he explained.
“Hence, the intention of imposing a vacancy tax is to discourage the wastage of scarce resources. It was also attributed to the fact that blocks of properties were previously purchased by foreigners, especially Chinese nationals, and left idle and unkempt,” Chang said.
Chang said that the unoccupied tax was imposed to ensure that residential properties are occupied and have life within them.
However, he said that the objective of a vacancy tax in Malaysia is not to target owners of such abandoned houses but rather property developers who have been unsuccessful in selling such properties.
Meanwhile, public response indicates that the vacancy tax will be ineffective and underappreciated.
“It’s not going to work here. To avoid paying taxes, the developer can make a bogus transaction with a third-party entity. A prospective buyer may be sought from these companies,” said a lawyer.
According to a veteran police superintendent, the tax is deplorable.
“Those property owners who are unable to rent out their properties must already pay bank installments. Owners would suffer considerably more if we paid this vacancy tax,” he said.
According to a retired banker, such a regulation will have direct or indirect ramifications for current laws and their enforcement in the current state.
“It is unquestionably a bad idea. What if the unit is purchased but there is no desire to rent it?”
A surveyor and property manager said that, in each case, wisdom is essential.
“Recently, there have been too many self-proclaimed economist gurus who do not understand Malaysian problems. The solutions must be Malaysian-made, not simply copied and pasted from a western solution,” he said.
According to a top analyst, this vacancy tax is no different than the quit rents that the authorities are having trouble collecting from owners whose units are left vacant.
“I’ve seen some statements posted in front of a specific unit that haven’t paid quit rent in 15 years. Is the government going to be sympathetic to owners who are unable to find tenants for their units?”
“Regrettably, it’s a myopic view. We cannot just blindly ‘import’ what is done in highly advanced countries with different economic standards and property market demands.”
Another person inquired about how the tax would be applied to vacant kampung properties.