PETALING JAYA: The property market, especially in the Klang Valley and Penang, are showing signs of getting frothy, so much so that talks about higher tax on property gains are getting louder as Budget 2011 announcement gets nearer.

Re-introduced earlier this year at the rate of 5% after a three-year hiatus, there are those who view that the real property gain tax (RPGT) should be implemented back on a original progressive scale where short-term gains are taxed the heaviest.

But industry players, understandably, are not too thrilled about the prospect on higher taxes.

“Personally, I don’t think the Government will increase it,” Master Builders Association of Malaysia (MBAM) president Kwan Foh Kwai told StarBizWeek in a telephone interview.

“But you’d never know what will happen next week,” he said.

The Government will table its Budget 2011 in Parliament on Oct 15.

From the contractors’ point of view, Kwan said, a healthy property market would benefit the whole economy.

“Prices had gone up in the past few quarters, but can be still considered relatively low because the market was stagnant in 2008,” said Kwan, who is a director at Sunway Holdings Bhd.

OSK Research, in a recent report said one potentially negative news for the sector could come in the form of a cap on loan to value ratio.

Such a move would probably be aimed at second or third home purchases, while first-time house buyers would probably be allowed to continue to borrow up to 90% of the property value.

Meanwhile, Bank Negara had increased interest rate three times so far this year from a record low level.

The Government re-introduced RPGT in the Budget 2010, but at concessional rate of 5% for disposal of properties held less than five years.

SOURCE: The Star