The 5% increase in the real property gains tax (RPGT) for properties held for two years or less is a realistic percentage, according to the Housing and Local Government Minister.

The 5% increase in the real property gains tax (RPGT) for properties held for two years or less is a realistic percentage, according to Housing and Local Government Minister Datuk Wira Chor Chee Heung.

Speaking to journalists after the launch of the Fiabci-Asia Pacific Real Estate Congress 2011 on Thursday, Oct 13, Chee said the proposal to raise RPGT by 5% was a practical approach as the government would not want to slow down the property and construction market.

The increase in RPGT would also leave little room for speculators to speculate and make quick gains, he added.

"To me, the 5% (increase) is not that severe," he said. "It is not too much of a deterrent actually." He believed that genuine purchasers as well as first time house buyers would still buy properties.

Once the budget is approved by Parliament, it will take effect next year at the earliest. Chor believes that the Malaysian property market is not headed towards an asset bubble as developers have been aggressively launching developments throughout the year, suggesting that there is ample supply.

He added that there has been some kind of rationalisation and stabilisation of prices as the government has introduced measures to mitigate the possibility of an asset bubble. Among the measures are the 1Malaysia Housing Programme (PR1MA) and the My First Home Scheme to help those in the lower and medium income groups purchase homes.

"A long held policy of the Malaysian government is to encourage home ownership. It is due to this administration's steadfast holding of this policy that we are revising the RPGT," said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah in his keynote address on Thursday.

He added that while the government recognises that real estate is a reliable store as well as creator of value, the state does not encourage real estate to be commoditised as an instrument of speculation. Hence the need to revise the RPGT.