Malaysia Abolishes Capital Gains Tax to Bolster Property and Financial Sectors


 Malaysia’s property market will become markedly more appealing to investment buyers as of the first of April when the country eliminates capital gains tax on all property deals. Whilst sellers are currently obliged to pay 30% tax on the profit made on a property, Prime Minister Abdullah Ahmad Badawi recently announced plans to abolish the levy. It is hoped that this decision will “inject more excitement and dynamism in both the property and financial sectors” and compliment the other pro-investment incentives implemented by the government.

Whilst CGT formerly discouraged property sales it is hoped that its absence will result in market liquidity and a healthier investment environment. Although the Malaysian property market is relatively undervalued compared to other countries, its robust, reassuring and stable economy and the removal of this tax should contribute to a rejuvenation of the property sector. Healthy foreign exchange reserves, low inflation, small external debt, unemployment below 4%, GDP over 5.5% for the past three years and consumer confidence sustained near 10%, all indicate that Malaysia’s economic future is set to flourish.
Another element which should bolster international real estate sales is the introduction of a range of cheap flights from London to Kuala Lumpur. AirAsiaX, a new long haul low cost airline plans to offer phenomenally low cost flights by August 2008 with average fares about 50% of the prevailing market rates. Visitor numbers to the country are therefore expected to increase along with Malaysia’s popularity as a tourism hub.
This is all good news for property gurus keen to secure shrewd investments. With the removal of CGT and access to the country facilitated, the property sector cannot fail to benefit.
Whilst the popular tourist destinations of Langkawi and Penang benefit from short term year round holiday lets, long-term investors would be advised to look to KL for the highest capital appreciation and the most promising yields. Prices in KL in 2004 rose 13.1% year on year, significantly above the country’s average of 5.7%. A good rental return is around 8.5% gross and with supply of property currently at 44% of demand, rental potential is extremely good.
Evidently, the most desirable location for investors would be in the heart of the city, at the core of Kuala Lumpur’s financial and business zones. Properties in this region though, tend to be incredibly rare. Hampshire Residences however, is a development lucky enough to enjoy a location that is second to none. Situated just a stone’s throw from Kuala Lumpur’s most famous architectural structure the Petronas Towers, 200m from KLCC Light Rail Station and within easy reach of embassies, main hotels and international schools, this high-end luxury serviced-apartment building offers a tantalising investment opportunity. One bed apartments are available from as little as £88,000.
To take advantage of Malaysia’s current economic growth potential and to be some of the first to benefit from the new tax organisation investors are urged to look to the cultural and geographic vibrancy of Malaysia. With freehold ownership available for foreign investors, affordability at a ten year high (only 18% of monthly income required to service a mortgage), GDP growth of 6.5% in 2006, a young educated population that is urbanizing, unemployment falling and rising wages, the country offers investment potential that one cannot afford to overlook.
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