Category: Property Value

Buying Property and Stamp Duty Planning

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Written by: Sr. KC Law

RPGT and Stamp duty planning

In our earlier article Selling Property and Real Property Gains Tax (RPGT) Planning, we discussed the prudent approach property owners can adopt to manage RPGT effectively when they decide to sell their property.

What consideration is there for a property buyer to take note of when buying a property?

Every purchaser has to pay Stamp Duty when buying any property, except specific property categories exempted by the government.

The Stamp Duty payable by purchasers depends on the property value and calculated based on the rate below:

stamp duty calculation

Example

When a purchaser buys a property at RM1.5M, what is the Stamp Duty the purchaser needs to pay?

The Stamp Duty based on the above rate is:

1st RM100K @1% = RM1K

Above RM100K to RM500K @2%= RM8K

Above RM500K to RM1M@ 3%= RM15K

Above RM1M to RM1.5M @4%= RM20K

Stamp Duty payable is =RM1K+RM8K+RM15K+RM20K=RM44K.

What is the basis of the Stamp Duty calculation apart from the schedule rate?

The stamp duty payable by a purchaser of a property is based on the market value of the property at the date of transaction.

Case 1

Buyer A buys a property at market value of RM1.5M.

Jabatan Penilaian dan Perkhidmatan Harta (JPPH) authority values its market value to be RM1.5M.

Stamp duty payable is RM44K.

NO action needed because it is valued at market price.

However, what can Buyer A do if JPPH authority computes the market value of the property as RM2M when the fair market value is RM1.5M thus increasing stamp duty chargeable to RM64K, which is RM20K more?

Buyer A can make an appeal to have the property revalued by the authority, submitting with the appeal a full Property Valuation Report prepared by a private Registered Valuation company justifying with solid evidences why RM1.5M is the correct and accurate fair market value.

Case 2

Buyer B buys a property below market value at RM1M from a desperate seller.

The fair market value is RM1.5M

How much stamp duty does the purchaser have to pay?

RM24K or RM44K?

The answer is RM44K. Why RM44K?

Stamp duty chargeable/computation is based on market value.

Case 3

Buyer C buys a property above market value at RM2M from his neighbour for his son who plans to get married next year.

The fair market value is RM1.5M

How much stamp duty does Buyer C have to pay?

RM44K or RM64k?

The answer is RM64K. Why?

Stamp duty computation is based on the higher of the two that is Sales and Purchase Agreement (SPA) value.

Remember this: You pay stamp duty when you buy property at market value or SPA price.

Should you need further advice or clarification. Please contact us at 03-7785 1888 or email us at action.v1039@gmail.com

About the Author

KC LAWSr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyors Malaysia, Member of Malaysia Institute of Estate Agents and Member of Business Valuers Association of Malaysia.

Getting a Property Valuation On Your Inheritance, When and Why?

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Written by: Sr. KC Law

While it is a trying time to cope with losing a loved one, as the beneficiary, you must be clear-headed when dealing with his/her property and assets. In this article, we suggest a protective measure for your real estate inheritance. Do read on.

What is a will?

A will is a legal document that determines how a person’s wealth will be distributed among his/her beneficiaries after he/she dies.

When a person dies with a valid will, a grant of representation is given to a person granted by the authority to deal with the assets and liabilities of the deceased.

The person granted with this representation is known as the “Executor”. The executor’s role is to administer the wishes of the deceased according to what is spelt out in the will.

The executor will need to appoint a lawyer to get a “grant of probate” from the High Court of Malaya before he/she is allowed to transfer/distribute the estate or assets to the beneficiaries based on the deceased will. This would take approximately 3-4 months

On the other hand, if the deceased did not leave a valid will, the next of kin may apply for the “letters of administration” in order to be appointed as the administrator of the deceased’s assets. This would take approximately 2 years. The distribution of assets will be in accordance with the Distribution Act 1958 and Distribution (Amendment) Act 1997.

At the same time, it is crucial for you as the beneficiary or the executor to get the property valued by a registered property valuer as soon as you can in order to have a “value stamp”.

Why is this so?

Other than enabling a fair distribution of estate and assets between beneficiaries, it also helps in your future Real Property Gains Tax (RPGT) filing should you as the beneficiary wish to sell the property immediately or at a later date. The RPGT chargeable gain is calculated by taking the current fair market value minus the fair market value at the date of the person’s demise.

As of 2019, there is a 5% RPGT on chargeable gain for individuals who dispose of their property acquired or inherited for more than 5 years. Whereas, for property owned by companies, there will be a 10% RPGT on the chargeable gain.

In order to reduce or eliminate uncertainty and errors in RPGT calculation during the disposal of your inherited property in the future, it is definitely wise to get a property valuation done for each of your inherited property.

Since valuation is not an exact science, it is difficult to accurately determine the fair market value of a property retrospectively, since the sentiment and market environment would have been different.

Therefore, having a property valuation done as soon as possible gives a more accurate assessment of the property value at that point in time.

To all property beneficiaries, real estate agents selling inherited properties, estate, will and trust lawyers and property holding companies, Action Valuers provide property valuation report service to address the above needs and help you manage these uncertainties. For more information, do contact us at 03-77851888.

About the author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyors Malaysia, Member of Malaysia Institute of Estate Agents and Member of Business Valuers Association of Malaysia.

What Is My Property Value And How Much Should I Sell My Property?

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Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers

Value vs Price

There are 2 aspects in selling that are almost akin to 2 pieces of puzzle that must complement one another-  Property Value & Property Price.

Have you ever wondered at what price should you sell your property for? Pricing it too low, you will lose money; Pricing it too high, you will not be able to get a buyer.

There are generally 2 categories of owners pricing their property for sale:

  1. Price it at above market price ( > property value)

  2. Price it at market price or slightly below market price (= or < property value)

Which will receive more response from the market and work favorably towards the owners’ objective of selling his property?

Let’s evaluate and break down the possibilities of each option based on personal past experiences and market observation.

  1. Price it at above market price (> property value)

    a) Most knowledgeable buyers may bypass the property advertisement and look elsewhere. Hence we lose potential buyers who are ready to buy but are put off by an overpriced property advertised.

    b) If we intentionally price it way above market price and say allow for price negotiation we may put across a message to the buyer that we are not sincere in selling the property.

    It will only defeat the purpose of selling because serious buyers will not be interested to waste time negotiating a deal knowing it is above market price.

    It may take 6 months, 1 year or longer for the price to drop to current market price level and genuine buyers will not have the patience to wait.

    Most of the time serious buyers will move to other property with a more realistic or acceptable price.

    c) It also takes too long to sell a property if it is overpriced in the current slow market.

    It is also not uncommon to see properties which have been in the market for over a year and may have been marketed by many real estate agents.

    The price will go down progressively from the time the property is first put up in the market for sale.

    Instead of wasting valuable time testing the market with above market price and reducing it overtime, why not set the price right from the start instead of letting genuine buyers walk pass you.

    Then there are also owners who hope for ignorant buyers who will buy their property at above market price, which rarely happens.

    Even if there are such buyers, we may not be able to get passed the bank to value it at the escalated selling price.

    If the buyer is not able to get the loan to purchase the property then how is the transaction going to proceed? The transaction will probably be aborted if the buyer needs bank financing.

    d) Marketing a property too long a period of time is not only wasting a lot of time, it also creates an image to the prospective buyer that there must be something bad/wrong with that property, that is why for so long it’s still in the market and remains UNSOLD.

  2. Price it at market price/slightly below market price ( = / < property value)

    a) We will be able to attract genuine buyers to the properties.

    b) There might be more than 1 interested buyer  for the property.

    c) Potentially selling slightly above market price if there are more than 1 offer.

    d) If owners can differentiate creatively their property from other similar properties that are currently in the market with words like “best price, best value, best view and quiet surrounding etc.”, the property will have the best exposure and best credibility to the market.

    e) Another reason why we should price property for sale competitively is so that it can even compete with an auction property in the same location.

    Auction properties are usually listed 20% or more below market even for properties in good location and in great demand. Because the price is so attractive, it attracts a lot of bidders as many as 20 to 30 bidders. At the end of the day, the successful bidder usually ends up buying above market value, higher than secondary sale value in the same location.

    f) Nowadays, prices of most properties are transparent to the public and most buyers are aware of approximately how much each type of property is worth by checking with property websites such as iProperty, Propertyguru etc. They can also check actual transacted prices in the Brickz website. Therefore, it is only wise to price the property correctly and competitively from the start before putting it up in the market for sale or to let.

P/S: The above advice is applicable in most cases. In certain circumstances, if the property has unique features and advantages from its extensive renovation compared to other similar properties around the area, it can be marketed with a higher premium.

Email us at action.e2520@gmail.com to get an indication of your property value!

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About the Author

KC LAW

Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.