You must have known that many people are not comfortable with the 5% Real Property Gain Tax (RPGT), especially the ones who own 30-years house in matured neighbourhood like Bangsar or TTDI. Although the intention is to curb property speculation, it somehow punishes the earnest homeowners who never think of speculating their home price at all.

I take it different way…

This 5% RPGT is a hint given by the government that the interest will kept low for probably another 2-4 quarters. In last federal meeting, it’s already decided that there will be no interest rate hike for the next 3 month. They have to keep it low for small businesses have access to liquidity and continue operating in this very tough economy.

Now relates that with 2010 fuel subsidy outlook.

Najib has already hint us that subsidy will be directed to ‘targeted low-income group’ to avoid exploitation and burden to government; which I think very fair indeed. But most importantly, it will make our local business operate in a competitive environment to survive in global competition. To remain competitive, they have to get rid of subsidy they get. Otherwise, keep on depending on ‘subsidy’ to enjoy super-income is not a good way of doing business. Continue the trend will make most local businesses afraid to venture overseas projects as no subsidy given.

Therefore, the probability for another fuel spike next year is very high. Firstly, is to reduce government deficit without compromising the quality of life in low-income group. Secondly, the oil prices are gradually but surely increase over time (being nature of commodity).

The side effect is everything will go up again as a result of higher inflation rate. Above all, you will see property prices spike like nobody business. Couple will low interest rates, this can be disaster! Just imagine investors keep on buying property just to hedge against inflation (and get out of low FD return from bank) no matter at what price (when BLR the lowest in history) and plan to sell back in future for another record-breaking price.

This what’s happen when someone has so much money; market will be flushed with ample liquidity.

If no control, the property price can easily increase 10-15% in just that particular year. And 10-15% for something that is 6 to 7-figure price is huge! This can become a burden to most working class who are still renting a house in KL; especially when most companies kept salary increment at low level currently.

Therefore, I personally like RPGT. In fact, I think the tax should be more like what it used to be before it was abolished in 2007 (up to 30% gain tax). In return, I hope government will keep the interest rate low until Q3 2010 to simulate economy.

But few concerns remain:

1. What the ‘low-income’ group look like? Anything below RM3k household income in KL is fair to me. Survival in KL is a lot harder than in Kampong. Poverty has to be redefined and not only for rural folks.
2. Given this ‘low-income’ group like RM1k fuel voucher per month is good, but what is government plan to help them absorb consumer price later; as everyone will adjust their price upwards after the fuel hike.
3. There will be less buying-spree among property investors after this which results to less profit for them (less tax for government in return). Can the 5% RPGT offset the difference?

And what can you do? I think you know it already, kan?