The issue of vacancy tax is quite a hot topic in the property industry recently. It was first raised by Datuk Hasanuddin Mohd Yunus (PH-Hulu Langat) in the Parliament, questioning if the government will impose similar tax practices as seen in several other major cities around the world to address the number of unsold luxury condominium units in the Klang Valley. In answering the question, the Deputy Federal Territories Minister Datuk Seri Edmund Santhara Kumar stated that there is no need to impose such a tax now as the number of unsold luxury condominiums (priced over RM1 million) is low, but such a proposal would be studied further.
A week later, the Housing and Local Government Ministry (KPKT) announced that a vacancy tax is being formulated and could be imposed as early as next year on property developers who fail to sell their properties. According to KPKT, the introduction of such a tax could encourage property developers to be more responsible in the projection of their projects, particularly in high-rise developments, in order to reduce the overhang of residential units in the country. However, the Minister of Housing and Local Government – Zuraida Kamaruddin – mentioned on 27 August that KPKT is still studying the vacancy tax and has not made any decision on the matter. Previously, the proposal for the tax was made based on figures the ministry obtained showing that unsold units are priced at RM500,000 and above.
Judging from the chronology of the incident, as well as the responses given by the industry players through mass media, the issue of imposing a vacancy tax on property developers seems to be lessening. However, one should not forget that it could be brought up again in the future once the industry recovers from the current downturn. So, what exactly is a vacancy tax and how can it help?
What is vacancy tax?
In theory, a vacancy tax is imposed upon any property that is left vacant or unsold for a certain amount of time, based on a percentage of the gross selling price. It has been implemented in cities with high foreign ownership of residential properties, like Vancouver in Canada, Oakland and Washington DC in the US, and Melbourne in Australia; as an anti-hoarding initiative to avoid all unoccupied houses in the market to be sold or rented out speculatively. By imposing a vacancy tax on both the primary and secondary property, the issue of housing affordability is expected to be addressed, particularly in an undersupplied market.
