The government has decided to exempt the 4 percent stamp tax on all residential properties valued less than $70,000 until January to contribute to sustaining the country’s economic growth.
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It wants to encourage business activity in the real estate and construction sector. Meanwhile, the government also wants residential developers to consider the possibility of discounting home prices.
According to the General Department of Taxation Cambodia, the stamp duty is levied on the transfer of ownership or the right of possession of immovable property.
Business insiders in the sector welcomed the move, citing it is the right decision that was made to help stabilise the market in a timely manner.
Hoem Seiha, director of research at real estate research company VTrust Appraisal, called it a preventive measure although the sector hasn’t shown any signs of decline.
Hoem said this measure is important because it will help to reduce any risk that the sector may be affect by the Coronavirus outbreak.
The elimination of stamp duty for transactions under $70,000 will benefit the affordable housing sector and the lower- to middle-class most, said Anthony Galliano, group chief executive officer of Cambodian Investment Management, a leading financial services company.
“However, this would likely have only a marginal affect,” he said, adding that there are already signs that property speculation has severely declined and prices are moving downwards. The government has limited tools to invigorate the property market in the absence of intervening on interest rates, but a tax stimulus is a potent measure.
Galliano said the recent recommended partial withdrawal of tariff preferences under the Everything but Arms trade deal with the European Union, the potentially damaging effect on tourism caused by CoVid-19 that will also disrupt supply chains, the exodus of Chinese workers in the now-banned online gambling business, the anticipated oversupply of condominiums, office space and retail malls coming to the market in 2020 and, finally, an overall global economic slowdown have the potential to create “a perfect storm”.
“If it materialises, the real estate sector will face significant challenges and prices will decelerate and likely drop significantly short-term,” he said.
“To encourage home ownership during the anticipated downturn, the government, through the National Bank of Cambodia, may need to take further steps by lowering interest rates,” he argued, explaining that a government policy encouraging mortgage lending can affect existing home sales in a positive way.
“It may also be wise to regulate supply, through permits, in 2020, so the inventory can adjust to market demand and price stabilisation,” he added.