When Prices in Sale and Purchase Agreements Aren’t What They Seem
Earlier this year, I received a promotional text offering an unsold unit in a completed condominium. The message was enticing: the unit was available at RM1,000 per sq. ft., which was said to be close to the original launch price. On the surface, it sounded like a bargain. The development was completed a year ago, and primary purchasers were selling at sub-sale prices, while I was offered the developer’s initial launch price. At this point, I didn’t ask about the stated price in the Sale and Purchase Agreement (SPA), but I knew it would be higher than the offered price. Developers usually offer discounts or rebates from the SPA price, so purchasers don’t pay the full price stated.
Curious, I did what most buyers would do — I checked a property portal for recent transactions. I found a few units of the same size recorded at more than RM1,300 per sq. ft. This data looked promising, and it seemed like a great opportunity.
Inflated prices in recorded transactions
When I met with the developer’s representative, I mentioned the portal figures. He clarified something that I initially didn’t realise: the recorded transaction figures were actually the developer’s SPA prices before any discounts were given. Those figures were presented alongside the sub-sale prices without any distinction being made. It was difficult to differentiate between them.
The official registry records the gross SPA prices, not the net prices after discounts are applied. Property portals then adopt these figures, which are filtered down to consumers like you and me.
This can give a misleading impression of market value. Without that disclosure, I might have assumed those figures were genuine transaction prices — when in reality, buyers may have paid significantly less.
Site inspection
During the inspection, I quickly understood why this particular unit remained unsold. While it offered open views from the balcony, it sat directly beside an old, dilapidated building. The structure wasn’t directly in front of the view, but it was close enough to affect the overall appeal.
For me, this was a setback. It may be worthwhile if the price were lower, as there are ways to mitigate an undesirable side view — such as landscaping, balcony screening or interior design tricks. But, at the offered price, I was skeptical about the upside gain.
The representative also shared that units close to the top commanded strong resale prices, thanks to expansive views and greater potential for capital appreciation. Lower-floor units, by contrast, weren’t enjoying the same trajectory. This information is noteworthy. While it isn’t entirely surprising, it was important for me to learn.
Stamp Duty on Memorandum of Transfer
In Malaysia, stamp duty on the Memorandum of Transfer (MOT) is governed by the Stamp Act 1949.
Stamp duty is assessed on the higher of:
a) The consideration stated in the Sale and Purchase Agreement (SPA) (i.e. the contract price, usually the gross price before rebates/discounts), or
b) The market value of the property. The amount of purchase price stated in the Memorandum of Transfer or the Deed of Assignment by way of transfer by the parties is not binding on the Collector of Stamp Duty, and they have discretion to call upon a valuation expert to obtain the market value of the Property (Ref 1).
This means that even if a developer offers rebates or discounts, the SPA will usually reflect the gross price, and that is what stamp duty is calculated on — unless the market value is higher, in which case LHDN may assess duty based on its expert assessment instead. Remember, discounts do not reduce stamp duty charges. If you need to pay for legal fees, check with your legal counsel if they are calculating based on the SPA price, not the net price after discounts.
Example
SPA Price (before discount): RM1,200 per sq. ft.
Developer discount: 10% (net price RM1,080 per sq. ft.)
Market value (JPPH): RM1,000 per sq. ft.
Stamp duty will be based on RM1,200 per sq. ft. (SPA price), as it is higher than the JPPH market value.
The Stamp Duty Office of the Inland Revenue Board (LHDN) refers to JPPH, where the market value of the property is ascertained (Ref 4). JPPH is the Valuation and Property Services Department of the Ministry of Finance, Malaysia. Its primary functions include providing property valuation and services to the Malaysian government. They collect and manage property data through their National Property Information Centre (NAPIC).
Shift Toward Recording Net Prices?
Malaysia currently records property transaction prices based on the Sale and Purchase Agreement (SPA), which may not reflect the actual net price paid after accounting for rebates, discounts, or incentives. There’s no publicly available information on whether all developers offer these benefits or if this practice is limited to a few. Typically, details regarding these benefits are disclosed at the sales gallery or when the representatives call you.
Should Malaysia consider recording net transacted prices—the actual amount paid by buyers—rather than relying solely on SPA figures? This shift could improve market value assessment, reduce market distortion, and likely result in a lower stamp duty on MOT for buyers.
Owners often prefer to keep the prices detailed in the SPA confidential rather than disclosing the actual prices paid for the properties. If buyers knew the actual prices, it could lower the final price for the property. Owners are typically reluctant to reveal details of any discounts and rebates, despite the fact that buyers may know that the SPA price does not reflect the actual amount paid.
In my experience, I haven’t had to disclose my price in the SPA during negotiations, nor have I shared information about discounts and rebates. I believe it’s an unspoken rule that owners are entitled to this level of privacy. You may find information about the initial project pricing on some property websites, but they may not disclose net prices. The typical discounts range from 8% to 10%, excluding early bird discounts of 2% to 3%, although higher discounts may be available
However, as a buyer, I would appreciate knowing these details even though the final negotiated price will ultimately be influenced by recent comparable transactions and the negotiating power of each party. Buyers prefer to pay a lower stamp duty on the MOT, and recording actual prices paid would help achieve this.
Implementing net price
Implementing net price recording in Malaysia would require a coordinated shift across legal, regulatory and industry practices.
Net price refers to the actual amount paid by the buyer, excluding rebates, discounts, incentives or non-cash benefits. Legislation and guidelines may need to be amended to require the disclosure of net prices, especially in primary transactions where incentives are common.
Even in secondary transactions, the price in the SPA would be higher if the sale requires the owner to carry out internal repairs and improvements to the property. Without inspecting the property’s interior, you may not be aware of its improved condition just by looking at the transacted price. Therefore, the SPA template should either include a mandatory “Net Price Declaration” section or directly incorporate the net price within the SPA.
Land registry platforms need to capture the net prices alongside SPA values. Developers and lawyers will be required to submit net price data when SPAs and MOTs are signed. Hopefully, we can begin this process with new developments in major cities, monitor the quality of data and market response before implementing to the rest of the country.
References:
1) Stamp Duty Imposed For Transfer Of Properties In Malaysia by TYH & Co.
2) Discounts, rebates, freebies – do house buyers really gain from them? | EdgeProp.my
3) https://focusmalaysia.my/will-discounts-and-rebates-affect-properties-intrinsic-value/
4) JPPH Stamp Duty https://share.google/oVyC2EGgaZzg4eUe8
Photo by John Murzaku on Unsplash
