GST Set to Bite
The introduction of the new GST, which will see a 6% levy imposed on most transactions, is also contributing to a drop in activity. While house sales themselves are exempt from the GST, factors contributing to housing prices, such as the labour and materials used in construction, are not. Increased costs will inevitably affect overall prices. Analysts expect the GST to push up house prices by around 4%, while Redha in March puts the increase at more than 6%.
Siva Shanker, the president of the Malaysian Institute of Estate Agents, believes the residential segment of the property market is set for a slowdown this year, with activity rising in 2016. “2015 will be a bit flat, but better for the secondary market. In 2016, the market will start climbing a bit,” he told local media in April. “In 2017, we’ll see serious interest and 2018 can be the next property high.”
Some analysts have suggested that the introduction of the GST could boost interest in older properties since these are less likely to be affected by higher costs, while for new builds there is likely to be a greater emphasis on affordability.
Tong Seech Wi, CEO of integrated property developer MCT, said his firm was looking to maintain revenue flow and earnings by sharpening its focus on more moderately priced units, with more than half of its output to be priced at RM500,000 ($137,000) or below. “This is what this market needs,” Tong said “We believe with this right product and pricing, we should be able to ride through this difficult period.”
