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Yes, property prices may be lower without GST. Buying decisions to change?

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Anyone here delayed signing their Sales & Purchase agreement after they heard about the GST becoming zero in less than 2 weeks’ time? Actually, GST does not affect only the property market. There are chatters that car prices may inch upwards when the Sales & Service Tax (SST) returns. Here’s an article in paultan.org  The reason is because the SST is likely to be in a higher percentage than the GST which is 6 percent and will become zero from1st June 2018. Anyway, many car brands have stepped up their promotions to entice buyers to make their decisions sooner rather than later. What are your thoughts for the property market then? My earlier thoughts here: Will the market get better? Does it even matter? The below would be the thoughts from the Real Estate and Housing Developers’ Association (REHDA) president Datuk Seri FD Iskandar in Edgeprop.my 

FD Iskandar commented, “Construction material prices and costs should go down. But we expect big-ticket shopping to be delayed until June, [when the new rate takes effect].” He also shared that some developers had already lowered their prices in response to the new GST rate and hopes more will follow suit. He added, “GST is about 2% to 4% of our cost… it is good that some have reduced prices. In the long run, the savings should be passed on to consumers. Hopefully, there will then be a higher number of people looking at properties.” He shared something which has to be improved; effective implementation and enforcement so that unscrupulous vendors could not profit from the move. As for permanently removing the GST, FD Iskandar said, “GST is an act of Parliament, so they will need to go through Parliament, if they wish to repeal it? Give a waiver? We shall see.” This is the article in TheEdgeMarkets.com

If it’s just about the GST, actually the rebates that some developers are giving today is already higher than the 2-4 percent mentioned by FD Iskandar. We should already be savvy to this fact. In fact, some developers are giving renovation packages which are sometimes already higher than the 2-4 percent as mentioned earlier. However, if the developer is giving an additional 2-4 percent discount on top of what they are already offering, then perhaps that’s really an additional sweetener. Anyway, GST has never been directly involved in the residential property pricing. It’s only a direct tax on the commercial properties. That’s why FD Iskandar said that GST is 2-4 percent of the cost (which came from the material costs). GST is not the main reason to buy yeah. Evaluate as usual and buy if it meets our expectations. On a long term basis, that 2-4 percent or even 6 percent will not be significant. Happy investing.

written on 20 May 2018

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