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Effects from a zero GST for typical Malaysian households

Posted in Property, KL / Selangor

When the GST becomes zero in a week’s time, how much would we be able to save from what we spend on a daily basis? I roughly calculated. I could probably save anything from RM2-RM4. Let’s not talk about big ticket items yeah. Just the usual breakfast in a franchised mamak, lunch in a usual cafe with set lunch and dinner at the kopitiam nearby my kids’ nursery. I think my calculation may be overly simplified but here’s an estimation by National House Buyers Association (HBA) secretary-general Chang Kim Loong. The article that quoted him is here, in FreeMalaysiaToday.com He says that with the abolition of the GST and TOLLS, a typical Malaysian family would be able to save RM400 a month. When we look a little further, RM400 for a year is RM4,800 and within just 5 years would be RM25,000 which is enough for downpayment to an affordable apartment! Perhaps with the abolition of GST together with the toll, nearly every Malaysian household would be able to buy a home.

Anyway, when we look at the article in FMT, Chang says that prospective house buyers expecting an immediate reduction in property prices will most probably not be getting it. This is because the government’s decision to zero-rate GST pending the re-introduction of the sales and services tax meant that developers are in a dilemma over the pricing of properties already built or under construction. This is because GST is applicable to materials, professional fees and other costs. He said, “If they bring their prices down by 6%, they will be lowering their profit margins.” This may not be likely and thus it will take some time for the property market to recover. Meanwhile, chartered property surveyor Ernest Cheong said it would take about two years for the property market to recover and it will benefit mostly those looking for properties priced at RM300,000 and below. He also said that developers should “forget dreaming” about making big profits. This is the full article for reference yeah. 

Frankly, I do not think the toll could be abolished within 100 days yeah. I also disagree with sudden abolishment because even these concessionaires would need time to adjust. What will happen to their workers? It is however true that when people have more money in their hands, they may be able to buy more things, including property. This will surely help to drive a stronger property market. With the 1 million homes being built within 2 terms of the government, then the prices would be stabilised instead of being pushed up so high and fast due to the demand for them. I also do not believe the home prices would be significantly affected by GST. In fact some rebates offered by developers are already bigger than 6 percent today. Happy following.

written on 23 May 2018

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