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6% GST but property prices up 6.2%

In a local English daily, it was reported that REHDA President, Datuk Seri Fateh Iskandar Mohamed Mansor announcing that as soon as Goods and Services Tax (GST) starts, it will push property prices up by 6.2%. This is due to the tax being applicable to some building materials. This is indeed a bold prediction. Is this prediction because REHDA members are starting to experience the uptrend in demand? For now, no indication of such and even in REHDA’s own survey, it said that 94% of its members are worried over the impact of GST on their overall business costs. Of course besides GST, two other main worries include financing for buyers and challenges from utility service providers and local authority.
Seriously, issues with financing can only be solved by both parties. The developers just have to provide more affordable units instead of the luxury mindset they had previously. Buyers just have to buy units they can afford and not try to stretch themselves too much. Banks are not going to tolerate the buyers who overstretch too much. They will just reject them instead of carrying over the buyers’ risk into their loan portfolio. This is one thing I personally like about the banks’ attitude in Malaysia. No nonsense. Please keep this strict measure in place. For everyone’s note, even with the ever higher outstanding household debt to GDP of Malaysia, the Non-Performing Loan for all banks continue to be going down or staying at similar levels. Want to know a little more detail? Read here: 84% of homebuyers have only ONE (1) outstanding home loan. 🙂
The second issue of slow approval processes, inconsistent policies/guidelines and high development charges from the local authorities remain the same. The reason is simple, it’s just not transparent enough. If only all these are pushed online and everyone can check on both the applications date as well as the approval dates, it would take out this blame game. I say blame game because every time the developers blame the local authorities, more often than not the local authorities would say that the approval is delayed because of incomplete documentation from the developers. Some developers would then say that the documentation is incomplete because local authorities did changes which were not informed in advance. And the argument continues. Just be transparent, please. Yes, both sides.
Property prices up by 6.2% beginning April 2015? I am sure the buyers would be the decider whether this happens and definitely not just the developers. Unless of course the market is restarting its uptrend beginning April 2015? If the surge restarts in terms of transactions, then whether GST kicks in or not, the property prices would start to inch up again and when you look back, it would definitely be higher than the 6.2% mentioned. However, if the market remain subsided like currently, this claim will somehow not happen. Just look at the launching prices of the prominent developers in 2013 versus 2015. Seriously, higher priced projects or lower priced projects? Happy investing or waiting, as usual.
written on 21 Mar 2015
next suggested article: Politics no. Interest Rates and GST YES.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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