REHDA: SST will push up property prices

REHDA: SST will push up property prices

REHDA stands for Real Estate Housing Developers Association. It represents housing developers here in Malaysia. According to REHDA’s recent survey, its members are concerned over the SST and thus are planning to increase the property prices by 3 to 5 precent. Not every developer but 67 percent of all its members are planning to do so. Do read the below:

Article in theedgemalaysia..com: “The sales and service tax (SST) is a major concern for property developers with over 70% planning to raise property prices by 3% to 5% because of it, according to a survey by the Real Estate and Housing Developers’ Association (Rehda) Malaysia.

The survey of 187 developers found that 62% expect the SST to greatly increase project costs and affect business operations. Around 70% believe it will raise construction costs by at least 3%, leading 73% to consider raising prices.” Article in theedgemalaysia..com:

Does this mean average prices will also be rising?

Property transactions in Malaysia are typically 80 percent from the secondary market and 20 percent from the new properties. Whether the average property prices move up or down depends on what the transaction prices are. In other words, this potential increase if it happens should not be pushing up the average number across the board. Latest average transacted prices are as follows:

How much is this increase in actual mortgage payment per month?

Take a look at the calculation below. If prices move up by 5 percent for a RM500,000 property, then the difference in mortgage payment every month considering everything else remain the same would be RM103. Assuming this buyer still wants to buy the same property but at a slightly higher price, he / she would have to save an extra RM3.50 every day from his expenses. If this property purchase is shared by a couple, then it’s RM1.70 per person. Just stop ordering a drink for one meal and they could afford this slight increase in price.

What if the new property is not selling well?

If the new property is not selling well, chances are the property developer will be willing to spend more on promotion, give more freebies and maybe even throw in a renovation package for free. The actual impact from all these could be that the buyer could now save more but the selling price remains the same. The reason developers does this versus just giving discount directly from the price is also because they wish to keep the prices they launched.

This is a typical strategy everywhere too. A new phone launched at a slightly higher price would give many freebies worth certain amount. Buyer wouid still pay the advertised price but they feel it’s worth it. The brand gets to keep its pricing too so that the next launch, it could also continue this price or push it higher too.

Choices are aplenty and it does not necessarily must be for a new property

When we need a property, we could consider buying a new one or we could consider buying one from the secondary market too. It’s always about choices and what we need. If we need one nearby office and there are no new launches, then buying a secondary unit would be a better choice. If we prefer to buy one which we could already touch, feel and see, then the secondary market will be a better choice too. A new property is usually more aesthetically pleasing, it gives a lot of space for us to unleash our own design philosophy and well, it’s NEW. Haha.

I believe demand and supply will always correct any pricing ups and downs. Just remember not to keep buying when prices are up as if there’s no ceiling. Remember to buy when we found a good unit at a price we want because on a longer term, prices will recover and it will move up higher than its previous high simply because of inflation alone.

Take a look at the below to understand that despite what we say about property prices being bad… it’s just whether the increase was more or was the increase closer to zero.

Happy choosing.

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