GST to have mininal impact on property sector

The goods and services tax (GST) is expected to be a mere blip on the property sector, with a rise of not more than 3% to 4% in terms of property prices, according to property consultancy Rahim & Co executive chairman Tan Sri Abdul Rahim Abdul Rahman.

Abdul Rahim said although the residential sub-segment is GST-exempt, building materials, labour and machinery are not, so developers would have to take this into consideration.

“There will not be more than a 3% to 4% price hike in residential properties, which is still lower than the 6% GST,” he told a press conference after the launch the company’s Property Market Review 2014/15 here yesterday.

However, he said prices, inclusive of the GST component, were expected to gradually increase in the range of 7% to 10%, which is a slower-but-steady growth compared with the double-digit growth of previous years.

This increment is not only due to the GST, but also the market’s supply and demand mechanism, he added.

“Buyers, sellers and developers are likely to adopt a wait and see attitude,” he said.

Abdul Rahim said while the GST would only have a “temporary and limited impact”, the greater issue in the overall property sector remains one of affordability.

He said such issues would persist, which, in turn, would increase the demand for affordable housing.

This is expected to add pressure on the Government to undertake speedier action.

He said the provision of more affordable housing might result in private developers reducing prices in order to compete with social housing being supplied by the Government.

He said Malaysia’s housing affordability had deteriorated to 3.6 times in 2014 from 2009’s 3.4 times.

The ratio compares the price of an average-priced, double-storey house with annual household income. The higher the ratio, the less affordable the house is.

Although a ratio of three to four times is still within the global average in certain parts of the country, this value has increased dramatically over the previous years.

The year 2009 is the commonly used benchmark year because property prices started their hefty increase from the end of that year.

According to studies by Rahim & Co, the least affordable terraced house is in Sabah, with a ratio of 6.2, followed by Penang at 5.9 and Kuala Lumpur at 5.6. - By The Star