Mixed views on price of houses after GST
Kuala Lumpur: There are mixed views on whether the price
of houses will go up, come down or remain the same when
the Goods and Services Tax (GST) kicks in on April 1.
Customs Department Director of GST, Datuk Subromaniam
Tholasy, "presumes house prices may even fall" while
Real Estate and Housing Developers Association (Rehda)
Chairman Datuk Ng Seing Liong believes it will rise.
And IFCA MSC Bhd's Chief Financial Officer Daniel Chow
thinks the GST will be a "non-event" in terms of selling
price increase.
Subromaniam said the price of
steel was "significantly down" and the price of other
raw material were coming down slowly in tandem with
falling oil prices.
"If we consider other market
conditions, I presume house prices may even fall after
taking into account the GST.
Property developers should pass on cost savings to house
buyers," he said in an interview. He said land was the
"biggest cost component" and there was no GST imposed on
residential land. |
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Residential houses and land are exempt from the GST but
construction material such as steel, cement, sand,
tiles, etc, are not and would be subject to the 6pc GST.
Currently, these construction materials fall under a
"First Schedule Goods" and do not incur any Sales and
Services Tax (SST). The GST replaces the SST in April.
Subromaniam agreed that under the GST, the base would be
broader with more input such as construction materials
being taxed. Whether this would lead to higher costs, he
said, the fact was that many items were already being
taxed under the SST, which was a less efficient regime
and could actually result in bigger tax costs.
"We have facts to show that the hidden SST is much more
than the actual rate," he added. Subromaniam said their
estimate was that with the GST, the actual increase – if
all factors remain the same – would be between 0.5pc and
2pc maximum.
"It is so minimal if any.
Developers should absorb it because their (profit)
margin is typically between 20pc and 30pc," he said. Ng,
however, said developers would not absorb the extra cost
and would pass this on to buyers. He said based on
Rehda's calculations, the GST would result in a 2.6pc
increase in house prices.
Calling for major
components such as cement, concrete, bricks and sand to
be zero rated, he estimated that they made up 44pc of
the cost of construction.
"If these can be
zero-rated, the impact will not be as great," he said.
He also urged the Government to zero-rate residential
houses instead of exempt rate.
(The customer does not pay a GST for zero-rate or
GST-exempt products. But the difference is that with
zero-rated, the developer gets to claim back the input
tax paid to the supplier but with the exempt rate he
cannot which results in a higher cost for him.)
IFCA-MSC's Chow did not foresee any increase in the
selling price from April to December because he believed
there would be an oversupply of residential properties
by the end of the year.
He said many had bought
properties two to three years ago paying only the
minimum 5pc as downpayment under the
Developer-Interest-Bearing-Scheme (which was no longer
in effect) with the intention of selling on completion.
"Most are opportunists and property flippers who bought
a few units and have no holding power to pay the
instalment once the property is completed.
"Those properties will be completed end of 2015 and 2016
and now the buyers are going to have to come up with the
money to pay."
(IFCA-MSC Bhd is one of the dominant software solution
providers for the property market.) Chow estimated the
GST tax implication to be 2.1pc to 2.2pc of the cost of
housing which he described as "very minimal".
"We are talking about a huge pressure due to the
oversupply of residential property which will cause
property developers to have a big question mark over
whether they have the ability to push prices up by even
a single per cent."
Source:
Daily Express
, dated
02/02/2015 |