SST exemption may not be permanent, IF…

I was at REHDA Institute’s CEO Series 2018 yesterday and the guest of honour was our Finance Minister Lim Guan Eng. After officiating the event, he stayed back for a press conference. One major issue got everyone talking right after his press conference. He warned developers that they need to reduce house prices on a national level. This was because the government has gave exemptions forsales and service tax (SST) on construction services. Else, he said, “If this does not happen, then the government may have to rethink the exemption given and find new ways to make houses affordable, especially to first-time buyers.” He said that the government has exempted the  and thus the prices should be reduced. Otherwise, the SST will be reimposed if developers do not pass the savings to buyers. He added that he hopes to see some positive outcome of the exemption before Budget 2019 on Nov 2.
According to Lim, the SST exemption was aimed at reducing cost for developers in the hope that those savings would be passed on to buyers. Lim’s call is something which was announced by REHDA Penang just 10 days ago. It’s chairman Datuk Toh Chin Leong had urged developers to reduce prices as a result of the SST exemption. He had said the association would talk to members about reducing prices for all new developments, if not immediately. According to an article in theedgemarkets.com our statistics Department data showed that Malaysian workers on average received a salary of only 35% of gross domestic product in 2016. This includes wages, bonuses and other income. Workers in China, Singapore and the United States enjoyed a higher share of 57%, 42% and 43%, respectively. These are benchmarks the new government is targeting, but it will take time.
Lim also said that the government is also working with Bank Negara to reassess its lending guidelines, while at the same time remaining sensitive to concerns over rising household debt. He added, “Debts backed by a decent house priced right should make home-related debt sustainable.” The article in Edgemarkets.com here.  Personally, I think it’s important to understand that SST is at most a few percent of the home prices and if the developers really do cut their prices at 6 percent, this is NOT solely because of SST. It’s even more important to understand IF the property we are buying is overvalued versus an additional 6 percent reduction. That would determine if the property purchase is a sound one. Happy understanding and buying Greater KL properties yeah.
written on 25 Sept 2018
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