Property buyers expected to benefit from SST

The Goods and Services Tax (GST) has been zerorised since June 1 this year. This means consumers who were once charged a 6% tax, have been charged absolutely nothing in the past few months.

This tax holiday will be in place for only a little while longer since the new or rather re-introduced Sales and Services Tax (SST) will be in place come Sept 1.

It’s no surprise then that car sales have hit the roof.

In fact, just recently, it was reported that all cars previously with zero GST had been sold off with new stocks expected once the SST is implemented. As for how much this particular tax will affect car prices, no one has a firm idea yet.

Cars aside, it was recently reported in local daily The Star, that the SST may benefit potential property buyers.

In the news report, president of the Penang Electrical Merchants Association, Khaw Tatt Siew said the SST may actually benefit house buyers compared to the GST.

This is because the 10% SST is a one-off charge which only applies to the manufacturer, supplier or contractor. However, the GST was applied at all stages, from raw materials to the manufacturer, supplier and contractor.

He said, “An example is the price of a RM100,000 property, which would cost RM106,000 with the addition of GST for buyers, but the 10% SST does not apply to the RM100,000 price tag.”

Thus Khaw said the SST was unlikely to affect the end-user much. He added, “The developers will possibly absorb the increase to boost their sales in view of the slow property market.”

On July 16, Finance Minister Lim Guan Eng announced that the provision of services would be taxed at 6% while the sales of goods would incur a 10% tax under the SST.

What is being implied here by Khaw is that many property developers will not pass the SST to end buyers in order not to scare them away with higher prices.

This is because the effect to the property price is likely to be much lower than 10% anyway. With current market sentiments, competition is tight. Potential buyers do have more considerations.

As for whether it’s GST or SST or TTT (tax, tax, tax), it matters not. What’s most important is whether the project we buy has the potential to give us higher returns.

As for concerns that all developers in all locations are having a tough time, think again. Just recently, a project launched in Johor, saw a long queue of potential buyers waiting to get their hands on a unit.

This goes against what everyone has been saying about this particular state – that there’s nothing happening there.

At the end of the day, all we need to remember is to invest only in places we love, wherever those may be.

This article first appeared in kopiandproperty.com

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.