PETALING JAYA: A developers group has cautioned that house prices are unlikely to go down even after the government’s announcement that certain building materials will be exempted from the sales and services tax (SST).
The Real Estate and Housing Developers Association (Rehda) said cheaper construction costs would not automatically result in lower house prices.
“Of course, some materials are cheaper under the SST than they were under the goods and services tax (GST),” its immediate past chairman Jerry Chan told FMT.
“But building materials are only part of the cost. That alone cannot ensure that prices will come down significantly.”
Chan said developers had other issues to consider, including labour, property market conditions, compliance costs and the cost of land, all of which would have a significant impact on house prices.
“Although the government says SST exemption on certain building materials will reduce house prices, I do not see that happening.
“The benefits of this are not significant enough to force prices to come down. They will remain the same,” he said to FMT.
Putrajaya announced last month that construction materials such as cement, sand and iron, along with construction services would be exempted from SST.
It voiced hope that this would reduce construction costs and ease pressure on the prices of houses, as well as industrial and commercial buildings.
Housing and Local Government Minister Zuraida Kamaruddin said she expected the cost of building materials to go down by 10% following the implementation of the SST on Sept 1.
She said 70% of house prices, including building materials and cost, could be reduced following the abolition of GST.
Her deputy minister Raja Kamarul Bahrin Shah Raja Ahmad also gave the assurance that house prices would be reduced by at least 10% after building materials were exempted from tax.
The National House Buyers Association meanwhile expected a marginal reduction in construction costs for future developments.
However, its secretary-general Chang Kim Loong warned that it remained to be seen whether developers would transfer such cost savings to consumers by lowering property prices, expressing concern that errant developers might take advantage of the situation by increasing their profit margin.