REHDA’S Datuk Ng Seing Liong does not think the property sector is coming to a halt any time soon.
“The population doesn’t permit a total slowdown. There is still a huge demand for affordable housing. Statistically, we still need another one million to 1.5 million houses so we have not reached that stage on affordable housing yet,” he says.
But he admits that 2015 is going to be a “challenging year” for the housing industry.
“The economic signs are all there because of the depreciation of the Malaysian ringgit, and low oil prices have affected the economy. That is why we are focused on affordable housing. This is where the people’s needs are.”
The introduction of the Goods and Services Tax (GST) in April too, he believes, will put a dent in the housing industry.
Residential property is exempt from GST but Rehda is asking for affordable housing (RM500,000 and below) to be zero-rated instead so that developers would be able to claim the input tax from suppliers for that segment instead of being asked to absorb it.
The GST will also see basic construction material like cement, bricks and sand being taxed the standard 6% GST rate. Currently, these are not taxed under the existing Sales and Services Tax (SST)
Ng is quick to point out that while some other materials in the industry have a 5% and 10% SST on them, these in fact are “not major building and construction components”.
Steel, bricks, and sand make up 44% of the construction cost and with these being charged GST, the cost is inevitably going to increase, he says.
“We anticipate that the GST will result in a 2.6% increase in house prices,” says Ng, who is chairman of the GST Task Force for Rehda (Real Estate and Housing Developers Association Malaysia).
“We are asking the government to zero rate on major components like cement, sand and bricks. The poor and rich use the same thing.”
On the Customs Department director of GST Datuk Subromaniam Tholasy pointing out that steel prices and raw material prices are coming down in tandem with oil prices, which should result in lower costs for developers, Ng says: “I won’t argue with that. But what will happen if the price of oil hits US$80 or US$100 (a barrel)?”
Recently, the price of Brent crude oil fell drastically below US$50, which is a six-year low. Last June, it was US$110 a barrel. And the price of steel too has been falling.
Ng predicts that the government would be able to make RM10bil from the GST for this year.
“I predict it will be as high as RM20bil next year because people will get more used to it. Singapore, for example, has only a population of six million and already they are collecting S$11.1bil (RM29.8bil). So it’s actually going to be big here.”
He says the GST has often been referred to as a “fairer” and “more equitable” tax.
“But some of the measures are highly prejudicial and unfair.”
If the GST is implemented in its “current form”, he says, it will cause financial hardship, add to the cost of development and increase house prices.
The industry sent a memorandum to the government a few months ago to express these concerns and Ng is still hoping that there will be changes before April.
He points out that there is actually a huge income potential the government can derive from tourists.
“There are 30 million tourists coming to the country each year. If each tourist pays RM1 in GST, that is already RM30mil. And if they pay RM100 in GST per person, how much is that from 30 million tourists? The 6% GST is not cast in stone. Why not charge 10% to 12% for the tourism sector like for the hotels?”
