When the Malaysian government rolled out the Goods & Services Tax (GST) on 1 April 2015, many people were unsure as to how it will fully impact the country’s property market, especially the housing sector.
So buckle up and find out how you gently break down the information to your buyers and investors after a year:
- The Effects of the New Tax Regime
With the GST in place, a rate of 6% is now imposed for all building materials like bricks, cement and floor tiles, as well as input services provided by contractors and engineers, which led to a higher cost for home builders.
- The Exemption of Residential Properties but Not All Residential Titles
Residential properties fall under the Exempt-Rated Goods category and are not subjected to GST, meaning that developers are forced to either accept a lower profit margin by absorbing a higher cost or raise prices to offset these costs.
Expensive land costs include conversion charges, premium cost and development charges, stamp duty and quit rent, as well as a shortage of land in urban areas like Penang and Klang Valley are all plagued by the GST.
- Commercial and Industrial Properties are the Most Affected
The GST has a greater impact on commercial and industrial properties as they fall under the Standard-Rated Goods category. Buyers are affected by the high costs plus GST for all commercial or industrial properties before they are completed, resulting in a rental yield decrease which would discourage potential tenants as well.
As the property sector is expected to suffer from gradual increases in cost, people may end up rethinking their plans of purchasing or investment. It’s good to know how the Goods & Services Tax (GST) affects the property market so you can inform your buyers and investors as well.
