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Property transactions are expected to decline by about 10%, with house prices remaining flattish or rising slightly by 3% to 5% upon the implementation of the goods and services tax (GST) on building materials, research house JF Apex Research said.
The imposition of the 6% GST will start on April 1 this year.
It anticipates the property market to moderate across the board, especially in the Klang Valley, Penang and Johor for all types of residential property, due to the challenging economic outlook, stringent mortgage approval, the Government’s cooling measures and the wait-and-see approach by buyers upon the implementation of the GST. Property market transactions may surge in the run up to the start of Goods and Services Tax on April 1, a real estate agent Michael Geh said.
The Fiabci Malaysia vice-president said those who can afford it will be rushing to buy homes in the three months before GST.
“The GST applies equally on both newly completed and second-hand older properties so buyers who are able to will be in a rush to buy properties to avoid paying the extra six per cent,” he said in a press conference. Geh said after the GST, some buyers may wait to gauge the situation before making a commitment.
“There will still be transactions after April as people still need to buy their first homes, to upgrade or to downgrade from their current homes, but it will be slower compared to the first three months of this year,” he said.
JF Apex Securities anticipates physical property transaction to dip in 2015 whilst property prices continue to rise with slower pace.
“Thus, we expect the property transaction to decline about 10 per cent, whilst house price to be flattish or slightly trend higher by three to five per cent upon implementation of GST on building material,” it said.
The research arm noted that empirical evidence suggests that developers have experienced slowdown in their new sales since the third quarter of 2014 (3Q14) with no signs of pre-GST rush and relaxation of tightening lending during year end (loan rejection rate as high as 30-40 per cent). Several developers have lined up aggressive launches to take advantage of pre-GST buying to lock in as much sales as possible before potential post-GST blues set in. Furthermore, it noted that developers’ operating margins may be eroded in considering of some provision of GST incurred for their construction works/marketing expenses/building materials and selling of commercial properties which are subject to GST.
The overall price increase will be less in the residential sub-segment, but more in the commercial sub-segment, PA International Property Consultants head of agency Wendy Tong says.
Although residential properties are zero-rated for GST, materials and services supplied in the development process will be subject to GST and these costs are likely to be passed on to home buyers.
“Pricing is determined by demand and we expect the market to be impacted for at least the first two quarters when the GST becomes effective,” Tong says.
Meanwhile, certified financial planner and property guru, Milan Doshi, advised investors and home buyers to be knowledgeable before purchasing any property.
“You should know the location of property you intend to buy and re-look at the types of property, whether it is secondary property or new.
“Most importantly, you need to understand the process and procedures when buying, including the legal and finance aspects of it,” Milan said.
