GST removal seen as boon for property market

PETALING JAYA: The removal of the Goods and Services Tax (GST) will boost sentiments in the property sector, particularly the commercial sub-sector.
Sunway University Business School professor of economics Dr Yeah Kim Leng said there will be some downward pressure in terms of pricing and consumers will benefit from this.
"Now is a good time to spur demand, a good time to buy and a good time for developers to market their products. Property developers could lower prices or promote packages to push sales during this period," he told SunBiz.
However, the long-term impact of the GST removal and the return of the Sales and Services Tax (SST) would depend on the finalised SST list as some items, including construction materials, could be exempted.
Meanwhile, Malaysian Institute of Estate Agents past president Siva Shanker said the removal of GST would spur the property market, particularly the commercial sub-sector.
According to him, many individual sellers of commercial units were absorbing GST to spur sales but with GST at zero rate from June 1, both supply and demand of commercial properties would increase, as there would be greater incentive to invest.
Overall, the property market is expected to show improvement from July onwards and perform better in the second half of 2018. The property market is expected to perform better this year compared with 2017, as the "feel good" factor from the general election drives private consumption.
"That euphoria will translate into sales immediately for the retail sector; private consumption will rise. When people feel good, they spend ... the feel good factor will continue as this government continues to do the right things, which I think they are. Malaysians will see changes that they never expected to see in their whole life and this will make them spend even more," said Siva.
He said the property market will be positive in terms of volume and value this year compared with 2017, albeit at a small growth of 2-4%, before raking in "fantastic growth" in 2019 and 2020.
"For 2018, perception and euphoria will drive the market and domestic economy. I think the property market will turn the U-curve this year and I reiterate my opinion that 2021 will be the next property high," he added.
Although developers are expected to be more positive in terms of new launches this year, they will also be more focused on the types of properties that have demand and avoid areas with low demand or overhang.
On the overhang, Siva said it would take a year or two for these units to be absorbed as they were built speculatively and developers would have to consider cutting prices or use marketing methods that would attract buyers.
Yeah, meanwhile, said GST, which is a broader and more efficient tax system, could make a comeback when the nation is more ready in the future.
"I would not rule out the return of GST. If we can raise the income levels of B40 and M40, GST could make a comeback next time when we are more ready … GST is stable and flexible. It can be adjusted to suit the economic situation. For example if the economy is doing well, the GST rate can be raised. SST also can be adjusted but the tax base is not so broad," he said.
Yeah said the most important thing for the government to do is to focus on spending efficiency and raising income levels.