Reduction in home prices must be visible

The govt might reconsider SST exemption if house developers fail to cut prices, says minister

By FARA AISYAH / Pic By MUHD AMIN NAHARUL

The reduction in house prices must be reflected in the actual numbers and not in the form of freebies or additional features, aligned with the government’s decision to exempt construction materials from the Sales and Services Tax (SST).

PPC International Sdn Bhd MD Datuk Siders Sittampalam said there is a definite moderation in house prices following the SST exemption, but the government and buyers would like to see a visible reduction.

“I think it makes sense that house prices will go lower marginally and it’s applicable in Malaysia in general. However, what is more important is that there must be a visible reduction in terms of the price, not in the form of freebies.

“It is going to be difficult to reduce the cost of land. As such, the alternative is to reduce the construction cost,” he told The Malaysian Reserve.

Siders also said one of the ways to reduce the construction cost is by using the Integrated Building System.

However, it is still not viable in Malaysia with the absence of economy of scale in the country.

He added that the government should also relook at the compliance cost the developers have to pay, which varies depending on states.

Meanwhile, VPC Alliance (KL) Sdn Bhd MD James Wong said there is not much leeway for developers to make substantial reduction in house prices if the tax exemption is solely on the basic construction materials and services.

“Just waiving some basic building materials from SST will not substantially reduce the house prices, but only marginally…and provided that the developers are willing to pass on their savings to the buyers,” he said.

Knight Frank Malaysia Sdn Bhd MD Sarkunan Subramaniam concurred that developers are able to reduce the house prices on SST exemption, if their profit margins are covered, and it would be marginal.

Yesterday, Finance Minister Lim Guan Eng said the government might reconsider the SST exemption on construction materials and services if developers fail to reduce house prices. He said the government is now waiting for the industry players to reduce house prices.

In the meantime, Real Estate and Housing Developers’ Association (Rehda) president Datuk Soam Heng Choon was reported as saying the association had acknowledged the SST exemption on the construction materials and services would provide 6% of direct savings to consumers.

He also said Rehda is currently undertaking a study on the possibility of reducing house prices