City & Country: What are the implications of GST?

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Property investors began to adopt a wait-and-see stance as the date for implementing the Goods and Services Tax (GST) drew close. And now that the new law has taken effect, things are unlikely to change in the short term.

“In the final run-up to the implementation of GST on April 1, purchasers took a wait-and-see attitude, wanting to better understand the impact of GST on their spending power and what they can invest in,” says Sarena Cheah, managing director of the property development division, Malaysia/Singapore, at Sunway Bhd.

She believes it is important to step up efforts to help consumers grasp the implications of GST for property purchases.

“There is a variety of property products available in the market and there are different GST treatments between residential and commercial properties. As a developer, we too have to take time and effort to understand the impact of GST on our supply chain, our products and the overall cost of doing business,” she says.

Based on what she has seen so far this year, Cheah believes the property market will remain cautious as it resolves all the teething problems.

“We do not expect prices to inflate or increase dramatically with GST’s implementation. Definitely, purchasers will need time to adjust and reassess their purchasing power in view of the new tax framework,” she adds.

For Gerard Kho, group CEO and president of Reapfield Academy Sdn Bhd, the impact on investment returns on residential and commercial properties today and in the future needs to be understood.

“For future investment returns, we have to consider how likely property prices will continue to rise, currency fluctuations, the capacity of individuals to buy and so forth.”

Kho says there is a need to comprehend consumers’ purchasing patterns today and what percentage of transactions will fall into categories affected by GST.

“For example, commercial property is clear but residential less so because the input is not zero-rated,” he adds.

Real Estate and Housing Developers’ Association deputy president Datuk Soam Heng Choon agrees that many issues need to be cleared up about GST.

“For example, how do purchasers know if bank loans for commercial properties are inclusive of GST? Will the loan be dispensed before the purchaser buys the property and what sort of rental income can he expect now with GST in place?” he asks.

“There are also guidelines that need to be clarified. If I own two properties, do I need to register? For purchasers, there should be a guideline on what they should do when buying properties,” says Soam,  who is also CEO and managing director of IJM Corp Bhd.

Cheah, Kho and Soam will be discussing these issues at the panel discussion, “Post-GST: The real impact on buyers”, at The Edge Investment Forum on Real Estate 2015, to be held at One World Hotel, First Avenue in Bandar Utama City Centre on April 25. The theme this year is “Investing in Uncertain Times: Make Better Decisions”.

 

This article first appeared in City & Country, The Edge Malaysia Weekly, on April 20-26, 2015