This article first appeared in The Edge Financial Daily on October 31, 2018

KUALA LUMPUR: The prices of the new houses are expected to fall by up to 10% as the exemption of the sales and service tax (SST) on construction services and building materials costs kicks in, Finance Minister Lim Guan Eng says.

He said following the SST exemption, the Real Estate and Housing Developers’ Association Malaysia (Rehda) had spoken to its members on the government’s aim to reduce the house prices.

“Previously, under the goods and services tax (GST), 6% was imposed on construction services. But under the SST, we decided not to impose the tax because we wanted to stimulate the property sector and hope it would lead to a decline in house prices,” he told a news conference in Parliament yesterday.

“(As such,) for new houses that are not subject to the SST, we want to see a drop in the prices. Otherwise, we will consider re-imposing the 6% SST [on developers],” he said.

Guan Eng said the reduction in prices can be expected on new houses that have not been built yet.

However, the prices of houses that are currently up for sale may have already been calculated according to the costs during the GST era.

Nevertheless, the minister said, there are plans by the government which will be announced at coming Budget 2019 this Friday.

As the tax exemption applies to all types of construction services, Guan Eng hoped the developers’ savings will be passed on to house buyers.

“The developers should be able to get some cross benefits, which should be given back to residential owners in the form of lower [house] prices.

“When people asked me am I asking too much for a 10% reduction with the waiver of 6% tax, I say, ‘No, we are very reasonable because we are talking about waiver of all construction services, including industrial, residential and commercial’,” he said.

“So the developers who benefit from this (tax exemption), please pass it on to the residential owners,” Guan Eng urged.

“We thank the government for taking note of our request and at the same time, being rakyat-friendly so that we can actually lower the prices of the houses. Ultimately, the beneficiaries are the house buyers,” said Rehda president Datuk Soam Heng Choon.

Soam said the association thanked the government for taking note of its request and at the same time, being rakyat-friendly.

“We can actually lower the prices of the houses. Ultimately, the beneficiaries are the house buyers,” he said.