KUALA LUMPUR (Oct 30): The prices of new houses in Malaysia are expected to fall by up to 10% as the exemption of the sales and service tax (SST) on construction services and building material costs kicks in, Finance Minister Lim Guan Eng says today.

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

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

"(As such,) for new homes that are not subject to the SST, we want to see a drop in 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 constructed yet.

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

Nevertheless, the minister assured that there are plans in pipeline by the government to be announced during the upcoming Budget 2019 this Friday.

As the tax exemption applies to all types of construction services, Guan Eng hoped that the savings in development costs incurred by developers will be passed on to home buyers.

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

"When people ask me am I asking too much for a 10% reduction with the waive 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 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 house prices. Ultimately, the beneficiaries in this are actually the house buyers," said Rehda president Datuk Soam Heng Choon.