Everyone dreams to have his/her own home! But in this competitive housing market only some can fulfil their dream because it costs money! One needs to think critically about so many things when wants to buy a home. It is very important to have knowledge about this housing market to take the deter decision when buying the house.
Malaysians government is going to implement Goods & Service Tax (GST) from April 2015. The Prime Minister of Malaysia said that the GST will not gadget on the residential properties. But Malaysians are very much apprehension about the general price of the property. It is for sure that the GST will affect the home price because it is related with first & second schedule goods which are used for the construction of the home.
Of course the GST will have short-term & long-term effect for the price of the home in Malaysia in future. Through this article, we will try to give you the possible scenario for the future prices of the property & home in Malaysia so that you can take the best decision, if you want to buy a home!
Besides, understanding about the GST and Sales Tax system will help to visualise the future affect of the property prices because GST is going to oust the Sales Tax from April 2015 in Malaysia. The resemblances between Tax scheme & GST will be helpful for the understanding.
Similarities between Tax scheme & GST!
If we want to know about the GST system the first we need to find the similarities between the Tax scheme and the GST system on the residential property. In both cases the customer does not need to pay the taxes when the customer wants to buy the residential property or a home because the tax is excluded.
According to the GST system the home or residential property is under the “Exempt Rated” category of properties and this Exempt Rated category is excluded from all kinds of charges. But it is noted that under the GST system “Standard Rated” category of properties are not excluded from charge. All kinds of commercial property is treated as the Standard Rated category of goods and consumer needs to pay the charge for the commercial properties.
But if we look other side of the coin then developers of the “Exempt Rated” category of properties will normally invite tax for the final products because the developers need to pay the tax to purchase the inputs & other materials under the GST system and present Sales Tax scheme. Interestingly, this is the root where the price will defer between the GST and Sales Tax scheme because the developers need to pay the tax in dissimilar rates for the inputs & other supplies.
Alterations between Tax scheme & GST!
According to the new GST system the inputs & materials along with the services such as engineers or contractors need to pay 6% tax. So this 6% added tax will obviously increase the production cost for the home or residential properties for the developers and the overall cost will be increased. Besides, under the Sales Tax Act of 1972, the primary construction materials such as cement, tiles or bricks are the First Schedule Goods and they are excluded from the Sales Tax. However, under this act, Second Secluded Goods for the construction of the residential properties are included only 5% Sales Tax.
So the developers paid only 5% Sales Tax under the Sales Tax Act. So, if we critically examine the new GST system then we will find that the price will go up because the developers need to pay the 6% tax for the Exempt Rated inputs & materials which will be included with the final price of the home or residential properties by the developers and the consumers need to pay the price from their pockets. Here the consumers is the victim, not the developer of the home or residential property.
Some consumers may think that they need not need to pay the GST during buying a house or residential property. But truth is the developer will add the additional tax of the GST with the final retail price of the home or residential properties.
The effect of GST!
It is clear that the price of the home or residential properties will increase 5 to 10 percent because of the added 6% Tax under GST. Besides, the final retail price for the Commercial Properties will increase because they are under the Standard Rated. However the home or residential property price will be less than the commercial property under the GST but the retail price will go up certainly.
Moreover, this increased price will affect the price of the secondary house or residential property market and simply the retail price will go up! Though according to the government the GST will not be implemented on the residential properties but reality is really will be different because of the GST which will be implemented from the first April 2015 at the 6% rate on almost all construction inputs or materials.
If you are planning to buy a house and thinking about the GST effect then just think about the theme of the article, then you will find the following key features of the residential property market trend only for the GST.
- The Property price will increase because of the new GST system in Malaysia
- The developers will add the GST tax with the final retail price of the home or property price
- The Commercial property price will be higher than the home or residential property price under the GST system
- The secondary residential property price will be effected for the new GST system and the price will also go up
These factors will help you to make the right decision, if you want to buy a home or any residential property for you because now you know about the present trend of the residential property market! So think critically and make your choice!