Customs: No reason for house price hike

PUTRAJAYA: Property developers have no reason to raise prices of houses from April 1 because they can claim back the costs incurred through taxable supplies under the Goods and Services Tax (GST).

Raizam Mustapha, Customs Department’s senior assistant director (property, construction and professionals), said developers could claim Input Tax Credit (ITC) for commercial properties and also for the GST incurred for infrastructural and recreational works of mixed development projects.

“All raw materials, some of which were not taxed under the Sales and Services Tax (SST), will now be taxable.

“Under the SST, materials such as floor tiles, pipes, fittings and paint were taxed between 5% and 10%, and these were not claimable from the Government.

“When the GST comes into effect, a 6% tax rate will be imposed on the materials but the ability to claim under the ITC means developers will see some savings,” she told a media briefing yesterday.

Among the items that would be newly taxed under the GST are cement, bricks and steel, in addition to construction work by contractors. 

The Customs Department had announced that there would only be an impact of between 0.5% and 2% on housing prices, if there were no changes in supply and demand. 

Raizam said the ITC was expected to serve as the stabilising factor to ensure that property prices in the country did not rise drastically.

On maintenance fees for stratified residential properties, Raizam said that as they were exempted from the GST, changes in fees would be decided by the building management committees.

“If they get services from companies which do not have to register for the GST, these firms cannot impose 6% charges on management committees,” she said.

Deputy Finance Minister Datuk Chua Tee Yong, who was at the briefing, later noted that property prices, especially in the cities, had been rising at a rate of over 6% yearly.

“The number of property launches have declined and the cost of building materials has also stabilised. This will help maintain the market price,” he said.

Asked to comment on those who had rushed to buy properties before the GST for fear of high prices, Chua said those giving such advice were not accurate.

“Look at the past few years, even without the GST, property prices have been on the rise. External factors, like state government policies, have also had an influence on the market prices of properties,” he added.

Chua said that ultimately, it was up to the developers to determine if the increased costs under the GST, estimated at between 1% and 2%, would lead to a price hike.

“Some developers may determine they can make a profit and impose a higher price on the properties, while some may believe they cannot sell as many and decide to absorb the costs,” he said. - The Star