‘Lower compliance cost impacts property prices’

PETALING JAYA: Property prices in new housing projects are expected to come down by at least five per cent soon once lower compliance costs, coupled with Sales and Services Tax (SST) exemptions, make it cheaper for the construction of homes, developers said.

Real Estate and Housing Developers’ Association Malaysia (Rehda) vice-president Datuk Zaini Yusoff said the SST exemptions on construction materials alone would lead only to two to three per cent drop in property price.

“SST, coupled with compliance cost, will allow us to reduce cost. Many developers will reduce their selling price,” he said at a media briefing on the Property Industry Survey 1H 2018 and Market Outlook 2H2018 & 1H 2019 yesterday.

Compliance cost is when developers are required to build utility infrastructure in their projects, such as electrical substations, sewage plants and telecommunications equipment. This requirement is estimated to account for 20 to 25 per cent of the overall development cost, and is one of the major factors contributing to high housing prices.

On Tuesday, Housing and Local Government Minister Zuraida Kamaruddin said the government was mulling a reduction in compliance cost for affordable housing developments. It had agreed in principle that utility companies should construct their own amenities to reduce the compliance cost.

This is one of the proposals in the new government’s affordable homes policy, which, if approved, would likely take effect next year.

Rehda president Datuk Soam Heng Choon said: “If the government can take the lead in reducing the input cost, we will work along with other stakeholders to reduce the price.”

He said lower compliance cost would have a bigger impact on property price compared with just SST exemptions.

Soam said if every supplier in the construction industry and related sectors reduced their prices, developers would reduce their selling price so that more people could own a home.