PENANG developers will be advised to reduce house prices, following lower construction costs due to the scrapping of the goods and services tax.

Toh Chin Leong, chairman of the Real Estate and Housing Developers’ Association’s (Rehda) Penang chapter, said under the new sales and services tax, developers enjoying cost savings should pass them on to homebuyers.

He said the state Rehda would ask members to reduce overall prices for residential units by 10%.

“We hope we can reduce the overall pricing by 10%. This is what we are going to try with our members,” he told a press conference at the SPICE Convention Centre today.

The 10% decrease would be only for homes costing RM300,000 and above, and not those categorised as affordable, low-cost or low-medium-cost.

For affordable housing, which are partly subsidised by developers, Toh said the state Rehda would try for a price reduction of 6%.

Under the previous GST regime, residential properties were exempt from the tax, and developers could not claim refunds. The additional costs incurred by developers due to the 6% GST were directly passed on to buyers.

Toh said developers were pleased that construction services, and some major raw building materials, like sand, rocks, cement and concrete, were not subject to SST.

“Some finished materials are still taxed, but prices have been reduced. So even though we include it in our cost and pass it on to homebuyers, it is still a much reduced cost.

“We welcome SST. We want to advise members that if they have savings due to SST, we should, by right, pass the savings on to buyers. We should not take advantage.”

He said if developers with ready stock could reduce the prices of their units immediately, it would be a very popular move.

“For those building affordable units, they will likely start (introducing reduced prices) with their new projects. This is because all the costs have been incurred for projects already under way.”

Finance Minister Lim Guan Eng, who was present at the presser, said the reduced pricing should start on September 1 at the earliest – the day SST came into effect – so as to be fair to developers.

He thanked Penang Rehda for responding positively to the government’s policy not to tax construction services, saying it was setting a good example as a responsible corporate body.

“On behalf of the ministry, we welcome Penang Rehda’s announcement. We hope this will be expanded nationwide, so that houses are cheaper.”

On Sunday, Lim told developers to lower house prices now that construction services were not subject to SST. – September 11, 2018.