Real Estate and Housing Developers' Association of Malaysia (Rehda) says the GST is likely to raise property prices.

Home prices will rise by about 2.6% once the goods and services tax (GST) comes into play, said the Real Estate and Housing Developers’ Association Malaysia (Rehda).

The chairman of the association’s task force on accounting and taxation, Datuk Ng Seing Liong, said that the calculation was based on its consultations with industry experts and member developers.

Rehda’s 2.6% estimate differs from that of the Customs Department, which expects the GST to have an impact of between 0.5% and 2% on house prices, assuming there’s no change in supply and demand conditions.

Ng said the association was in full support of the GST and concurred with Customs GST director Datuk Subromaniam Tholasy, who had said that land did not incur the 6% GST rate.

However, he said land was by no means the largest cost component in property development.

“As our calculation clearly spells out, the construction cost, which constitutes 46% of the total development, is not only the largest component but also the component which will attract the GST of 6%,” he said in a letter to StarBiz.

He said the GST on this component would inevitably lead to an increase in house prices.

Appending calculations for a housing unit originally priced at RM400,000, Ng said the price post-GST would be around RM410,560.

Under the 46% construction component, costs were broken down into non-service taxable and service taxable segments, representing 44%, or RM176,000, and 2%, or RM8,000, respectively.

Under the non-service taxable segment comes items such as cement/concrete, steel, bricks and sand, while the service taxable segment includes tiles and fittings/sanitary. Under the existing sales and service tax, no tax is imposed on the non-service taxable category, while the service taxable category has a tax of up to 10% imposed on it.

Post-GST, Rehda’s calculations showed that the non-service taxable cost had gone up to RM186,560, while the service taxable cost remained at RM8,000.

It maintained the same cost estimates for other items, including land (15% or RM60,000), infrastructure and pre-development works (10% or RM40,000), professional fees and marketing costs (6% or RM24,000), finance costs (6% or RM24,000) and profit (17% or RM68,000).

Ng said Rehda also disagreed with Subromaniam, who had said that developers could easily absorb cost increases as their margins were around 30%.

He said it was currently impossible for developers to earn up to a 30% profit, as most development costs were on the rise, along with various capital contributions and charges imposed on developers.

“On average, as tabulated in the calculation, developers, most of which are public-listed companies, are only making around 17% at best,” he said.

However, Ng said it was still too early to determine the actual house price increases post-GST, as Rehda was still in discussions with the Government and there appeared to be many more issues to be ironed out.

Source: StarProperty.my

After a more than four-year delay, the third and final phase of the Tun Dr Lim Chong Eu Expressway will finally be opened to the public on Nov 1.

Jelutong MP Jeff Ooi said construction work on the project, known as the Jalan Tan Sri Teh Ewe Lim Extension, was already 95% complete.

“The 800m road costing RM70mil is borne by the developer, IJM. It will be open to traffic from midnight onwards on Nov 1.

Initially, it was scheduled to be opened in August, but there were several factors which delayed it.

“Firstly, it was Indah Water Konsortium in relocating the sewage pipes. Then the Mutiara Idaman apartment residents insisted on having an entrance and exit next to the road, despite it being objected by the Public Works Department.

“We settled the issue with the residents by retaining the entrance and exit. The developer will also install safety measures such as guard rails,” he told reporters before a walkabout to inspect the progress along the road in George Town yesterday.

Ooi said the large amount of utility lines at the squatter area along the road’s intersection with Jalan Jelutong also caused the project to be delayed.

“Work could only be carried out at night to move the utility lines due to busy Jalan Jelutong.”

He said the state government would also announce a new name for the road.

The extension is expected to help alleviate traffic congestion in Jalan Perak and Jalan Jelutong.

Source: StarProperty.my

An upcoming mixed development by Koperasi Tunas Muda Sungai Ara Bhd., along Jalan Sultan Azlan Shah in Bayan Lepas, Penang. This development is strategically located next to Ideal Vision Park, along with the approved Heng Ee primary and secondary school.

The development consists of the following:

• 36 units of 2-storey bungalow houses
• 66 units of 2-storey semi-detached houses
• 1 block of 17-storey condominium (480 units) with 68 units of 3-storey shop offices
• 2 blocks of 20-storey condominium (1665 units)
• 1 block of 20-storey low cost apartment (675 units)
• 59 units of 3 & 4-storey shop offices
• 19 units of light industrial

The launch date is yet to be fixed. I think this project is potentially a jointly development with Ideal Property Group.

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by Charles Tan

Today, I had lunch with a very capable young friend. She is many years younger than me but she already owns her own business in partnership with a very prominent personality here in Malaysia. A rich one. Over lunch, we were talking about her first property and I asked why is she not thinking of buying a second one. She said, she prefers landed but these days, landed are either too expensive or too far away. She does not want to travel a long time every time just to reach her destination on time. Then, I asked her why she prefers landed over her current apartment. As usual, the three major reasons were presented.

1) Bigger

2) More Land space

3) Standing on actual land.

Bigger. This was true long time ago when landed properties were the norm and high rises were all flats or apartments. Then, many years ago, the condos started. Most of the time, it was those 800 – 1,000 sf ones. These units are really smaller than the typical terrace houses then. Today, there are many more bigger units, from 1,500sf all the way to 2,500 sf. A typical 20 x 70 double storey terrace house would have a built up of just 1,400sf – 1,500sf which meant that just thinking about size alone, its no longer true that landed is bigger. Condos are actually getting bigger, more of them. Landed are getting smaller, most of them or they now give you more storeys, townhouses or superlinks etc.

More land space. I am not sure how you want to compare the tiny plot of ‘grass covered land’ within your 20 x 70 terrace house with a huge park within the modern condominiums of today. Some even have a rooftop garden, complete with an infinity swimming pool. Some allows you to do BBQ on the rooftop while you chit-chat with a huge group of friends. Yes, it is true, you do not swim everyday and you also do not ask your friends to drop by everyday. If you insist that hey, the condo’s BIG plot of land is SHARED while I own my own piece of land, then yeah sure. You win. Do remember, nothing stops me from using the whole big plot of land within the condo. I am not sure if you can use your neighbour’s plot of land.

Standing on actual land. Actually, this is true. If you own a landed property, you stand on the ground itself. Meanwhile, if you are in a condo, sometimes even the ground floor may not be standing on the ground because the car parks might be below. Tell me however, is standing on the actual ground really more important that having a place to stand? As usual, if your answer is that hey, I am prepared to pay a huge premium so that I can stand on my own piece of land and not standing on another person’s rooftop, ok you win.

The purpose of this article is not to tell you to buy condo. It is to tell you that if you like landed, just say you like landed. Don’t give the three reasons above. You can even say I buy landed to show people that I am richer. That’s a pretty good reason too. Or you can say, my parents love only landed property. In fact there are lots of other reasons which you can attribute to just the landed ones and I would agree. As for capital appreciation reason, that’s another story altogether. Happy Investing, whether it’s condo or landed.

>> This opinion article comes courtesy of Charles, the founder of kopiandproperty.com. He is popular for sharing his thought on property investment mostly based on his own 11 years experience as well as from all the readings and conversations with property gurus in the industry. (Source)

The famous opening line in A Tale of Two Cities by Charles Dickens presents to us the tension and opposing attitudes borne between the inhabitants of the two cities. This disparity reflects our perception of “Strata Living” – a form of progressive yet regulated community living made possible by its inhabitants within its gated guarded boundary.

Strata is a legal concept that has been around officially for almost three decades in Peninsular Malaysia since the introduction of the Strata Title Act in the 80s and has never cease to expand its roots till to-date. As a working concept, it stretches further back to history under the subsidiary title under the National Land Code. Official statistics from the Housing Ministry in late-2012 shows that one out of four stays in a strata development in Peninsular Malaysia. In response to such pressured demands, the yet to be enforced Strata Title (Amendment) Act 2013 (STAA) and Strata Management Act 2013 were passed in parliament to better serve such needs.

Strata living often relates to the affordability and buying power. The common presumption is the less fortunate gets a piece of “air space” made possible by construction technology. Nonetheless, parallel to the scenario in the Dickens fiction, there may exist a twin (a Siamese genre for this instance) with overlapping similarities while simultaneously distinguishable by the underlying motivation akin to the two sides of the same coin.

The reality of strata living has come about due to the scarcity of land in areas where infrastructures are concentrated and increasing land cost. Over the years, the Government has been trying to improve house ownership through the introduction of affordable houses, with the most recent example being PR1MA. The basis of strata living is self-management and self-sufficiency.

In other words, once developers have done their part, they wipe their hands clean of any further obligations save for any latent defects or negligence. This form of strata living is seen as affordable. The negative part is you have small plots of land with residential units densely packed together; a suffocating and uncomfortable setting to raise a family. So is the tale of one city – a grey and morbidly dense city.

Yet, by a flip of the same coin, the concept of strata living need not be restrictive. It is not confined to vertical multi-level structures but also horizontal living – gated, guarded and landed communities. This type of strata living is naturally more expensive and caters to the higher income group – lavish strata living with lesser restraint on space, practically the area of an entire building with landscaping. Imagine the typical Western upper-class neighbourhood – the lack of fencing between the houses within the gated boundary creates opportunities for connection and interaction. Children are able to roam freely and safely within the gated boundary.

With the soon to be effective STAA 2013, the exclusivity in strata living lifestyle is expected to increase. By virtue of the Act, the management corporation (MC) has the discretion to designate limited common property areas for the exclusive enjoyment of a particular group of parcel owners. In other words, there will be more diversity in strata living moving forward.

With such an enactment, one can only envision the inevitable formation of the MC that is akin to that of a resident’s committee in Singapore. Moving-in resident, owner or tenant, is required to undergo MC screening, which resembles a school admission interview and will be categorised based on social status, income levels etc.

Moving up a notch, one can envisage the setting up of a property management fund contributed by the owners and managed by professional fund managers to ensure a handsome return to the MC for long-term sustainability in maintaining the desired lifestyle of the strata community. Simultaneously, without much restraint financially, outsourcing such maintenance work to a professional management group is made possible.

Such is the tale of another city – a desired city of hopes and possibilities. There are both strata projects, but so vastly different.

From the above, one city simply does not reflect the other. While the idea of chipping into strata living is involuntary at large, there are pros in strata living that warrant the higher income group to choose and favour strata living.

Bundling with the improvement of the strata regime that caters to the wants of this higher income group, strata living is the way forward for Malaysia in our path to a developed nation.

Chris Tan is the founder and managing partner of Chur Associates

Source: StarProperty.my