Speaking to FMT, Ernest Cheong said though the impending sales and services tax (SST) was unlikely to affect prices, sales of property, except for those considered affordable, would be sluggish.
“The SST is unlikely to affect property prices because manufacturers of construction materials and developers are likely to absorb the extra costs, given that property sales is slow.
“Developers thinking of taking advantage of the SST will only be hurting themselves, so I believe the impact will be negligible.”
Cheong said he believed property sales would continue to be sluggish because many people simply can’t afford to buy homes.
He was commenting on a report citing Institute for Democracy and Economic Affairs (IDEAS) senior fellow Carmelo Ferlito’s recent prediction that the property bubble, which has been building up over the past few years, will burst soon.
Cheong said he believed the bubble burst would only be triggered when banks could no longer afford to sustain loans taken by developers and defaulters, and when developers could not afford to hold to existing prices and inventory.
“Then it is likely that there will be panic selling by developers and panic foreclosures by banks.
“This is out of the government’s control and they shouldn’t interfere, let market forces dictate prices.”
Meanwhile, Melaka-based developer, Anthony Adam Cho said he didn’t feel the bubble would burst in the near future unless an external crisis affected domestic sentiments.
He said with the country’s growth expected at around 5.3% this year and despite the initial market contraction and capital flight after the May 9 polls, the situation wasn’t as bad as it was made out to be.
He said the demand for homes would always be there, with the country’s population growing 3 to 4% annually.
“Roughly, the country needs 25,000 new homes annually to meet the demand. All these years, we have only managed to produce about 60% every year, so we have pent-up demand.
“When the economy of the country grows, there will be a rush to buy whatever is available in the country and this inevitably pushes prices of land to rise, thereby pushing up the prices of houses.”
Cho predicts a temporary slow down in sales of houses for 2018 and 2019, but this should improve once the economy grows, given the new government’s commitment to reduce corruption and ensure a more friendly business environment.
Ferlito had said the spectacular growth of the high-end property segment was ignited by rising profit expectations, growing demand, and a supportive credit market.
He said the mix of these elements had generated a bubble which reached its peak between 2012 and 2013.