Sabah Housing and Real Estate Developers Association (Shareda) president Chew Sang Hai said while there would be a drop in construction costs, it would be too small to amount to any drastic reduction in overall housing prices.
He added that other expenses had to be factored in, such as land value and compliance costs, which would be absorbed into the final property pricing.
Forty years ago, he said, construction costs comprised about 70% of total development costs. However, that amount had decreased to about 50% presently.
“Building materials comprise about half of that 50%. In other words, if you waive the main items like steel bars, cement and bricks, among others, we are talking about some 20% in building materials of the total development cost.”
With 10% SST waived on this portion, he said, people could expect a decrease of about 1.5% or below 2% in construction costs.
“With that small reduction, it doesn’t mean that prices will drop 1.5% because this is insignificant,” he added.
“But the important thing here is the message from the federal government. They are willing to look into this industry by starting with the first step.
“Waiving the SST will give developers a better avenue to deliver more affordable houses to the market.”
Chew also praised Finance Minister Lim Guan Eng whom he said had acknowledged that the industry needed a financial boost, especially in delivering affordable property.
“To me, he is sending a good signal to the industry that the federal and state governments are doing something. (But) of course, we need to look into the details,” he said at a press conference to announce the 2018 Shareda Nite recently.
Lim recently announced that construction materials including cement, sand and iron, as well as construction services would be exempted from the SST.
He said he hoped this would help reduce construction costs and ease the pressure on the prices of homes, as well as industrial and commercial buildings.
Shareda vice-president Johnny Wong said the SST waiver would also contribute to market stability.
“Every year, we have inflation, so waiving the SST will keep inflation from going up.
“It takes three to four years to complete a development project. Imagine if we can’t contain this pricing (and) if the SST is imposed on it. That means we would have to calculate what the price will be for the next four years.
“So by not charging SST on building materials, it will not inflate for the next four years. It will help to control the house prices for the next few years. This is a critical point,” he said.