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The Star
3 days ago
- Business
- The Star
13MP boost for affordable housing
PETALING JAYA: The government's announcement under the 13th Malaysia Plan (13MP) to develop one million affordable housing units between 2026 and 2035, will help ease pent-up demand and improve homeownership prospects. Zerin Properties chief executive officer Previn Singhe said the government's target of building one million affordable homes over a 10-year period is both 'bold and ambitious'. 'Beyond numbers, success will depend on building in the right places, close to jobs, transport and services, as well as ensuring these homes are designed to genuinely meet the needs of B40 and M40 families. 'This is so they do not risk becoming future overhang statistics,' he told StarBiz. Previn said it is imperative that there are 'supporting measures' to ensure this plan succeeds. 'Measures such as the improvement of existing affordable housing financing schemes, including the expansion of the rent-to-own and housing credit guarantee programmes, will be critical in widening access to homeownership for first-time and lower-income buyers. 'At the same time, making schools a mandatory component of large-scale housing projects will enhance liveability and strengthen long-term community value. 'Together, these measures push housing delivery beyond bricks and mortar –towards building integrated, future-ready communities.' Olive Tree Property Consultants founder and chief executive officer Samuel Tan also said the move by the government to build one million affordable homes under the 13MP was 'ambitious'. 'The government remains committed to ensuring access to quality, affordable and inclusive housing. As of this year, 180,000 housing units have been completed, with another 235,000 currently under construction.' He noted that structural issues, such as the mismatch between housing supply and demand, as well as property prices that remain beyond the reach of many, continue to pose challenges. 'Selection of locations and developers are equally important. Achieving one million houses is only a quantitative target. What is more important is the qualitative target.' TA Research said the planned increase in affordable housing supply, particularly in strategic locations, should help ease pent-up demand and improve homeownership prospects for lower- and middle-income households. 'On the demand side, improved financing mechanisms, including tiered interest rates and flexible tenure structures, are expected to enhance affordability, especially for first-time buyers. 'We are also encouraged by the government's move to empower a central housing agency to lead planning and delivery efforts.' The research house said this could significantly reduce inefficiencies and eliminate duplication of efforts between federal and state bodies, paving the way for more targeted and effective execution. Tan noted that Malaysia faces a significant challenge in providing affordable housing for its citizens, with house prices often exceeding what many can afford. 'This affordability crisis is driven by various factors, including rising land costs, construction costs and a lack of sufficient affordable housing supply. 'There is also a discrepancy between the types of housing being built and the actual needs of the population, with an oversupply of high-end properties and a shortage of affordable options.' This imbalance, said Tan, is exacerbated by factors like income inequality and variations in housing preferences across different demographics. Moreover, he said the construction industry in Malaysia needs to embrace modern technologies and innovative building methods to improve efficiency, reduce costs and enhance the quality of housing. 'The adoption of the Industrialised Building System (IBS), for example, can help accelerate construction and lower costs, making housing more accessible.' He added that there should also be a consolidation of housing agencies to initiate and monitor housing development. 'Currently, multiple agencies are doing the same job and this increases the cost and causes confusion among the stakeholders,' Tan said. To ensure that initiatives under the 13MP come to fruition, Previn emphasised that there is a need to 'prioritise execution over announcements.' 'Malaysia's development plans have historically struggled with delivery gaps. To avoid repeating this pattern, we must establish clear ownership and accountability structures at both federal and state levels. 'There is also a need to ensure transparent timelines, key performance indicators and public reporting mechanisms for all flagship initiatives.' Previn also said there is a need to enable stronger inter-agency coordination, particularly between planning units, regulators and implementation bodies. 'Without robust execution frameworks, even the most well-crafted plans risk stalling.' Another significant structural shift that has been proposed under the 13MP is the mandatory adoption of the build-then-sell (BTS) model for housing development - to be enforced through amendments to the Housing Development Act. TA Research noted that while the intention is to curb project abandonment and enhance buyer protection, it added that the move introduces substantial funding and working capital risks for developers. 'Under the 10:90 BTS structure, developers must complete construction before receiving the bulk of sales proceeds. This could delay new launches and deter participation from smaller players with limited balance sheet strength or constrained access to project financing. 'In our view, this would accelerate market consolidation and widen the competitive gap in favour of well-capitalised players.' That said, the research house said it does not expect the implementation to be immediate. 'Given that it requires legislative amendments, the process is likely to involve multi-stakeholder consultations and industry engagement. A rushed rollout would be disruptive, and we believe policymakers are aware of the potential implications. 'We anticipate a phased approach that balances buyer protection with developer viability, potentially through exemptions, transitional support, or segmentation by developer scale,' it said. Previn also concurred that the BTS model is a major structural change that enhances consumer protection and market credibility, which reduces risks of poor-quality or abandoned projects. 'It will also accelerate IBS adoption, improving efficiency and delivery timelines. 'However, smaller, highly leveraged developers may face liquidity pressures, longer project cycles and higher financing costs, unless accompanied by supportive financing mechanisms or phased implementation of BTS.' Without sufficient large, capable IBS suppliers, Previn warned that there would be bottleneck risks that would push up costs and erode affordability. Tan meanwhile noted that currently, developers are allowed to sell houses before they are built under the 'sell-then-build' model. He noted that making the BTS model mandatory will be difficult. 'There are many obvious merits for this initiative. But it carries several problematic issues. Only the deep pocket developers can afford to implement this scheme. 'It will then be an uneven playing field for the start-ups and smaller development companies.' Tan said the additional holding cost will be passed on to the end-purchasers, making house prices more expensive. 'This will jeopardise our Home Ownership Programme. On the other hand, it will ensure that abandoned projects are curbed. End-purchasers buy what they see ensuring that quality is maintained. 'We opine that this BTS model should not be mandatory. Developers are given the options to choose the most appropriate models. The authorities must monitor their performance to ensure quality and timely delivery,' he said. Previn said many of the 13MP's strategies such as the BTS model and affordable housing targets are conceptually strong, but 'must be grounded in market data and developer capacity.' 'Enforcing BTS across the board without a phased rollout could tighten housing supply and raise costs in the short term 'Additionally, affordable housing should not just be 'affordable to build' but also meet the preferences and needs of the target buyers,' he said.
The Star
07-07-2025
- Business
- The Star
Rising ESG adoption in real estate sector
PETALING JAYA: Property experts are seeing a rise in environmental, social and governance (ESG) adoption within the real estate sector, driven by heightened awareness among industry stakeholders. Zerin Properties chief executive officer Previn Singhe noted that ESG adoption has been 'cascading across Malaysia's property sector,' particularly in the Klang Valley, Penang and Johor. 'This isn't merely regulatory compliance – it's a fundamental market shift. Tenants, investors and financiers now demand sustainability as table stakes,' he told StarBiz. By asset class, Previn said the commercial segment (comprising the office, retail and hotel sub-sectors) was the most advanced when it came to ESG adoption, as it was driven by investor mandates and tenant demand. 'Key ESG practices include energy optimisation, electric vehicle charging, green leases (office and retail), low-carbon materials and enhanced indoor air quality monitoring – all of which are increasingly expected in premium assets.' He added that healthcare facilities were investing in high-efficiency heating, ventilation and air conditioning upgrades; air filtration systems that improve indoor air quality; and building automation systems that optimise temperature and airflow in real-time. 'Meanwhile, in the industrial/logistics sectors, which are being driven by global supply chain requirements, ESG is gaining ground through rooftop solar, green tenancy clauses and tracking of resource use especially in export-oriented industrial parks.' As for the residential segment (comprising both landed and strata developments), Previn noted that developers like Gamuda Bhd , Sunway Bhd and Sime Darby Property Bhd are integrating ESG into landed homes through solar panel infrastructure, bioswales and sustainable landscaping. 'In strata properties, the management corporations are beginning to adopt waste separation and water-saving retrofits, though progress is often limited by fragmented ownership and funding constraints. 'Individual private landed homeowners are also tapping into solar panel incentives under Tenaga Nasional Bhd 's Net Energy Metering 3.0 scheme to reduce energy bills.' Olive Tree Property Consultants chief executive officer Samuel Tan said ESG adoption within the property market has been gaining traction over the years. 'Going forward, it will become the norm rather than a mere white-washing or marketing gimmick. 'Beyond ESG adoption in the construction and development stage, there will be further integration (of ESG practice) right from the acquisition and planning phase, to the eventual stages of building completion, maintenance, leasing and asset management.' Olive Tree Property Consultants executive director Tan Wee Tiam, meanwhile, said it was not surprising that ESG adoption had gained prominence within the real estate market. 'ESG adoption in real estate development ensures long-term compliance of environmental integrity and conformity of ethical practice. 'Such practice will definitely become more prevalent moving forth in view of the challenges such as global warming and extreme temperature changes, rapid building obsolescence due to lousy construction method and sloppy maintenance, lack of ethical and proper governance control in the whole development cycle. 'All the malpractices, if not curtailed in the initial stage of the development cycle, the adverse impact will eventually manifest itself subsequently. The risk to the buyers and investors will be very high and likely become a costly one.' Going forward, Previn said the outlook for ESG adoption within the real estate industry remains promising. 'ESG is becoming increasingly embedded in both the strategy and compliance frameworks across the real estate sector. 'Over the next three-to-five years, we anticipate deeper integration of ESG principles into investment decisions, asset management and day-to-day operations.' Previn believes that there will be stronger policy alignment, including mandatory disclosures, green building codes and carbon pricing mechanisms. 'There will also be improved digitalisation of ESG data, with tech tools enabling real-time monitoring of energy use, emissions and indoor air quality.' He also expects to see a rise of ESG-linked financing such as green loans and sustainability-linked bonds tailored for real estate players. 'There will be a broader adoption beyond prime assets, reaching into mid-market residential, industrial parks, logistic hubs and especially in energy-intensive sectors like data centres, which are expanding rapidly across Malaysia. 'We also see continued use of global ESG benchmarking platforms like the Global Real Estate Sustainability Benchmark which (provides ESG assessments and sustainability benchmarks for commercial real estate and infrastructure), particularly among real estate investment trusts and fund managers, to assess performance, identify gaps and communicate progress to investors.' However, Previn emphasised that capacity building remained critical. 'This is particularly among small and medium enterprises, property managers, valuers and strata communities to ensure ESG integration goes beyond compliance and becomes embedded in valuation, leasing strategies and long-term asset planning.'
![Revised SST could push property prices higher [BTTV]](/_next/image?url=https%3A%2F%2Fassets.nst.com.my%2Fassets%2FNST-Logo%402x.png%3Fid%3Db37a17055cb1ffea01f5&w=48&q=75){kind=small}
New Straits Times
17-06-2025
- Business
- New Straits Times
Revised SST could push property prices higher [BTTV]
KUALA LUMPUR: Malaysia's property prices, especially in the commercial and industrial segments, are likely to rise as the revised Sales and Service Tax (SST), effective July 1, 2025, is set to increase construction and development costs. The sector may see some developers delaying project launches to reassess pricing strategies, safeguard profit margins, and re-evaluate overall project viability amid the evolving cost landscape. Olive Tree Property Consultants CEO Samuel Tan said the non-residential segment will likely bear the brunt of the tax hike, though broader ripple effects across the entire property market cannot be ruled out. Developers facing rising input costs are expected to pass these on to buyers, especially in commercial sectors like retail, office buildings, and industrial facilities, he told Business Times. Although residential properties are exempt from SST, Tan noted that indirect effects, such as shared infrastructure costs and inflation across a developer's portfolio, could still impact pricing in the housing segment. Under the revised SST framework, selected non-essential goods will be taxed at 5 per cent to 10 per cent, while construction services related to infrastructure, commercial, and industrial buildings, where taxable value exceeds RM1.5 million annually, will face a 6 per cent service tax. Tan warned that the SST's potential retrospective application could disrupt ongoing contracts, project timelines, and budgets, raising financial uncertainties. Tan urged the government to reconsider applying SST to the construction sector, which already bears multiple layers of taxation on materials, labour, and equipment. He also argued that the current timeline gives insufficient lead time for stakeholders to adapt. Tan suggested lowering the SST rate for construction services from 6 per cent to 4 per cent and limiting the tax to only the service portion of a project, excluding hardware and building materials. He also questioned the appropriateness of applying SST to construction, arguing that sales tax is meant for tangible goods sold by manufacturers, not services. "The construction sector involves labour and materials. Therefore, to impose SST on the construction sector is wrong. Construction is not providing a sale or service," he said. Tan highlighted that many pre-construction activities, like site clearing, planning, and regulatory approvals, already incur service taxes. Adding another layer risks double taxation, increasing project costs and ultimately burdening end purchasers. Residential exemptions and policy clarifications Housing and Local Government Minister Nga Kor Ming clarified on Sunday that residential properties sold under the Housing Development Act (HDA), including serviced apartments on commercial land intended for residential use, will be exempt from the revised SST. The exemption follows discussions with Finance Minister II Datuk Seri Amir Hamzah Azizan, in response to concerns from property developers about potential cascading tax effects. To prevent double taxation, the government will implement business-to-business (B2B) exemptions, ensuring that the service tax is applied only once in the transaction chain, Nga said, according to Bernama. The Finance Ministry also clarified that basic construction materials such as cement, sand, and aggregates will remain zero-rated. Of the 400 tariff codes for building materials, only eight will see a tax increase, affecting items like laminated glass, netting, and vats, representing just two per cent of all codes. Contractors may also separate material and service components in billing, ensuring SST applies solely to the service portion of the work. Nga reaffirmed the government's commitment to balancing fiscal reforms with housing affordability. Despite reassurances, analysts warned that the residential sector could see knock-on effects from higher non-residential construction costs. "For current commercial and industrial projects, developers may be locked into pre-agreed pricing and unable to shift the additional tax burden to buyers. But in future developments, cost transfers will depend on market demand," one analyst said. "In a weaker market, developers may absorb the added costs, compressing margins and delaying launches. In a stronger market, prices will likely be adjusted upward." Analysts also flagged a lack of clarity over how the SST will apply to existing contracts, leaving developers and contractors exposed to unexpected tax liabilities and project risks. "Without clear transitional guidelines, managing costs and contracts will become increasingly complex," said one expert. "Even if residential units remain tax-exempt, rising overall development costs may still push prices upward, especially in integrated or mixed-use projects." Malaysia's residential property market has been gradually stabilising over the past three years following pandemic-related disruptions and inflationary pressures. The market began to recover in 2023 after a sluggish 2022, with the national average home price rising by 3.3 per cent year-on-year to RM467,000, an increase of about RM15,000. The House Price Index (HPI) also showed positive momentum, with nationwide house prices growing by 3.2 per cent. Certain states outperformed the national average, with Negeri Sembilan posting the highest price growth at 6.5 per cent, followed by Johor at 6.2 per cent, suggesting rising demand and development beyond the Klang Valley. This uptrend was supported by improving market confidence, ongoing economic recovery, and renewed activity in both the primary and secondary markets. In the first half of 2024, the HPI reached 218.7 points, with the average home price edging up to RM471,918, a 0.9 per cent year-on-year increase. However, by year-end, the market began to show signs of cooling. The HPI reached about 222 points in Q4, with annual growth slowing to 1.4 per cent in December from 4.3 per cent in September. The slowdown was most notable in the high-rise and high-end segments in urban areas, where supply outpaced demand. In contrast, landed and suburban properties remained resilient, supported by sustained demand from families and owner-occupiers. As of early 2025, Malaysia's average home price stood at RM486,070, up 3 per cent from the beginning of 2024, indicating continued, albeit moderate, market stability. REHDA warns new SST will push up home prices The Real Estate and Housing Developers' Association (REHDA) Malaysia has raised concerns that the 6 per cent SST on construction services will raise developers' costs and likely lead to higher home prices. While acknowledging the Ministry of Finance's intention to boost government revenue through the revised SST structure, REHDA cautioned that the added tax burden could slow down the property sector. REHDA president Datuk Ir Ho Hon Sang said the association is still assessing the full impact, but the new SST could prompt developers to delay or revise projects, ultimately dampening market momentum. He noted that the industry already absorbs indirect taxes on materials and labour and warned that retroactive application of the SST could result in significant cost overruns. Contracts signed before the effective date should not be subject to the new tax. Developers may be forced to absorb costs, which is unsustainable, he said in a statement. Although residential and public housing projects are exempt, REHDA remains concerned about developments built on commercial land, especially serviced apartments within mixed-use projects. "In city centres, where residential units are often part of mixed developments due to land scarcity, subjecting these units to SST will inevitably lead to increased housing prices, ultimately impacting homebuyers who will have to bear the brunt," Ho said. He added that affordable housing schemes like Rumah Madani, Rumah Selangorku, and Rumah Mesra Rakyat may also be affected if located on commercial land. Moreover, some local authorities require commercial elements, such as shop lots, in strata residential developments. These, along with internal infrastructure, would also fall under the SST, further inflating costs. REHDA is urging the government to postpone the implementation, currently set to take effect in two weeks, and to consider a grace period until 2026. Many SME developers have yet to register with the Inland Revenue Board. A delay would provide them adequate time to comply, Ho said. Analysts: SST a negative surprise for the sector Maybank Investment Bank (Maybank IB) said the implementation of a 6 per cent SST on construction services is expected to weigh on property developers, particularly those with ongoing commercial and industrial projects that offer limited room to pass on rising costs. It cautions that for projects already sold or under construction, developers may be forced to absorb the additional tax burden, especially in cases where contracts include regulatory change clauses. This could lead to margin compression across various segments of the property development value chain, the bank said in a note. Maybank IB views the tax measure as a negative surprise for the sector and notes that it introduces further uncertainty at a time when the property market is already navigating soft demand and elevated costs. It highlighted that developers involved in data centre construction, such as Eco World Development Group Bhd (Eco World Malaysia) and Sime Darby Property Bhd (SD Property), could see project cost escalations that may erode internal rate of return (IRR). With data centres forming a strategic growth area for several developers, the added SST could reduce long-term profitability, the firm said. Moreover, Maybank IB said that developers with a significant exposure to investment properties such as malls could face dual pressure. It said that while the 8 per cent SST on rental income is typically borne by tenants, the ability to negotiate higher rents may be constrained in a subdued economic environment. Maybank IB also pointed out the lack of clarity around how the tax will be applied to ongoing contracts signed before 1 July 2025 but billed after that date. This ambiguity could further complicate financial planning and contract negotiations over the coming months. Developers may attempt to pass on the added costs in future or unsold projects. However, pricing power is likely to be limited by slower economic growth and cautious buyer sentiment, the bank said. In this context, it estimates a reduction of about 4 sen in the revised net asset value (RNAV) of Eco World Malaysia and SD Property due to increased construction costs associated with data centre projects. Despite the near-term headwinds, Maybank IB maintains a neutral stance on the overall property sector, pending further policy clarity. RHB Investment Bank Bhd believes the revised SST will have a limited overall impact on the property sector, thanks to sustained demand for industrial properties. In a research note, the bank said the ongoing US-China trade tensions and shifting global tariff policies are prompting more companies to relocate to Southeast Asia, benefiting industrial hubs like Iskandar Malaysia. "Sales of industrial properties as well as projects in Iskandar Malaysia remain strong year-to-date. Hence, although property companies will likely record a slight margin compression, the demand for industrial and commercial properties should stay healthy over the medium term," it said. RHB noted that the SST's inclusion of construction contracts and leasing income could slightly dent developers' profit margins. It said that developers with greater exposure to industrial and commercial segments are expected to bear higher costs, as contractors are likely to factor in the 6 per cent SST in future project bids. Projects already under construction will also face cost increases for remaining works. "Eventually, we expect developers to pass on the incremental costs to buyers, so new industrial and commercial property prices will likely be more expensive and market forces (demand and supply) will continue to play their role." MBAM: SST could strain construction sector The Master Builders Association Malaysia (MBAM) has urged the government to review the upcoming 6 per cent SST on construction services, warning that the move could severely strain cash flows and disrupt ongoing developments. The association said that the construction industry is already grappling with numerous financial burdens, including taxes on materials, labour, and equipment. With most contracts being fixed-price and time-bound, the imposition of SST, particularly if applied retrospectively, could lead to breaches of existing agreements, project delays, and escalating costs. The industry operates on tight margins and already bears statutory costs such as EPF contributions for foreign workers, CIDB levies, stamp duties, and HRD Corp contributions. Adding a new layer of tax at this stage could compromise project viability, MBAM said. To minimise disruption and ensure fair implementation, MBAM proposed several key measures. It urges the government to postpone SST application to new contracts signed after Jan 1, 2026, instead of July 1, 2025. The association also proposed reducing the tax rate from 6 per cent to 4 per cent and excluding the tax on ongoing projects to prevent unforeseen cost burdens on contractors bound by pre-agreed budgets. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency.
New Straits Times
16-06-2025
- Business
- New Straits Times
Revised SST could push property prices higher
KUALA LUMPUR: Malaysia's property prices, especially in the commercial and industrial segments, are likely to rise as the revised Sales and Service Tax (SST), effective July 1, 2025, is set to increase construction and development costs. The sector may see some developers delaying project launches to reassess pricing strategies, safeguard profit margins, and re-evaluate overall project viability amid the evolving cost landscape. Olive Tree Property Consultants CEO Samuel Tan said the non-residential segment will likely bear the brunt of the tax hike, though broader ripple effects across the entire property market cannot be ruled out. Developers facing rising input costs are expected to pass these on to buyers, especially in commercial sectors like retail, office buildings, and industrial facilities, he told Business Times. Although residential properties are exempt from SST, Tan noted that indirect effects, such as shared infrastructure costs and inflation across a developer's portfolio, could still impact pricing in the housing segment. Under the revised SST framework, selected non-essential goods will be taxed at 5 per cent to 10 per cent, while construction services related to infrastructure, commercial, and industrial buildings, where taxable value exceeds RM1.5 million annually, will face a 6 per cent service tax. Tan warned that the SST's potential retrospective application could disrupt ongoing contracts, project timelines, and budgets, raising financial uncertainties. Tan urged the government to reconsider applying SST to the construction sector, which already bears multiple layers of taxation on materials, labour, and equipment. He also argued that the current timeline gives insufficient lead time for stakeholders to adapt. Tan suggested lowering the SST rate for construction services from 6 per cent to 4 per cent and limiting the tax to only the service portion of a project, excluding hardware and building materials. He also questioned the appropriateness of applying SST to construction, arguing that sales tax is meant for tangible goods sold by manufacturers, not services. "The construction sector involves labour and materials. Therefore, to impose SST on the construction sector is wrong. Construction is not providing a sale or service," he said. Tan highlighted that many pre-construction activities, like site clearing, planning, and regulatory approvals, already incur service taxes. Adding another layer risks double taxation, increasing project costs and ultimately burdening end purchasers. Residential exemptions and policy clarifications Housing and Local Government Minister Nga Kor Ming clarified on Sunday that residential properties sold under the Housing Development Act (HDA), including serviced apartments on commercial land intended for residential use, will be exempt from the revised SST. The exemption follows discussions with Finance Minister II Datuk Seri Amir Hamzah Azizan, in response to concerns from property developers about potential cascading tax effects. To prevent double taxation, the government will implement business-to-business (B2B) exemptions, ensuring that the service tax is applied only once in the transaction chain, Nga said, according to Bernama. The Finance Ministry also clarified that basic construction materials such as cement, sand, and aggregates will remain zero-rated. Of the 400 tariff codes for building materials, only eight will see a tax increase, affecting items like laminated glass, netting, and vats, representing just two per cent of all codes. Contractors may also separate material and service components in billing, ensuring SST applies solely to the service portion of the work. Nga reaffirmed the government's commitment to balancing fiscal reforms with housing affordability. Despite reassurances, analysts warned that the residential sector could see knock-on effects from higher non-residential construction costs. "For current commercial and industrial projects, developers may be locked into pre-agreed pricing and unable to shift the additional tax burden to buyers. But in future developments, cost transfers will depend on market demand," one analyst said. "In a weaker market, developers may absorb the added costs, compressing margins and delaying launches. In a stronger market, prices will likely be adjusted upward." Analysts also flagged a lack of clarity over how the SST will apply to existing contracts, leaving developers and contractors exposed to unexpected tax liabilities and project risks. "Without clear transitional guidelines, managing costs and contracts will become increasingly complex," said one expert. "Even if residential units remain tax-exempt, rising overall development costs may still push prices upward, especially in integrated or mixed-use projects." Malaysia's residential property market has been gradually stabilising over the past three years following pandemic-related disruptions and inflationary pressures. The market began to recover in 2023 after a sluggish 2022, with the national average home price rising by 3.3 per cent year-on-year to RM467,000, an increase of about RM15,000. The House Price Index (HPI) also showed positive momentum, with nationwide house prices growing by 3.2 per cent. Certain states outperformed the national average, with Negeri Sembilan posting the highest price growth at 6.5 per cent, followed by Johor at 6.2 per cent, suggesting rising demand and development beyond the Klang Valley. This uptrend was supported by improving market confidence, ongoing economic recovery, and renewed activity in both the primary and secondary markets. In the first half of 2024, the HPI reached 218.7 points, with the average home price edging up to RM471,918, a 0.9 per cent year-on-year increase. However, by year-end, the market began to show signs of cooling. The HPI reached about 222 points in Q4, with annual growth slowing to 1.4 per cent in December from 4.3 per cent in September. The slowdown was most notable in the high-rise and high-end segments in urban areas, where supply outpaced demand. In contrast, landed and suburban properties remained resilient, supported by sustained demand from families and owner-occupiers. As of early 2025, Malaysia's average home price stood at RM486,070, up 3 per cent from the beginning of 2024, indicating continued, albeit moderate, market stability. REHDA warns new SST will push up home prices The Real Estate and Housing Developers' Association (REHDA) Malaysia has raised concerns that the 6 per cent SST on construction services will raise developers' costs and likely lead to higher home prices. While acknowledging the Ministry of Finance's intention to boost government revenue through the revised SST structure, REHDA cautioned that the added tax burden could slow down the property sector. REHDA president Datuk Ir Ho Hon Sang said the association is still assessing the full impact, but the new SST could prompt developers to delay or revise projects, ultimately dampening market momentum. He noted that the industry already absorbs indirect taxes on materials and labour and warned that retroactive application of the SST could result in significant cost overruns. Contracts signed before the effective date should not be subject to the new tax. Developers may be forced to absorb costs, which is unsustainable, he said in a statement. Although residential and public housing projects are exempt, REHDA remains concerned about developments built on commercial land, especially serviced apartments within mixed-use projects. "In city centres, where residential units are often part of mixed developments due to land scarcity, subjecting these units to SST will inevitably lead to increased housing prices, ultimately impacting homebuyers who will have to bear the brunt," Ho said. He added that affordable housing schemes like Rumah Madani, Rumah Selangorku, and Rumah Mesra Rakyat may also be affected if located on commercial land. Moreover, some local authorities require commercial elements, such as shop lots, in strata residential developments. These, along with internal infrastructure, would also fall under the SST, further inflating costs. REHDA is urging the government to postpone the implementation, currently set to take effect in two weeks, and to consider a grace period until 2026. Many SME developers have yet to register with the Inland Revenue Board. A delay would provide them adequate time to comply, Ho said. Analysts: SST a negative surprise for the sector Maybank Investment Bank (Maybank IB) said the implementation of a 6 per cent SST on construction services is expected to weigh on property developers, particularly those with ongoing commercial and industrial projects that offer limited room to pass on rising costs. It cautions that for projects already sold or under construction, developers may be forced to absorb the additional tax burden, especially in cases where contracts include regulatory change clauses. This could lead to margin compression across various segments of the property development value chain, the bank said in a note. Maybank IB views the tax measure as a negative surprise for the sector and notes that it introduces further uncertainty at a time when the property market is already navigating soft demand and elevated costs. It highlighted that developers involved in data centre construction, such as Eco World Development Group Bhd (Eco World Malaysia) and Sime Darby Property Bhd (SD Property), could see project cost escalations that may erode internal rate of return (IRR). With data centres forming a strategic growth area for several developers, the added SST could reduce long-term profitability, the firm said. Moreover, Maybank IB said that developers with a significant exposure to investment properties such as malls could face dual pressure. It said that while the 8 per cent SST on rental income is typically borne by tenants, the ability to negotiate higher rents may be constrained in a subdued economic environment. Maybank IB also pointed out the lack of clarity around how the tax will be applied to ongoing contracts signed before 1 July 2025 but billed after that date. This ambiguity could further complicate financial planning and contract negotiations over the coming months. Developers may attempt to pass on the added costs in future or unsold projects. However, pricing power is likely to be limited by slower economic growth and cautious buyer sentiment, the bank said. In this context, it estimates a reduction of about 4 sen in the revised net asset value (RNAV) of Eco World Malaysia and SD Property due to increased construction costs associated with data centre projects. Despite the near-term headwinds, Maybank IB maintains a neutral stance on the overall property sector, pending further policy clarity. RHB Investment Bank Bhd believes the revised SST will have a limited overall impact on the property sector, thanks to sustained demand for industrial properties. In a research note, the bank said the ongoing US-China trade tensions and shifting global tariff policies are prompting more companies to relocate to Southeast Asia, benefiting industrial hubs like Iskandar Malaysia. "Sales of industrial properties as well as projects in Iskandar Malaysia remain strong year-to-date. Hence, although property companies will likely record a slight margin compression, the demand for industrial and commercial properties should stay healthy over the medium term," it said. RHB noted that the SST's inclusion of construction contracts and leasing income could slightly dent developers' profit margins. It said that developers with greater exposure to industrial and commercial segments are expected to bear higher costs, as contractors are likely to factor in the 6 per cent SST in future project bids. Projects already under construction will also face cost increases for remaining works. "Eventually, we expect developers to pass on the incremental costs to buyers, so new industrial and commercial property prices will likely be more expensive and market forces (demand and supply) will continue to play their role." MBAM: SST could strain construction sector The Master Builders Association Malaysia (MBAM) has urged the government to review the upcoming 6 per cent SST on construction services, warning that the move could severely strain cash flows and disrupt ongoing developments. The association said that the construction industry is already grappling with numerous financial burdens, including taxes on materials, labour, and equipment. With most contracts being fixed-price and time-bound, the imposition of SST, particularly if applied retrospectively, could lead to breaches of existing agreements, project delays, and escalating costs. The industry operates on tight margins and already bears statutory costs such as EPF contributions for foreign workers, CIDB levies, stamp duties, and HRD Corp contributions. Adding a new layer of tax at this stage could compromise project viability, MBAM said. To minimise disruption and ensure fair implementation, MBAM proposed several key measures. It urges the government to postpone SST application to new contracts signed after Jan 1, 2026, instead of July 1, 2025. The association also proposed reducing the tax rate from 6 per cent to 4 per cent and excluding the tax on ongoing projects to prevent unforeseen cost burdens on contractors bound by pre-agreed budgets. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency.
New Straits Times
12-05-2025
- Health
- New Straits Times
Johor poised for major hospital expansion amid rising healthcare demand
KUALA LUMPUR: Johor is set for a major expansion in both public and private hospital developments, driven by rapid population growth, accelerating urbanisation, and increasing demand for high-quality healthcare services. According to Samuel Tan, founder and chief executive officer of Olive Tree Property Consultants, the state's growing population—driven by local expansion, migration, and its close ties with Singapore—is generating an urgent need for additional hospitals. "The expanding population is putting pressure on existing healthcare infrastructure. We're seeing a growing demand for hospital beds, medical specialists, and advanced treatment facilities," Tan told Business Times. He further noted that Johor's economic diversification, continued industrialisation, and enhanced cross-border connectivity are reinforcing the urgency of healthcare infrastructure development. "While each district has at least one hospital, the increasing number of workers, tourists, and investors in Johor makes it clear that more healthcare infrastructure is necessary," he said. Tan added that strategic planning and sustained investment will be critical to ensure Johor's healthcare system can meet future public health needs and support long-term socio-economic development. "As Johor continues to grow, ensuring equitable access to healthcare across both urban and rural areas is essential. This is not just about adding more hospitals—it's about building a modern, integrated healthcare ecosystem that can support the region's future growth," he said. Johor's healthcare landscape and the role of JS-SEZ Tan pointed out that Johor already has a relatively well-developed healthcare landscape, featuring a balanced mix of public and private institutions. The private healthcare sector, in particular, is known for its efficiency, quality of care, and appeal to medical tourists. Johor's healthcare profile is further elevated by the Johor-Singapore Special Economic Zone (JS-SEZ)—a strategic cross-border initiative formalised on Jan 7, 2025. The agreement, signed by Prime Minister Datuk Seri Anwar Ibrahim and Singapore's Deputy Prime Minister Lawrence Wong, included six memoranda of understanding and a letter of intent. As part of the JS-SEZ, the Johor state government is actively inviting international healthcare and pharmaceutical companies to invest within the zone. Several stakeholders have already expressed interest in developing hospitals, clinics, and pharmacies. "Medical tourism will be a key growth driver under the JS-SEZ," said Tan. "Singaporeans and international patients are increasingly choosing Johor for medical treatment due to its lower costs, availability of skilled professionals, and state-of-the-art medical technology." He added that rising healthcare costs in Singapore further enhance Johor's appeal as a cross-border healthcare destination. Ongoing and upcoming hospital projects Urbanisation and industrial development across Johor, especially in Johor Bahru, are amplifying demand for modern healthcare facilities. This is compounded by rising incidences of chronic diseases and an ageing population requiring long-term care. Johor Bahru currently hosts several established private hospitals catering to both local and international patients, including KPJ Johor Specialist Hospital, Regency Specialist Hospital, Columbia Asia Hospital, and Gleneagles Medini. On the public side, Hospital Sultanah Aminah (HSA) remains the largest government hospital in the state, while Hospital Sultan Ismail (HSI) functions as a major referral centre, particularly for cancer and specialised care. To alleviate pressure on these facilities, new hospitals are in development. Among them is the 304-bed Pasir Gudang Hospital in Bandar Seri Alam, Masai—slated for completion in June 2025 at a cost of RM380 million. It is expected to significantly ease patient congestion at HSI. Another major initiative is Hospital Sultanah Aminah 2, a public-private partnership project set to begin construction in 2026. The new hospital will offer 1,500 beds and will be developed on a 28.33-hectare site provided by the Ministry of Defence. "With these developments, Johor is not only enhancing its healthcare system for residents but also positioning itself as a hub for medical tourism, elderly care, and wellness," Tan said. Future outlook: Elderly care and preventive healthcare Looking ahead, Tan believes Johor is well-positioned to become a centre for elder care, rehabilitation, and retirement living. He also highlighted a shift toward preventive healthcare, with trends like genome sequencing and lifestyle-based disease prevention gaining traction. "These emerging approaches are expected to reduce long-term medical costs and help ease the burden on healthcare facilities," he said. According to the Department of Statistics Malaysia (DOSM), the percentage of Malaysians aged 65 and above is projected to rise from 8.1 per cent in 2024 to 14.5 per cent by 2040. This demographic shift underscores the urgent need to expand healthcare infrastructure and services to meet the demands of an ageing population. Malaysia continues to be recognised globally for its robust healthcare system. Tan pointed out that in the 2019 International Living Annual Global Retirement Index, Malaysia scored 95 out of 100 and ranked first in the "Best Healthcare in the World" category. "Malaysia remains a top choice for international patients seeking affordable, high-quality medical care—and Johor is emerging as one of its most important healthcare frontiers," Tan concluded.
