GST will push up home prices by 2.6%, said Real Estate and Housing Developers Association Malaysia

But it says still too early to determine exact increase

PETALING JAYA: 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.

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

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.

By Isabelle Lai The Star/Asia News Network


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More Malaysians are being declared bankrupt!

JOHOR BARU: Young Malaysians are being declared bankrupt because they spend more than they earn, says Minister in the Prime Minister’s Department Nancy Shukri (pic).

This trend was worrying because most of them had just started working but already had debt problems, she added.

“This younger generation are supposed to be the next leaders. Instead, we have those who are already facing financial difficulties at a very young age,’’ she told a press conference after opening an information programme for young people at the Home Ministry complex at Setia Tropika here yesterday.

Quoting figures from the Insolvency Department, she said there was an increase in the number of young Malaysians being declared bankrupts in the past five years.

She said there were nearly 22,000 cases last year, an increase from about 13,200 in 2007.

Within the first six months of this year, more than 12,300 young Malaysians had been declared bankrupt. They include 3,680 women.

“On the average, 70.22% of the cases are men,” said Nancy, adding that most of them have outstanding debts of RM30,000 or more and could not afford to settle their dues.

She said the high bankruptcy rate among Malaysians at a young age mainly resulted from defaulting on instalment payments on car, housing and personal loans.

Nancy said there had been celebrities who were also declared bankrupt but most of them declined to seek assistance from the Insolvency Department.

She added that aside from the department, those who have problems managing their finances could seek advice from the Credit Counselling and Debt Management Agency.

The Star/Asia News Network

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Money, money, money ... Love of money is the root of all evil !

Lets not use Money as an all-powerful weapon to buy people

ONE can safely assume that the subject of money would be of interest to almost all and sundry. ABBA, the Swedish group, sang about it. Hong Kong’s canto pop king, Samuel Hui made a killing singing about it. Donna Summers, Pink Floyd, Dire Straits, Rick James and quite a few more, all did their versions of it.

Is money all that matters? The ‘be all and end all’ of life?

This will certainly be a fiercely-debated subject by people from both sides of the divide; the haves and have nots. Just last week, my 12-year-old asked if the proverb Money is the root of all evil is true. Naturally, like most kids of his generation, he would not have a clue as to how difficult it is for money to come about. Or why, when it does come about, it has the power to make and break a person. To a Gen-Z kid, the concept of having to ‘earn’ money is somewhat alien. Simply because everything he ever needs and beyond is ‘magically’ provided for.

Forget about teaching this generation to earn their keeps, just expecting them to pick up after themselves is a herculean ask. But we are not here to talk about that, instead, is money really the root of all evil? Perhaps, the proper answer would be ‘the love of money is’.

Let’s see what sort of evil comes with this love of money. Top of mind would be corruption, covetousness, cheating, even murder, just to name a few. These, of course, are of the extreme.

What about at the workplace? How does the love of money or rather the lure of money affect the employment market? Let me take on a profession closer to my heart, the advertising industry. Annually, our varsities and colleges churn out thousands of mass communication and advertising grads. Of these, only a handful would venture into the industry. Where have all the others gone?

A quick check with fellow agency heads reveals that many have opted to go into the financial sectors as the starting packages are somehow always miraculously higher than those offered by advertising agencies. A classic case of money at work. For those who have actually joined the ad industry, some get pinched after a while because of a better offer of ... money, and more. (As if this is not bad enough, the “pinchers” are often not only from within the industry but are clients!)

The fact is there is absolutely nothing wrong in working towards being the top of one’s profession and getting appropriately remunerated for it. The problem starts when money is used as the all-powerful weapon to ‘buy’ people. Premium ringgit is often paid to acquire many of these hires, some of whom, unfortunately, are still a little wet behind the ears. Paying big bucks for talent is all right, as long as the money commensurate with the ability and experience of the person.

Case in point is if an individual is qualified only as a junior executive with his current employer, should he then be offered the job as a manager and paid twice the last drawn salary? All because some of us are just so short on resources.

Now, hypothetically, if this person was offered the managerial post anyway, would he be able to manage the portfolio and deliver what is expected of him? Would he, for instance, ask what he needs to bring to the table? After all, he has suddenly become the client service director and draws a salary of RM20k a month. Does he actually need to bring more new businesses, or what? We can call ourselves all sorts of fancy titles but the point is we have got to earn it. As they say, the proof of the pudding is in the eating.

Having served on the advertising association council for the past nine years and presiding over it the last two, it concerns me greatly to see the how money is affecting and somewhat thinning the line of qualified successors to the present heads.

The lack of new talents coming into the ad business is increasingly worrisome. Though it may look a seemingly distant issue to most clients, they must now take heed. The agencies are business partners and if there is going to be a dearth of talents it will surely affect the clients’ business in the near future. So rather than pinching the rare good ones from the agencies, would it then not be in the clients’ best interest to instead remunerate the agencies so to secure better and higher standards of expertise? Food for thought, eh?

Pardon me for being old school. I am a firm advocate of the saying that one should not chase money. First learn to be at the top of your trade and money will chase you. Then again, we are now dealing with and learning how to manage the present generation. A generation of young, smart, fearless, and somewhat impatient lot who may not be as loyal as their predecessors. A generation that loves life and crave excitement. Adventure is in their blood and ‘conforming’ is a bad word. And money, lots of it, makes the world go faster for them.

As elders, we need to look hard and deep into how to inculcate the right value of money in this new generation. These are our children. They are the future. If we make no attempt to set this right and instead keep on condoning the practice of over-remunerating them, we will be in trouble. The fact that Malaysia will soon have to compete in the free-trade region further allows money to flex its muscles more. I shudder to think what would happen to our young ones if we keep on mollycoddling them with the wrong idea that they ought to be highly paid just for breathing.

Folks, my sincere apologies if I have inadvertently touched some tender nerves but a wake-up call this has to be. For our dear clients, think about the proposition to review your agency’s remunerations – upwards I mean. This, over taking people from the industry, will save you more in the long run.

For those of us in the agencies, let us keep polishing up our skills and not let money be the sole motivator. If you are good, others will take notice. Work hard, the rewards will come. Just exercise some patience.

I leave you with a saying that one Mr Jaspal Singh said to me when I was a rookie advertising sales rep with The Star eons ago: “Man make money, money does NOT make a man”. (Or woman, of course.)

Till the next time, a very Happy Deepavali to all.

God bless!

 By Datuk Johnny Mun, who has been an advertising practitioner for over 30 years, is president of the Association of Accredited Advertising Agents. He is also CEO of Krakatua ICOM, a local ad agency.