THE EDGE REIF 2015: Higher cost, margin compression pressure for developers with GST

PETALING JAYA (April 25): Developers will experience higher cost of inputs and margin compression pressure after the implementation of Good and Services Tax (GST), said Sunway Bhd’s managing director of property development division of Malaysia and Singapore, Sarena Cheah (pictured) during her presentation on “Post-GST -- The Real Impact on Buyers” at the The Edge Investment Forum on Real Estate 2015 today.

“Pricing also depends on [the] supply and demand situation. Regardless of the implementation of GST, properties in strong locations, with good features will still command strong values,” explained Cheah.

“In Malaysia, overall, there is a drop in transactions and a rise in prices. There are a few factors contributing to this trend. One is the fact that the primary market has shrunk, and supply has been going down. Property prices in strong locations are also going up and buyers are more discerning in property investments.

She highlighted the loan application and approval levels over the past few years.

“In 2013, there were more loan applications, signifying more demand. But there was a drop in 2014. The interesting thing is, although the percentage of loans has gone down, the property market remains the same. I believe [that] the government, especially from the bank perspective, would not allow the property market to dip as it would multiply negative impacts on the economy.”

“Although the loans have been more regulated, the banks will still choose strong developers, with good products and locations for loan approvals, for credible purchases,” she said.

Meanwhile, Cheah noted that buyers are adapting a “wait and see” attitude in light of GST. “As with any new implementation, there are always uncertainties. After the announcement in October 2013, I believe we thought GST was a good effort but perhaps the manner and clarity of the implementation could still be improved,” stressed Cheah.

Moving forward, Cheah suggested that developers should stick to the basic: which is to provide strong products, in solid locations with competitive pricing as there will always be demand.

“The key is to be able to offer value to our purchasers whether it is in terms of product attributes or in financial return prospects,” said Cheah.

For the full details of The Edge Investment Forum on Real Estate 2015, read the May 4 issue of City&Country, the property pullout of The Edge Malaysia.

Also, do check out the videos here and here.