PETALING JAYA: The Real Estate and Housing Developers’ Association (Rehda) has urged the government to simplify and adjust the Sales and Service Tax (SST) framework, warning that the new regime will increase construction costs and weigh on homebuyers’ affordability.
Rehda president Datuk Ho Hon Sang said while residential properties are technically exempt from SST, many related components, such as machinery rental and labour, fall under the 8% tax bracket, which inevitably pushes up overall project costs.
“Developers will have to pay first and only later know how to adjust once the clarification comes out. This uncertainty makes it difficult to plan,” he said at the release of the Rehda Property Industry Survey for First Half 2025 today.
According to the survey, 62% of respondents expect the SST to significantly affect their project and business operations, while 73% anticipate adjusting their property selling prices as a result, with the majority projecting increases of between 3% and 5%.
Ho said Rehda has proposed a simpler calculation method to avoid confusion and prevent double taxation.
“In any contract, there are two big components: labour and materials. Materials are not subject to SST, but labour is. To compute this line by line is cumbersome. So we suggest assuming a 50-50 split, meaning, just tax 3% on the overall contract cost instead of 6%.”
He added that developers have been absorbing cost pressures for decades, but margins have now tightened to the point where it is no longer sustainable.
“You need enough margin to make sure that if there’s a recession and buyers pull out, you can still finish the project. That’s why the SST framework needs clarity and balance,” Ho stressed.
Beyond the SST, Rehda is also appealing for the revival of the Home Ownership Campaign (HOC), last introduced in 2021. Ho said the campaign had stimulated sales in the past and could help restore buyer confidence. “During the HOC implementation, the pickup rate was good. We believe that reintroducing the HOC will spur sentiment and bring back the feel-good factor. It is very important for buyers to feel good again, to buy.”
The survey revealed that residential launches in the first half of 2025 declined by 26% from the second half of 2024, totalling 12,938 units. Sales also dropped, with only 3,125 units sold, translating to a take-up rate of 24% compared to 55% previously.
Two- and three-storey terraces, along with single-storey homes, were the most saleable properties, reflecting continued buyer preference for landed homes.
“Currently, landed houses are the most saleable. Buyers will go for landed units if the price is comparable,” Ho said.
Service residences, however, remain the hardest to move, constituting the largest share of unsold units, many of which have remained on the market for more than three years.
Affordability remains a significant challenge for Malaysians seeking to own a home. The survey found that 71% of developers faced financing issues in the first half of the year, with 64% citing end-financing rejections.
Loan rejections were particularly high for homes priced between RM300,000 and RM700,000, with between 16% and 30% of applications turned down.
“It’s ironic. We want to help the people who can’t afford, but then because they can’t afford, they don’t get the loan. So it’s a catch-22,” Ho remarked.
While the overall market was subdued, Johor stood out with a surge of launches and strong take-up, buoyed by renewed investor interest in the Iskandar region.
“You are being influenced by the euphoric market in Johor; the pickup rate is very good, and sales are very encouraging,” Ho said.
In contrast, developers in Selangor and Malacca are taking a more cautious approach, launching projects selectively based on clear demand.
Encouragingly, developers are showing greater interest in sustainability. About 73% of respondents agreed that green building certification was an effective way to improve environmental performance in the property sector.
“Two or three years ago, there was not much attention on green buildings. But now developers are paying attention to this green agenda,” Ho said.
The top benefits cited were energy savings, reduced operating costs, and financing incentives, while challenges included higher costs, a lack of government incentives, and limited public awareness.
Overall, respondents remained neutral about market prospects for the rest of 2025, with optimism expected to pick up slightly in the first half of 2026.
Ho said with the right policy support, particularly on tax reforms and home ownership incentives, the sector could regain momentum.
“With clarity on the SST and measures like the HOC, we can restore confidence and strengthen the market for the benefit of both developers and homebuyers,” he added.