What would happen to your house now that government is going to tax 5% beyond 5 years? Part 3.
When there is a transaction cost, usually it is shared in equal portion by seller and buyer. Like stamp duty, it is negotiated between both parties although the law says the purchaser (or transferee) should pay for it. So, same is for this 5% tax. However, the buyer would NOT want to pay for it! At higher cost, he can walk away. He still has choices.
During high demand, this transaction cost is absorbed by the buyer – because of limited choice. This probably means property will cost a little bit more. It is like GST, SST, etc. Sellers will not want to make any losses. Hence, it will be included in the cost of the goods. At the end, property price will go up. Although this is true, it is a slow process. Other factors like demand and supply would have greater impact.
The only way property price will come down is cutting demand, having less population. Would that happen to Malaysia? No right? We are a young growing nation. Next is when there is oversupply – like now.
What the developers are suffering in an oversupply market is cash flow. They canNOT get to sell fast enough. The market has unsold units – money tied up. So, in desperation, they will sell with rebates and bonuses, just to get some cash. We have been seeing this scenario for the last 4 to 5 years since 2014.
What is making it worse is developers are not one person. Over built developers have excess stock. Emerging developers are coming in with smaller size properties at lower prices. This makes the oversupplied (larger units) unable to sell even at a discount. So, that is what some say the government should reject approving construction of new projects as to limit incoming supply. This is kind of artificial price control to enable existing stock to still sell.
Again, this is not free market policy. If government were to do that, it will hold the property at higher price. That is colluding with the developers to punish the Rakyat! Thus, that is not a sustainable policy as Rakyat does not stand to benefit.