Is there GST on residential property in Malaysia?
The short answer is: No.
Under both the old GST system and the current SST regime, residential properties are classified as Exempt Rated. This means the developer cannot "charge" you an extra 6% on top of the RM500,000 house price at the point of sale.
However, commercial properties like shop lots, SOHOs, and offices are Standard Rated. If you're buying a commercial unit, you usually have to pay the tax out of pocket.
Why do "Exempt" property prices still go up?
This is the part that confuses most homebuyers. Even if you don't see "GST" or "SST" on your billing statement, you are still paying for it implicitly.
Think of it like a bowl of Laksa. You aren't taxed for eating it at a stall, but if the price of rice noodles and fish goes up because of taxes, the uncle selling the Laksa will eventually raise his prices to survive.
In property terms:
- Raw Materials: Developers pay taxes on cement, steel, and bricks.
- Professional Services: Architects, engineers, and lawyers charge Service Tax, which is currently 8% in 2024/2025.
- No Tax Refunds: Because residential property is "Exempt," developers cannot claim back the taxes they paid on materials (Input Tax).
To maintain their profit margins, developers simply bake these costs into the final selling price.
SST vs. GST: Which one is "cheaper" for homebuyers?
While the government hasn't officially confirmed a GST comeback for 2026, economists often compare the two. Under SST, some building materials are exempt, while others are taxed at 5%.
Under a standard GST model (usually 6%), almost everything in the supply chain is taxed. Here is a simplified look at how tax shifts could affect a new project:
| Tax Component | SST Environment (Current) | GST Environment (Potential 2026) |
|---|---|---|
| Basic Materials | Some items 0%, others 5% | Usually 6% |
| Professional Services | 8% Service Tax | 6% GST |
| Developer Tax Claims | Cannot Claim | Cannot Claim (Residential) |
| Price Impact | Base Level | Potential 2% - 4% Increase |
(Please verify the latest tax rates on the official MoF or Lembaga Hasil Dalam Negeri website before making financial decisions.)
How the secondary (sub-sale) market reacts
The secondary market (buying from an individual owner) usually follows the lead of the primary market. If a new condo in Cheras starts selling for 5% more because of tax-driven construction costs, owners of older condos nearby will naturally raise their asking prices too.
This is known as the "knock-on effect." Even though you aren't paying a direct tax to the government when buying from a person, the overall market value rises to match new development costs.
Smart ways to prepare for 2026
If you are looking to enter the market soon, here are three ways to protect your wallet:
- Lock in prices early: Buying during the SST era might save you from the "price recalibration" that happens when a new tax is introduced.
- Check the "Commercial" status: Many modern apartments are actually SOHOs or serviced apartments. Check if the tax treatment is residential or commercial.
- Budget for "Hidden" Costs: Remember that legal fees and valuation reports are subject to Service Tax/GST.
FAQ: Common Questions About Property Taxes
Q: If I sign a SNP now but the tax changes in 2026, do I pay more?
A: Usually, for residential properties, the price is locked in the Sales and Purchase Agreement (SNP). However, you should check your contract for clauses regarding statutory changes in tax.
Q: Does GST apply to the renovation of my house?
A: Yes. Contractors and interior designers will charge you the prevailing tax (SST or GST) on their labor and the materials they buy for your renovation.
Q: Is it better to buy a sub-sale house to avoid these taxes?
A: Sub-sale transactions between individuals are not subject to GST/SST. However, you still have to pay the Real Property Gains Tax (RPGT) and Stamp Duty.
Q: How does the 8% Service Tax affect my purchase?
A: Currently, you pay 8% on professional services like legal fees and agent commissions. This is an upfront cost you must budget for alongside your downpayment.
Q: Can residential developers claim back their tax costs?
A: No. Because residential property is Exempt, developers absorb the Input Tax on materials and pass that cost to you in the house price.
Conclusion
Tax systems like GST or SST aren't meant to "attack" homebuyers, but they do increase the cost of doing business for developers. In the end, those costs usually trickle down to you.
While we can't control what the government decides for 2026, you can control how you plan your finances. By understanding these "hidden" costs now, you can avoid any nasty surprises when you finally get the keys to your dream home.
Compare your loan options with Loanstreet’s home loan calculator to see which bank gives you the best deal before prices shift!
This article was written in collaboration with YYC Advisors. YYC is a group of chartered accountants, tax specialists and GST/business consultants. They provide GST training for businesses gearing up for GST with the enviable reputation of breaking down complex information into simple and easily understandable pieces for a better understanding of the issue at hand. For more information, please refer to YYC Advisors.
