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What the SST Expansion Means for Malaysian Homebuyers

NEWS

Written by Fazrina Fezili

What the SST Expansion Means for Malaysian Homebuyers?

The Malaysian government’s latest move to expand the Sales and Services Tax (SST) has raised important questions among current and prospective homebuyers, property investors, and industry professionals. While residential property buyers are not directly taxed under the new rules, the implications of this new tax regime, taking effect on 1 July 2025, are far-reaching—affecting construction costs, commercial real estate investments, and service providers across the housing supply chain.

In this article, we explore how the SST expansion affects residential and commercial property buyers, what industry leaders are saying, and how you can navigate this evolving landscape.

What Is the SST Expansion 2025 and What Has Changed?

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The Sales and Services Tax (SST) is Malaysia’s current indirect tax system, replacing the previous Goods and Services Tax (GST) in 2018. Unlike GST, which imposed a broad-based 6% tax on most goods and services, SST is more targeted. Under the 2025 expansion, the government has broadened SST coverage to include additional service sectors—most notably construction services and commercial property leasing.

Key Highlights of the 2025 SST Expansion:

  • 6% SST now applies to construction services for projects exceeding RM1.5 million
  • 8% SST applies to rental and leasing of commercial properties exceeding RM500,000 annually
  • Residential properties (under the Housing Development Act) remain exempt
  • Sales tax on goods remains unchanged for most building materials like cement and sand

How SST Expansion Affects Property Prices?

Although homebuyers are not taxed directly, indirect costs are expected to rise—potentially leading to higher selling prices for many properties, including construction, renovation, and related service fees.

Reasons Behind the Cost Increase

  • Developers bear SST on construction services and may pass the cost to buyers
  • Construction services become more expensive due to the 6% SST
  • Serviced apartments on commercial titles may include SST on maintenance fees
  • Renovation works and contractors may charge SST on upgrades
  • Property-related services like legal, valuation, and agency services now include 8% SST
  • SST may reduce developer profit margins, resulting in fewer incentives or project delays

Industry experts, including REHDA (Real Estate and Housing Developers’ Association), warn that this change could lead to higher home prices, especially in mixed-use and commercial-titled projects.

This move will lead to a slowdown in the market, as developers make adjustments to their plans,” – Datuk Ho Hon Sang, REHDA President (NST, 2025)

According to market data, construction costs in Malaysia rose by over 10% in 2024, and the 6% SST on services adds further strain on budgets.

SST vs GST: Which Is More Impactful for Property Buyers?

Under the former GST regime, homebuyers faced a uniform 6% tax across almost all services and materials, often resulting in 3–4% higher property prices. With SST, the scope is narrower but more targeted.

Tax System Tax Rate Input Tax Credit Scope Impact on Homebuyers
GST (2015–2018) 6% Yes Broad (goods + services) Moderate to high
SST (2025) 6–8% No Targeted (services + selected sectors) Indirect, moderate

Bottom Line: SST has less direct impact on end buyers than GST—but cost increases may still trickle through due to service-level taxation.

Commercial Property and Investment Real Estate: SST Implications

Commercial property owners and investors are directly impacted by the SST, especially those with high-rent assets or multi-use developments.

  • Lower rental margins due to the 8% SST on leases over RM500,000
  • Higher building maintenance costs and reduced tenant demand
  • Potential reevaluation of investment ROI and rental strategies

SST Impact on Property-Related Services

The SST expansion also affects property services commonly used by buyers, sellers, and landlords:

Service Category SST Rate Impacted Parties
Legal, valuation, property agency 6% Professional services in property transactions
Renovation & building maintenance 6% Contractors and service providers
Construction (commercial/infrastructure) 6% Projects over RM1.5 million
Commercial leasing/rental 8% Annual rental > RM500,000
Financial, leasing, beauty, etc. 6-8% Depending on service and revenue thresholds

If you’re planning to renovate your property or lease out commercial real estate, be prepared for SST-inclusive quotations and contracts.

Government Response and Industry Reactions

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The government continues to assure buyers that housing affordability remains a key priority. However, industry groups have expressed concerns over rising costs and shrinking developer margins.

  • Real Estate and Housing Developer's Association of Malaysia (REHDA) has called for exemptions on more construction-related services
  • Master Builders Association Malaysia (MBAM) warned of potential project delays and cost overruns
  • Developers may postpone new launches or reduce project scale
  • Middle-income buyers may face affordability challenges despite residential SST exemptions
  • Ministry of Housing reaffirmed that all HDA homes remain SST-exempt
  • Financial analysts note developers may absorb or pass on costs, depending on market strength

With inflation relatively stable (~1.8%), the concern lies with project margins and the long-term housing supply—particularly affordable housing.

Strategic Advice for Homebuyers in 2025

First-Time Buyers

  • Prioritize government housing schemes like PR1MA and Rumah Selangorku
  • Use Housing Credit Guarantee Scheme (HCGS) to improve loan eligibility
  • Confirm SST status on your selected development
  • Compare affordability and incentives across multiple projects

Upgraders

  • Account for higher prices and renovation expenses
  • Clarify with developers whether SST-related costs are absorbed
  • Seek value-added offerings from competing developments
  • Think long-term: resale and rental potential matters

Property Investors

  • Reassess rental yields for commercial units (post-SST)
  • Consider switching to residential units to avoid SST on rents
  • Monitor new mixed-use and industrial launches closely

A Cautious but Informed Market

While the SST expansion doesn’t directly tax homebuyers, it does impact the broader property ecosystem—from construction to leasing. Buyers who understand the tax landscape will be better positioned to navigate the changes and secure the best deals.

Whether you're a first-time buyer, seasoned investor, or upgrading your home, it's more important than ever to consult trusted property advisors who can explain how SST may affect your decisions in 2025 and beyond.

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Article Highlights

Malaysia SST 2025

SST expansion Malaysia

impact of SST on property

SST vs GST

Malaysia homebuyer tax

SST construction tax

commercial property tax Malaysia

residential property Malaysia

buy house in Malaysia 2025

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