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Japan’s property market stands firm in 2025 as a compelling location for real estate investment in Asia. Undergoing a transformative period surrounding demographic change, Japan’s utilising the growing foreign interest and sustainability initiatives to create a resilient and stable property market. Here’s a rundown of Japan’s Market Insights to help you make informed decisions about your investments. Key Takeways:Japan’s Economy: The GDP in Q1 2025 shows at -0.2%, a slower pace than what was estimated, largely due to the tariffs from the United States. Real GDP is projected to grow by 0.7% in 2025.Japan’s Development: Addressing sustainable and smart housing development, as well as the redevelopment of large areas of vacant homesJapan’s Job Market: A stable 2.5% unemployment rate, but an exceptionally high employment rate for new graduates at 98%, with wage increases across sectors to incentivise employment. A high demand in tech, finance & services.Japan Real Estate: Increased interest from foreign and domestic investors, especially in the commercial market due to stable returnsTable of contentsJapan’s Economic StateAnalysts forecasts for 2025What’s keeping Japan’s economy ticking in 2025?How Is Japan’s Real Estate Market Performing in 2025?Tokyo property trendsIQI’s View on Japan’s Real Estate OpportunitiesFAQs About Investing in Japan Real EstateJapan’s Economic StateEconomic OverviewJapan’s economy is recovering with Q1 GDP at 0.0% (after -0.2% dip), projected to grow 0.7%–1.2% in 2025 depending on the source.Private consumption and investment remain solid despite global headwinds; domestic demand is the key growth driver.Inflation moderates to around 2.4%–2.8%, and wage growth supports spending.Yen weakness (¥150–160/USD) gives foreign investors a 20–30% price advantage.Japan entered 2025 with cautious optimism, experiencing both risks and opportunities as they bounce back post-COVID and deal with uncertainties pertaining to global politics and economies. As of mid-2025, Japan remains the world’s fourth-largest economy, with nominal GDP projected at approximately USD 6.9 trillion for 2025.In Q1 2025, Japan’s economy showed renewed resilience, with their GDP recorded as 0.0% quarter-on-quarter, improving slightly from a -0.2% contraction in early 2025. Exports faltered due to global tensions but consumption figures revised upwards, with private consumption, comprising more than half of Japan’s economy, grew 0.1% where it was predicted to be flat in the initial reading. The capital expenditure component of GDP (private demand) expanded 1.1% in Q1, though economists had expected 1.3%. For the broader economy, this signals a cautious but positive shift toward recovery, supported by internal demand despite external hindrance. For domestic investors, the boost in consumption and capital spending suggests improving business and consumer confidence, which may support further economic momentum. As for foreign investors, the combination of economic stabilisation, potential monetary policy adjustments, and relatively attractive real estate and asset prices in Japan could present timely entry points into a market that is showing signs of bottoming out and gradual strengthening.Source: ReutersAnalysts forecasts for 2025IMF: The IMF expects Japan’s economy to expand 1.2% in 2025, after they experienced a 0.1% increase in 2024 owing to private spending. Headline inflation is projected to flow to 2.4% in 2025 from 2.7% last year. "After three decades of near-zero inflation, signs are growing that Japan's economy can reach a new equilibrium with inflation sustained at the Bank of Japan's 2% headline inflation target and growth at the 0.5% potential," the IMF said1.OECD: Slightly more optimistic, OECD predict real GDP is projected to grow by 0.7% and 0.4% in 2025 and 2026 respectively. Driven by domestic demand as wages rise, supporting private consumption. Headline consumer price inflation at 2.8% this year, converging to 2% next year2.Bank of Japan: Revised its fiscal‑year 2025 growth outlook down to between 0.5% and 1.1%, settling around 0.5%, citing impacts of U.S. tariffs3.What’s keeping Japan’s economy ticking in 2025?Private ConsumptionHousehold consumption has been surprisingly robust, with Q1 2025 marking the fourth consecutive quarter of rising consumption, thanks to steady wage gains of 2.3% as of April 2025, and improved employmentInvestment MomentumDespite global headwinds, business investment remains solid—buoyed by corporate profitability and strong order backlogs in machinery, digital transformation, and green sectors.Inflation and Policy SupportHeadline inflation has seen a modest decrease from its peak of 4% in January 2025, standing at 3.6% in April. This is driven by energy and food price acceleration as subsidy effects fade. TourismWith inbound tourism projected to surpass 33 million visitors in 2025 (JNTO), there is a booming interest in short-term rental properties, especially in Tokyo. This could be a lucrative opportunity for investors as hotels comprised 47% of foreign transactions in 2024. TradeJapan’s government is preparing its “summer” economic outlook for 2025, and is expected to revise its GDP growth forecast downward from 1.2% to below 1.0%, reflecting weakening global demand amid U.S. tariffs. Additional subsidies targeting energy, gas, and gasoline will roll out progressively through 2025, as detailed in an OECD report. Digital ExpansionThe Ministry of Economy, Trade and Industry (METI) is expanding tax incentives and direct subsidies for firms investing in AI, robotics, biotech, semiconductors, and renewables. They have also set an intellectual property strategy to maximise their capital through the use of artificial intelligence. Social and demographic incentivesIn response to demographic decline, new reforms aim to increase labour participation among women, seniors, and skilled foreign workers. These include childcare expansion, reskilling programmes, and visa relaxations.Expanding outside the regionGovernment support for regional cities includes infrastructure grants, affordable housing schemes, and incentives to relocate companies outside Tokyo. These measures enhance the appeal of emerging investment hubs like Fukuoka, Sapporo, and Nagoya.How Is Japan’s Real Estate Market Performing in 2025?OverviewJapan’s real estate market is stable, with commercial deals up 30% YoY in 2024.Tokyo leads, but Osaka, Fukuoka, Nagoya, and Sapporo are rising stars due to infrastructure and regional incentives.Rental yields: Tokyo ~3.4%, Osaka ~4.5%, Sapporo ~5%, with nationwide avg. at 4.2%.Property prices rising steadily; Tokyo condos average ¥110 million (~$800K).Occupancy rates high, with central Tokyo below 5% vacancy and strong rental growth.It’s worth noting that 37% of Japan’s population is in Tokyo, with prefectures like Osaka, Nagoya, and Fukuoka experiencing internal migration in recent years due to stabilising prices and easier entry points. Foreign investors are important too, primarily coming from North America, Europe, Singapore, Hong Kong and South Korea. According to UNCTAD's World Investment Report 2024, Japan was the 19th-largest recipient of FDI globally, with an inflow of USD 21.4 billion, down from USD 34.1 billion one year earlier. The real estate sector totaled approximately USD $436 billion in 2024, with economists predicting it to rise in coming years. The average nationwide land price rose about 2.7% in January 2025 and office, retail, logistics, and residential segments in urban centers are seeing the most inflows. In 2024, commercial real estate deals soared: $23.6 billion by mid-year—a 30% increase from 2022. Foreign capital comprised roughly 27% of total transactions, up from 21% five years ago. This recovery signals the slow strengthening of Japan’s property market, as it is the strongest gain they’ve had since 1991. Japanese currency shows at 150-160 yen per USD – which means a 20-30% purchasing advantage for foreign buyers (compared to 5 years ago). Due to the weakened yen, foreign investment is over $10 billion, with a 45% increase in Q1 2025, showing the continued interest from foreign buyers.A recent survey of real estate professionals revealed that 70% hold a positive outlook on current market conditions—the most favorable sentiment reported in the past five years. Many anticipate robust investment opportunities on the horizon. Notably, 31% of experts now believe Tokyo’s property prices will reach their peak in 2025, up from 25% the previous year, indicating growing confidence among both domestic and international investors that the market upswing may persist. The legal and tax environment of Japan aids in this growing optimism. Japan’s property market is one of the most open in Asia, with minimal restrictions on foreign ownership and clear legal procedures, making it exceedingly beneficial for international investors. Ownership RightsForeigners can purchase freehold property in Japan without any citizenship or residency requirements.Title registration is transparent and legally protected, with lawyers or judicial scriveners (shiho-shoshi) typically handling documentation.Taxes and FeesReal estate acquisition tax: 3–4%Residential property and land have a 3% tax rateCommercial property has a higher rate of 4%Stamp tax: Ranges from ¥10,000 to ¥480,000, depending on the property priceIncome:Rental income is subject to progressive tax (5–45%), with deductions allowed for depreciation, maintenance, interest, etc.Withholding tax for non-resident individuals is 20.42%, 10.21% for residents imposed at the time of property acquisitionFinancing & ManagementForeigners may access mortgage financing through select Japanese and international banks, typically requiring 30–50% down payment.Property management firms are widely available and often bilingual, charging 3–5% of gross rental income.Tokyo property trendsResidential pricesTokyo’s property price index rose 8.14% in January 2025, with inflation-adjusted growth around 3.95%, which means there is strong demand and factors leading to a positive increase in market conditionsThe average new condominium in Tokyo’s 23 wards will cost over ¥110 million ($800,000) in 2025. While this is a slight dip, it remains near all-time highs.Rents & OccupancyIn Q4 2024, average mid-market rent in Tokyo’s 23 wards (its municipalities) hit ¥4,332/m² (US $29/m²), up 1.3% QoQ (quarter on quarter) and 6.4% YoY (year on year). The core central five wards averaged ¥5,250/m² (US $35), growing 6.7% YoY. Occupancy rates rose to 96.6% (23 wards) and 97.2% (central five)Vacancy in central Tokyo is now below 5%, with net effective rents rising ~3% YoY (CBRE Japan, Q2 2025).Rental YieldsNationwide average gross rental yield stands at 4.22% in Q1 2025, slightly down from 4.33% in Q2 2024. Studio/apartment yields in the Tokyo central five wards average 3.7% per CBRE data. Combined capital and income returns in Tokyo commercial assets reached about 4.8% by mid-2024, up from 4.4% in 2023.Tokyo’s central wards yield is 3.44%, compared to 4.47% in Osaka and 4.96% in Sapporo. This disparity reflects Tokyo’s status as Japan’s most mature and in-demand market for investors seeking steady returns and capital preservation.Payback:With yields in the 3.5–4.5% range, investors typically recover their capital in 22–28 years, factoring in rental growth and cap rate compression.These property trends highlight the growing interest in Japan’s urban landscape, especially in the wards where there is a focus on redevelopment. For example, the Nakano ward, a site focused on station area projects, saw land prices increase by 16.3%, and popular tourism hubs such as Shibuya climbing exceptionally high by 32.7% in a year. For institutional investors focused on investing in larger scale commercial property, higher returns and long-term demand visibility is crucial. These sectors are key:Office & IndustrialFueled by ¥18.8 billion in corporate capital expenditure in Q1 2025, demand remains solid in urban hubs.Prime locations include Marunouchi, Shibuya, Roppongi (Tokyo), Umeda (Osaka)Attractions include long-term leases, stable occupancy, predictable incomeSome risks are that this sector is sensitive to business cycles and macroeconomic shiftsLogistics & Data CentresContinues to outperform due to e-commerce growth and digital transformation.Japan’s data center market is expected to nearly double by 2028, which would fuel development activity​. Key regions of investment include Greater Tokyo, Osaka, and Nagoya peripheries.Demand drivers include 5G, AI, and gamingSome barriers include the high capital requirement and operational complexityRetail & HospitalityBenefitting from post-COVID tourism rebound and domestic consumptionMain cities include Tokyo Kyoto, Sapporo, and FukuokaIQI’s View on Japan’s Real Estate OpportunitiesAs we move through 2025, Japan remains a rare combination of economic stability, open market access, and relatively affordable global real estate. It offers investors a sturdy legal framework, clear ownership rights, and a deep property market. With government incentives focused on development, tourism, and sustainability being proposed, Japan is a great location to invest for consistent rental income in urban centers, attractive capital appreciation in select growth hubs, opportunities due to currency, and diversification into an expanding property market. Tokyo continues to lead the way as a global city offering solid long-term returns, but cities like Fukuoka and Osaka are worth looking into as they are reshaping the narrative with regional innovation and somewhat attractive yields. Investors who commit to understanding Japan’s unique ecosystem will not only preserve capital, they may very well grow it, steadily and sustainably, in a country keeping strong with resilience and determination. Ready to Explore Investment Opportunities in Japan?Whether you’re a seasoned investor seeking diversification or a first-time buyer exploring Japan’s property market, our expert team at IQI Global is here to help you navigate Japan’s evolving real estate landscape.FAQs About Investing in Japan Real EstateWhere is the best place to invest in Japan? The best places to invest in Japan are Tokyo, Osaka, and Fukuoka.Tokyo offers long-term capital growth, Osaka gives you higher rental yields, and Fukuoka is an emerging hotspot with rising demand and affordable entry prices. Your ideal location depends on your investment goals—whether you're looking for steady income, strong appreciation, or a balance of both.Is it better to use my Japan property for Airbnb or student rental? Both can be profitable, but it depends on the location and legal requirements.Airbnb works well in tourist-heavy areas like Tokyo, Kyoto, or Sapporo, but you'll need a proper minpaku license to comply with short-term rental laws.Student rentals are more stable and suit cities with large universities, such as Osaka, Nagoya, and Fukuoka. They often come with longer-term leases and less turnover.Can foreigners buy property in Japan? Yes, foreigners can buy property in Japan with no restrictions on ownership.You don’t need to be a resident or citizen, and you can own freehold land and buildings just like locals. Legal procedures are straightforward, and many real estate firms offer bilingual support for foreign buyers.Is Japan a good country to invest in real estate? Yes, Japan is considered a safe and stable market for real estate investment.It offers clear ownership laws, strong demand in urban areas, and attractive pricing due to the weakened yen. Tokyo remains a top global city for property investment, and other cities like Osaka and Fukuoka are growing fast, providing opportunities for solid rental yields and capital appreciation.Start your Japan property journey today. Fill in your details and let our experts connect you with the right investment.[custom_blog_form]Continue reading:IQI Expands Presence In 21 Countries With Launch Of IQI Japan OfficesSurvey of Japan Digital Transformation (DX) progress in the Real Estate Industry 2021Top 15 Best Countries for Real Estate investmentWhy a strong dollar is bad for the Global economy - By Shan Saeed, Chief Economic ConsultantReferences:

Did you know: Malaysians living in fast-paced cities like Klang Valley tend to move homes every 5 to 7 years?  This trend is driven by the rising cost of living, frequent job relocations, and the constant challenge of finding affordable yet quality housing that fits modern lifestyles. It’s one of the key reasons why many are rethinking the age-old debate: "Is it smarter to rent for flexibility or buy to invest in the long run?" But... what if you could actually do both? In this guide, we’ll break down the real costs, pros and cons, and hidden truths behind both renting or buying, so you can make a confident and informed decision in 2025. Rent or Buy?:Financial Breakdown: Investing vs Spending  Stability vs Flexibility: Which Lifestyle Suits You?  The Hidden Costs You Shouldn’t Ignore  Why Not Both? (How Can You Rent & Buy at The Same Time)Property as an Investment: Is It Still Worth It?  Final Thoughts: Make the Choice That Fits You  Financial Breakdown: Investing vs Spending Buying Buying a home means you're not just paying for shelter; you're investing in an asset that could grow in value over time.  With every mortgage payment, you're building equity essentially increasing your ownership stake in the property. And if property prices rise? That’s a win for your net worth. Renting Renting on the other hand, gives you freedom from long-term financial commitments.  You pay a fixed amount each month, typically with no surprise costs for maintenance or repairs. But, unlike buying, that money doesn’t build anything for your future. Once it’s paid, it’s gone. But if you’re someone still saving up for a down payment or planning to stay in a location short-term, renting can make more financial sense.  Stability vs Flexibility: Which Lifestyle Suits You? Buying When you own a home, you can renovate your kitchen, paint the walls any colour, and turn that spare room into your dream office.  Homeownership gives you a sense of permanence, stability, and full control over your space. But with that stability comes responsibility. You're in charge of repairs, upkeep, and property taxes. Plus, selling a home and moving isn’t something you can do overnight. Renting  Renting offers unmatched flexibility. Want to move cities for a new job? Upgrade or downsize easily?  Renting gives you that freedom. Perfect for people in transition, digital nomads, or those still figuring things out. Ultimately, it depends on your current stage of life and priorities. Are you nesting or exploring? The Hidden Costs You Shouldn’t Ignore BuyingBuying a home doesn’t just involve the sticker price. There are other costs to consider: Down payment (typically 10% of property price in Malaysia) Legal fees and stamp duty Valuation and loan agreement charges Maintenance, renovations, and sinking fund (for strata properties) RentingRenting on the other hand, usually requires: One to two months' deposit Advance rental Minimal maintenance responsibilities (landlord covers most costs) Don’t forget to factor these in when calculating your monthly housing budget. Often, first-time buyers underestimate the hidden costs and end up financially stretched. FactorBuyingRentingEquityBuilds over timeNo equity builtFlexibilityLow (tying down)High (easy relocation)CostsUpfront + maintenanceUsually fixed monthly expenseLifestyleHome personalization possibleLess responsibilityLegal/TaxMortgage, taxes, potential benefitsFewer entanglementsLong-Term ValuePotential appreciationNo asset appreciationWhy Not Both? (How Can You Rent & Buy at The Same Time)Still unsure which option makes more sense for your future? What if we told you: you can do both? In fact, many savvy Malaysians are choosing to do both rent where they want to live, and buy where it makes financial sense. Here’s how: Buy a property in a high-yield or affordable rental area, such as a subsale unit in a developing location. Continue renting your own place in a more convenient or lifestyle-friendly neighbourhood. Rent out the unit you purchased to generate income. Use that rental income to grow your savings or even pay off the loan. Over time, as the property appreciates or the rental income grows, you’ll have the option to upgrade and purchase a better home for yourself later on. This hybrid approach gives you the best of both worlds: the flexibility of renting and the long-term financial benefit of owning an appreciating asset. Property as an Investment: Is It Still Worth It? In Malaysia, property has long been seen as a solid, low-risk investment.  Despite market fluctuations, real estate tends to appreciate over time especially in prime areas like Klang Valley, Johor, and Penang. Plus, with the rise of Airbnb and rental income opportunities, many homeowners are turning their properties into income-generating assets.  If you're buying with an investor mindset, renting it out could help cover your mortgage and even provide passive income. However, like any investment, property comes with risks. Oversupply, market downturns, or unexpected repairs can eat into your returns.  Always do your research, calculate rental yield, and have an emergency fund in place. Final Thoughts: Make the Choice That Fits You  There’s no one-size-fits-all answer. What matters most is making a choice that aligns with your lifestyle, finances, and future goals. Whether you're buying your first home or looking for a flexible rental, being informed is the smartest thing you can do.  Malaysia’s property market offers opportunities for both renters and buyers, and with the right strategy, either choice can lead to a secure and comfortable future. Need expert advice or want to explore your options? Reach out to our team of property professionals. We’re here to help you make the right move. [custom_blog_form]Continue Reading: Rent vs Buy in Malaysia: Which Makes Sense with Your Current Salary?Klang Valley Property Market Insight: Opportunities and Challenges8 Important Tips for a Hassle-Free Home Buying Process

Hey there! Feeling like taxes are a maze you just can't figure out? Does all the news about Malaysia's changing Sales and Service Tax (SST) sound like financial jargon that might hit your wallet, especially when it comes to finding or keeping a roof over your head or a place for your business?Trust us, the new rules kicking in soon have many people scratching their heads, wondering how they will affect property prices and rents.But don't sweat it! We're here to explain it in simple terms so you know exactly what's happening and how it might impact you and your real estate plans in Malaysia.Here are the key takeaways about how Malaysia's expanded SST could impact real estate:Key Takeaways:Starting July 1, 2025, service tax will apply to several new areas, including construction services and commercial rental and leasing services.Residential properties and building work directly related to purely residential housing projects remain exempt from service tax.Construction services for non-residential and mixed-use buildings (such as offices, shops, and homes within a mixed-use project, provided the project is approved accordingly) are now subject to a 6% service tax if the service provider exceeds a certain threshold.Commercial property rental and leasing services are now subject to an 8% service tax if the service provider exceeds a certain income threshold. However, there are exemptions for residential rentals, very small businesses, and certain business-to-business (B2B) situations.What do You Know About the SST Expanded Version?1. What Exactly is This Expanded SST Hitting Malaysia's Real Estate?2. Will Buying a New House in Malaysia Get More Expensive After July 1, 2025?3. Will Renting an Office or Shop Space Be More Expensive?4. What About Serviced Apartments and Homes in "Mixed Developments"? Are They Taxed?5. How Does This New Tax Change Impact Property Developers and Builders?6. I'm Buying / Renting / Investing. What Should I Do Right Now?7. Getting Ready: Understanding Timelines and Finding Help8. Frequently Asked Questions (FAQs)1. What Exactly is This Expanded SST Hitting Malaysia's Real Estate?Okay, let's cut through the tax talk. Malaysia already has a Sales and Service Tax (SST). Think of it like a tax added onto certain goods when they're sold or specific services when they're provided. It has been around, but according to the Ministry of Finance1, the government is making some updates starting July 1, 2025.The government states that its primary objective is to expand the tax base slightly to support public services, but in a manner that's "targeted" so as not to disproportionately burden individuals, particularly when it comes to daily essentials. The big news is that service tax is now being applied to certain services that were previously exempt from taxation2.These include services such as construction and renting out commercial properties. Since real estate development and rental involve, well, construction and renting, people are discussing how these changes could shake up the property world.2. Will Buying a New House in Malaysia Get More Expensive After July 1, 2025?Many potential homebuyers will probably ask this question. The new rules introduce a 6% service tax on construction services. This applies if the taxable service value of the construction service provider exceeds RM1.5 million annually. The RM1.5 million threshold means that smaller contractors undertaking minor jobs might not reach this threshold, but most developers working on larger projects will.Image Source: FMTNow, here's a critical point, and some good news: Construction work specifically for residential buildings and public facilities directly related to these residential buildings is exempt from service tax. This was clearly stated by the Housing and Local Government Minister, Nga Kor Ming, after discussions with the Finance Minister II, Datuk Seri Amir Hamzah Azizan.3The government has also maintained a 0% sales tax on basic construction materials, such as cement, sand, and aggregates, which helps keep essential supplies affordable.4 Therefore, if someone is building a standalone house on land approved solely for residential use, the construction service for that house and the basic related amenities within that residential area shouldn't have the 6% SST added to them.Think of it like building your dream home from the ground up on a plot designated just for houses; the main building job here generally remains tax-exempt for service tax.However, and this is where things become a bit murky and worry some individuals, especially industry players like the Real Estate and Housing Developers' Association (REHDA)5.They argue that even with residential exemptions, increased costs from taxes on other parts of their business or other types of construction (like commercial or mixed-use) could indirectly lead to higher property prices overall.For example, if a developer builds commercial properties and residential properties, some increased costs from the commercial side could be factored into the business's overall pricing strategy. REHDA president Datuk Ir Ho Hon Sang highlighted that the industry already pays indirect taxes on materials and labour, and the SST adds to this burden.6Image Source: Malay MailWorks Minister Datuk Seri Alexander Nanta Linggi expressed that, despite these concerns, the government expects the SST expansion to have a limited impact on house prices, partly due to the residential exemption and transitional measures, such as a 12-month exemption for certain existing non-reviewable contracts.73. Will Renting an Office or Shop Space Be More Expensive?Okay, switching gears to rentals. If you rent a space for your business, such as an office or a shop, this area is changing. Rental or leasing services are now subject to an 8% service tax.8 This applies if the person or company providing the rental service (the landlord) has a total leasing or rental income exceeding RM500,000 within 12 months.9This threshold means that very small landlords might not be affected, but larger property owners and management companies will likely be.What counts as commercial rental? It covers activities such as leasing office buildings, shopping centres, warehouses, and renting out machinery, vehicles, or other tangible assets used for business purposes. For example, you are renting a printing machine for your business. If the rental company is large enough, you could now incur 8% SST.But wait, there are key exemptions here too!Residential property rentals are exempt from this tax. So, renting a house, apartment, or even residential units like SOHOs (Small Office Home Offices) is off the hook. Imagine renting a condo to live in that won't suddenly have 8% SST added.10If your business is classified as a micro, small, or medium enterprise (MSME) and has annual sales under RM500,000, you, as the lessee, might be exempt from paying the service tax on your commercial rent.There are also Business-to-Business (B2B) exemptions for rental and leasing services to avoid something called "cascading tax" (where tax is added multiple times in a supply chain). In simple terms, if a registered business rents to another registered business, which then rents it out again, the intermediate step may be exempt; however, the final rent paid by the end-user business remains subject to tax if the thresholds are met.Existing contracts that cannot be reviewed or renegotiated ("non-reviewable") get a 12-month exemption from the effective date.The Malaysia Retailers Association highlighted that rent is a significant fixed cost for businesses, and passing this tax to tenants could strain retail companies and consumers. CIMB Securities noted that this tax pressure on tenants could limit REITs' ability to increase rents for existing tenants.114. What About Serviced Apartments and Homes in "Mixed Developments"? Are They Taxed?Okay, this is where it can get a little confusing, and it's a big point of concern for developers like REHDA. A serviced apartment, even if people live in it, is often built on land zoned for commercial use or as part of a project that includes shops, offices, or hotels alongside residential units. These are called mixed developments.According to the official Guide on Construction Work Services from the Royal Malaysian Customs Department, construction services for mixed-use buildings are subject to service tax, and this applies to the total contract value for the entire building, including the residential and public utility areas within it, if approved by the local authorities for mixed development.Therefore, if you're building a tower with retail on the bottom floors and serviced apartments above, the construction service for the entire tower could be taxed at a rate of 6%.Think of building a tower block that's going to have shops, a gym (maybe considered a public facility), and serviced residences all rolled into one.The official guidance states that the construction of the entire building is subject to a 6% service tax if the contractor's annual services exceed the threshold.Image Source: BH OnlineREHDA president Datuk Ir Ho Hon Sang voiced strong concern that in city centres where land is scarce, residential units (like serviced apartments) are often built within these mixed developments. Subjecting the construction services for these buildings to SST, he believes, will inevitably lead to increased housing prices for the final buyers.He noted that even affordable housing under government schemes could be affected if it is located on commercial land as part of a mixed-use project.This contrasts with building services for a standalone apartment building or a housing estate on land zoned only for residential purposes, which remains exempt from the service tax. It's a distinction based on the type of development approval, not just whether people live there.5. How Does This New Tax Change Impact Property Developers and Builders?It's not just about potential price hikes for buyers or rent for tenants; this expansion significantly affects the businesses that build and rent these properties. For property developers and construction companies, the new service tax on construction (6%) and commercial rental (8%) can add to their operating costs.Image Source: The Edge MalaysiaIndustry associations, such as the Master Builders Association Malaysia (MBAM) and REHDA, have appealed to the government, warning that adding a 6% service tax to construction services will strain cash flows, disrupt existing contracts, and potentially lead to project delays or cost overruns.12 MBAM president Oliver Wee noted the industry already faces multiple layers of taxes.Image Source: MaybankMaybank Investment Bank (Maybank IB) indicated that for ongoing projects that have already been sold, developers may need to absorb the additional 6% construction cost, which could squeeze their profit margins, particularly for commercial and industrial builds. Maybank IB also highlighted concerns that developers involved in data centre construction may face increased costs and potentially reduced internal rate of return.13For rental income (from commercial properties such as malls or offices), while the 8% SST is typically borne by tenants, developers who own these properties worry that this might make it harder to negotiate rental increases, especially if the economy is slow.14 Maybank IB noted this could 'restrain developers’ leverage for rental increment negotiations'.So, while there's relief that pure residential construction is exempt, the tax on commercial and mixed-use construction, as well as commercial rental, adds new cost lines for developers and builders. They're hoping for more straightforward guidelines on how existing contracts are treated and adequate time to adapt business models and pricing strategies.15The Federation of Malaysian Manufacturing (FMM) noted they weren't consulted on the service tax expansion and are pushing for more straightforward transitional guidelines.6. I'm Buying / Renting / Investing. What Should I Do Right Now?Okay, so with all this swirling around, what's a person like you to do if you're thinking about property in Malaysia?a. HomebuyerUnderstand that while the construction of purely residential buildings is exempt, indirect costs or taxes on elements of mixed developments could still potentially influence prices. If you're looking at a serviced apartment or a unit in a building with shops or offices, ask the developer specifically about the project's classification and whether the construction tax has been factored into the price.While official sources indicate that construction is taxable for mixed development, how it affects the final sale price to you is something to clarify directly with the developer. Remember that even if construction costs go up, final pricing is always subject to market demand.16b. Home RenterGood news! Residential rentals are explicitly exempt from the new 8% SST. So, this tax change shouldn't affect your house or apartment rent.c. Business OwnerThis is where you need to pay attention. If your landlord is a business that exceeds the annual rental income threshold of over RM500,000, your rental service is likely subject to 8% SST starting July 1, 2025. Check if your business qualifies as an MSME with annual sales under RM500,000, as you might be exempt.Review your lease agreement and discuss it with your landlord to determine if and when this tax will be applied to your rental payments.d. InvestorIf you're buying a residential property to rent out as a home, that rental income isn't subject to the new tax. If you're investing in commercial property or units in mixed developments, be aware of the potential for higher construction/acquisition costs due to the 6% tax on construction services for such projects, and the 8% tax that will apply when you rent out that commercial space (if your rental income hits the RM500k threshold).In any situation, understanding your specific circumstances and potentially getting advice tailored to you is key.7. Getting Ready: Understanding Timelines and Finding HelpThe big date everyone's been talking about is July 1, 2025. That's when the expanded SST framework officially comes into effect for these new services, including construction and commercial rentals.Recognizing that this is a significant change, the government has announced a grace period until December 31, 2025, for businesses to comply with SST registration and reporting requirements.The Federation of Malaysian Manufacturing highlighted that no prosecution or penalties will be imposed for late registration, delayed filing, or errors if businesses show they are taking reasonable steps to comply by this date.This grace period helps businesses get their affairs in order, but it doesn't mean the tax isn't effective from July 1st or that it doesn't apply to taxable services from that date.There's also a mention of a 12-month exemption for existing non-reviewable contracts.This means that if a business signed a contract before July 1, 2025, which locked in pricing and terms without the possibility of review (hence, 'non-reviewable'), it may be exempt from applying SST on that contract for one year. This primarily affects businesses with those specific types of pre-existing agreements, allowing them a transition period.Change can feel like trying to hit a moving target, but getting informed is the first step! For the most accurate and official guidance, the Royal Malaysian Customs Department (JKDM) website (https://mysst.customs.gov.my/) and its publications, such as the "Guide on Construction Work Services17" and "Guide on Rental or Leasing Services18," are the primary sources.They even provide contact numbers for inquiries. Consulting with a tax professional or legal advisor can also help you navigate how these specific rules apply to your unique property or business situation.Embrace the change, get informed, and don't hesitate to ask the right questions. It's all about making wise decisions in the evolving landscape of real estate in Malaysia.So, while residential homes themselves remain shielded from direct SST on construction and rental, the expanded tax does add complexity, especially for mixed developments and commercial rentals.Industry players face new costs and adjustments, which could subtly ripple through the broader market. Understanding these nuances and staying informed is the best way to navigate Malaysia's property landscape confidently.8. Frequently Asked Questions (FAQs)What is the new SST expansion effective from July 1, 2025? The Malaysian government is expanding the scope of its Service Tax (SST) from July 1, 2025, to include several new categories of services, such as construction, rental or leasing (specifically commercial), financial, private healthcare, education, and beauty services, aiming to broaden the tax base.Is service tax charged when building my own residential house? No, construction work services specifically for residential buildings and related public facilities (like roads and playgrounds within a residential area) that are approved solely as residential developments are exempt from service tax.Does the new 6% SST apply to all construction work in Malaysia? No, the 6% SST applies only to construction services for infrastructure, commercial, and industrial buildings where the service provider's annual taxable service value exceeds RM1.5 million. Construction of residential buildings on land approved solely for residential use is exempt.Will the rent for my residential apartment increase because of SST? No, the rental or leasing of residential buildings is explicitly exempt from the new 8% service tax on rental and leasing services. This exemption applies regardless of the landlord's income.How does the SST affect serviced apartments on commercial land? Construction services for serviced apartments built within a "mixed development" project approved by local authorities are generally subject to the 6% service tax on the total building value, even if they are used for residential purposes. This is a key concern for developers regarding potential price increases for buyers.Does the 8% SST apply to all commercial rental income? No, the 8% SST on commercial rental/leasing services applies only to the service provider if their annual rental income exceeds RM500,000. Rentals of assets located outside Malaysia, financial leases, renting reading materials, and possibly rentals where the tenant is an MSME with sales under RM500,000 are exempt.As a homebuyer, what steps should I take to understand how the SST might impact me? Focus on confirming whether the property you're interested in (especially in mixed developments) is subject to taxes on construction services, and discuss any potential tax impacts on the final price directly with the developer. While general residential construction is exempt, projects involving commercial elements may be indirectly affected, potentially influencing costs.Do you have further questions about the SST's impact on your specific property or business situation? Don't go it alone! Connect with us to help you make the best move in Malaysia's evolving real estate market.[custom_blog_form]Continue Reading:Robert Kuok Real Estate Business: From Sugar to CityscapesKuala Lumpur Market Insights 2025: Economy, Jobs & Real EstateThe Trump Real Estate Empire: Inside His Iconic Property PortfolioReference and Citation

Version: CN, BMStarting July 1, 2025, major changes to Malaysia’s electricity tariff structure and service tax (SST) are expected to affect homeowners, tenants, landlords, and investors alike.  With Tenaga Nasional Berhad (TNB) introducing a more detailed billing structure and SST applying to higher electricity usage, the real estate sector must brace for rising operational costs and shifting affordability. In this article, we’ll break down what the changes are, why they’re happening, and how they could affect real estate, plus practical tips to manage your electricity bills under the new system. Understanding TNB's NEW Tariff & SST Charge: What Is the New TNB Tariff & SST Policy?  Why Is the Government & TNB Doing This?  New TNB Domestic Tariff (July 2025)  How Will This Affect the Real Estate Market?  Overall Market ImplicationsHow to Reduce Electricity Bills Under the New Tariff  Final Thoughts  Frequently Asked Questions (FAQ's)What Is the New TNB Tariff & SST Policy? Effective July 1, 2025, TNB will roll out a new electricity tariff structure under the government’s Regulatory Period 4 (RP4).  This includes a five-part breakdown of charges to enhance billing transparency, along with the implementation of 8% SST on households using more than 600 kWh/month. Breakdown of the New Tariff Components: Energy (Generation) Charge – Cost to generate electricity Capacity Charge – Cost of maintaining supply availability Network Charge – Cost of delivering power through TNB’s grid Retail Charge – Customer service, billing, and meter reading Automatic Fuel Adjustment (AFA) – Monthly fuel cost variations, capped at ±3 sen/kWh Why Is the Government & TNB Doing This? The revised tariff is part of a national effort to: Reflect the true cost of electricity supply more transparently Encourage energy efficiency through usage-based incentives Replace the older ICPT mechanism with AFA for more timely adjustments Support national sustainability goals by discouraging energy waste TNB and the Energy Commission (Suruhanjaya Tenaga) argue that this change brings Malaysia closer in line with international energy billing standards while shielding low-income households from excessive hikes. New TNB Domestic Tariff (July 2025) Here’s a simplified version of the new domestic electricity charges for consumers: Component Usage ≤ 1,500 kWh Usage > 1,500 kWh Energy Charge 27.03 sen/kWh 37.03 sen/kWh Capacity Charge 4.55 sen/kWh 4.55 sen/kWh Network Charge 12.85 sen/kWh 12.85 sen/kWh Retail Charge RM10/month (waived if ≤600 kWh) RM10/month SST (8%) Applies if usage >600 kWh/month Applies Note: Households using ≤600 kWh/month are exempt from the RM10 retail charge and SST. How Will This Affect the Real Estate Market? 1. For Homebuyers Rising electricity costs, especially for homes that consume more than 1,500 kWh/month mean higher cost of ownership.  For homebuyers, the rise in electricity tariffs could reshape purchasing decisions and priorities. As energy bills become a more prominent part of monthly expenses, buyers may begin to scrutinise a property's energy performance just as closely as its location or layout. Homes that lack proper insulation, ventilation or energy-saving features may be viewed as long-term financial burdens, particularly for first-time buyers already stretching their budgets. Additionally, higher construction costs brought on by increased operational expenses could push property prices upwards, making affordability an even bigger challenge. In response, homebuyers may start to favour properties with solar panels, energy-efficient appliances or green building certifications, viewing them as a better investment over time.This could result in: New homes might become more expensive as building costs are going upPeople may avoid buying homes that are not energy-efficient2. For Tenants For tenants, particularly those in energy-intensive units or older buildings, the higher electricity tariffs could significantly reduce disposable income. Monthly utility bills could rise sharply, especially in units that rely heavily on air conditioning, water heaters or outdated electrical systems. This financial strain may cause tenants to seek smaller, more efficient units or negotiate for lower rents. The result could be a reduced demand for high-maintenance properties, especially in markets saturated with supply.This could result in: Higher monthly rents Strained affordability 3. For LandlordsLandlords are likely to face increased pressure as tenants grow more cost-conscious. To maintain occupancy rates and remain competitive, they may need to upgrade properties with energy-efficient fixtures or offer incentives to tenants concerned about high utility costs. Retrofitting older units with modern solutions like inverter air-conditioners, LED lighting or solar-powered water heaters may no longer be optional, but a necessity. While these investments require upfront capital, they could enhance long-term property value and attract more stable, sustainability-minded tenants. Landlords unwilling or unable to adapt may face longer vacancy periods or be forced to lower rental prices to retain interest.This could result in: Risk of lower rental incomePressure to upgrade units4. For Investors & Developers Commercial properties, especially those with higher energy needs such as Small-office Home-office (SoHo) or Small-office Versatile-office (SoVo) units, are likely to feel the brunt of increased electricity tariffs. With operating costs on the rise, property owners and investors could face shrinking profit margins as they contend with larger utility bills and higher service charges. Over time, this could affect the financial viability of energy-intensive developments, prompting a shift in investor preferences toward more sustainable, energy-efficient projects with lower running costs.Projects using commercial titles (e.g., SoHo, SoVo) will face higher service charges. This impacts: Rental yields Long-term operational expenses Development pricing, particularly for energy-intensive properties Overall Market Implications1. Impact on Affordability and Transaction VolumeHigher energy costs add to the overall cost of living and homeownership. This added financial strain could slow down property transactions, particularly in lower to middle-income segments where budgets are already tight. Buyers and tenants may delay decisions or opt for more affordable, lower-maintenance alternatives.2. Possible Government InterventionTo cushion the impact of rising tariffs, government support may become more likely. This could come in the form of energy rebates, tax relief for green upgrades or new financing schemes aimed at encouraging sustainable homeownership and development. Such interventions would help stabilise the market while guiding it toward a more energy-conscious future.3. Shift in Buyer and Tenant PreferencesThe increase in electricity tariffs is pushing both buyers and renters to become more selective. Properties that are not energy-efficient (especially older buildings) are becoming less desirable due to higher monthly utility costs. As affordability becomes a growing concern, demand is expected to shift towards homes that offer lower energy consumption through smart designs, green certifications or modern energy-saving systems.4. Market Moving Towards Compact and Sustainable LivingIn the long term, rising utility costs may lead the market to embrace smaller, more efficient, and environmentally friendly homes. Compact layouts, passive cooling designs, and integrated smart systems could define the next wave of residential development making sustainability not just a trend, but a necessity.How to Reduce Electricity Bills Under the New Tariff To manage costs and stay below SST thresholds, here are some effective strategies: 1. Monitor Usage Monthly Use less than 600 kWh to avoid SST and retail charges. Consider a smart meter or app to track real-time consumption. 2. Take Advantage of Time-of-Use (ToU) Tariffs Shift heavy usage (laundry, air-conditioning, charging devices) to off-peak hours. (Weekdays: 10:00 PM – 8:00 AM, All day on weekends and public holidays.)3. Invest in Energy-Efficient Appliances Switch to LED lighting, inverter air-conditioners, and energy-rated refrigerators. These upgrades may reduce your total bill significantly over time. 4. Consider Solar Energy Installing solar panels under the Net Energy Metering (NEM) scheme can help offset your energy consumption and stabilize long-term electricity costs. 5. Claim Efficiency Rebates If your usage stays below 1,000 kWh, you may be eligible for energy efficiency rebates of up to 25 sen/kWh. Final Thoughts The new TNB tariff and SST structure may seem technical, but its impact is real especially in the context of homeownership costs, rental yields, and tenant affordability.  Whether you're buying, renting, or investing in property, understanding how electricity charges work is now more important than ever. As utility bills start playing a bigger role in real estate decisions, staying informed and energy-smart will give you a clear edge. Frequently Asked Questions (FAQ's) When will the new TNB tariff and SST changes take effect? The new tariff structure and SST changes will apply starting July 1, 2025.Who will be charged SST on their electricity bills? Households consuming more than 600 kWh per month will be subject to 8% SST on their electricity bills.How will the new TNB tariff impact property buyers and renters? It may increase monthly utility costs, leading to higher homeownership expenses and potential rent increases.What is one way to reduce electricity bills under the new tariff system? Shifting electricity use to off-peak hours through the Time-of-Use (ToU) scheme can help lower bills.Looking to invest in property or buy your dream home? Connect with our expert agents today to discover the best and most affordable options tailored to your needs.[custom_blog_form]Continue Reading: US Tariffs: How Are They Affecting Malaysia Real Estate?Budget 2025 Malaysia: RM900 Million For Affordable Housing, Tax Break and More!Smart Home Trends for 2025: The Future of Connected Living