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New Straits Times
4 days ago
- Business
- New Straits Times
Revised SST could push property prices higher [BTTV]
KUALA LUMPUR: Malaysia's property prices, especially in the commercial and industrial segments, are likely to rise as the revised Sales and Service Tax (SST), effective July 1, 2025, is set to increase construction and development costs. The sector may see some developers delaying project launches to reassess pricing strategies, safeguard profit margins, and re-evaluate overall project viability amid the evolving cost landscape. Olive Tree Property Consultants CEO Samuel Tan said the non-residential segment will likely bear the brunt of the tax hike, though broader ripple effects across the entire property market cannot be ruled out. Developers facing rising input costs are expected to pass these on to buyers, especially in commercial sectors like retail, office buildings, and industrial facilities, he told Business Times. Although residential properties are exempt from SST, Tan noted that indirect effects, such as shared infrastructure costs and inflation across a developer's portfolio, could still impact pricing in the housing segment. Under the revised SST framework, selected non-essential goods will be taxed at 5 per cent to 10 per cent, while construction services related to infrastructure, commercial, and industrial buildings, where taxable value exceeds RM1.5 million annually, will face a 6 per cent service tax. Tan warned that the SST's potential retrospective application could disrupt ongoing contracts, project timelines, and budgets, raising financial uncertainties. Tan urged the government to reconsider applying SST to the construction sector, which already bears multiple layers of taxation on materials, labour, and equipment. He also argued that the current timeline gives insufficient lead time for stakeholders to adapt. Tan suggested lowering the SST rate for construction services from 6 per cent to 4 per cent and limiting the tax to only the service portion of a project, excluding hardware and building materials. He also questioned the appropriateness of applying SST to construction, arguing that sales tax is meant for tangible goods sold by manufacturers, not services. "The construction sector involves labour and materials. Therefore, to impose SST on the construction sector is wrong. Construction is not providing a sale or service," he said. Tan highlighted that many pre-construction activities, like site clearing, planning, and regulatory approvals, already incur service taxes. Adding another layer risks double taxation, increasing project costs and ultimately burdening end purchasers. Residential exemptions and policy clarifications Housing and Local Government Minister Nga Kor Ming clarified on Sunday that residential properties sold under the Housing Development Act (HDA), including serviced apartments on commercial land intended for residential use, will be exempt from the revised SST. The exemption follows discussions with Finance Minister II Datuk Seri Amir Hamzah Azizan, in response to concerns from property developers about potential cascading tax effects. To prevent double taxation, the government will implement business-to-business (B2B) exemptions, ensuring that the service tax is applied only once in the transaction chain, Nga said, according to Bernama. The Finance Ministry also clarified that basic construction materials such as cement, sand, and aggregates will remain zero-rated. Of the 400 tariff codes for building materials, only eight will see a tax increase, affecting items like laminated glass, netting, and vats, representing just two per cent of all codes. Contractors may also separate material and service components in billing, ensuring SST applies solely to the service portion of the work. Nga reaffirmed the government's commitment to balancing fiscal reforms with housing affordability. Despite reassurances, analysts warned that the residential sector could see knock-on effects from higher non-residential construction costs. "For current commercial and industrial projects, developers may be locked into pre-agreed pricing and unable to shift the additional tax burden to buyers. But in future developments, cost transfers will depend on market demand," one analyst said. "In a weaker market, developers may absorb the added costs, compressing margins and delaying launches. In a stronger market, prices will likely be adjusted upward." Analysts also flagged a lack of clarity over how the SST will apply to existing contracts, leaving developers and contractors exposed to unexpected tax liabilities and project risks. "Without clear transitional guidelines, managing costs and contracts will become increasingly complex," said one expert. "Even if residential units remain tax-exempt, rising overall development costs may still push prices upward, especially in integrated or mixed-use projects." Malaysia's residential property market has been gradually stabilising over the past three years following pandemic-related disruptions and inflationary pressures. The market began to recover in 2023 after a sluggish 2022, with the national average home price rising by 3.3 per cent year-on-year to RM467,000, an increase of about RM15,000. The House Price Index (HPI) also showed positive momentum, with nationwide house prices growing by 3.2 per cent. Certain states outperformed the national average, with Negeri Sembilan posting the highest price growth at 6.5 per cent, followed by Johor at 6.2 per cent, suggesting rising demand and development beyond the Klang Valley. This uptrend was supported by improving market confidence, ongoing economic recovery, and renewed activity in both the primary and secondary markets. In the first half of 2024, the HPI reached 218.7 points, with the average home price edging up to RM471,918, a 0.9 per cent year-on-year increase. However, by year-end, the market began to show signs of cooling. The HPI reached about 222 points in Q4, with annual growth slowing to 1.4 per cent in December from 4.3 per cent in September. The slowdown was most notable in the high-rise and high-end segments in urban areas, where supply outpaced demand. In contrast, landed and suburban properties remained resilient, supported by sustained demand from families and owner-occupiers. As of early 2025, Malaysia's average home price stood at RM486,070, up 3 per cent from the beginning of 2024, indicating continued, albeit moderate, market stability. REHDA warns new SST will push up home prices The Real Estate and Housing Developers' Association (REHDA) Malaysia has raised concerns that the 6 per cent SST on construction services will raise developers' costs and likely lead to higher home prices. While acknowledging the Ministry of Finance's intention to boost government revenue through the revised SST structure, REHDA cautioned that the added tax burden could slow down the property sector. REHDA president Datuk Ir Ho Hon Sang said the association is still assessing the full impact, but the new SST could prompt developers to delay or revise projects, ultimately dampening market momentum. He noted that the industry already absorbs indirect taxes on materials and labour and warned that retroactive application of the SST could result in significant cost overruns. Contracts signed before the effective date should not be subject to the new tax. Developers may be forced to absorb costs, which is unsustainable, he said in a statement. Although residential and public housing projects are exempt, REHDA remains concerned about developments built on commercial land, especially serviced apartments within mixed-use projects. "In city centres, where residential units are often part of mixed developments due to land scarcity, subjecting these units to SST will inevitably lead to increased housing prices, ultimately impacting homebuyers who will have to bear the brunt," Ho said. He added that affordable housing schemes like Rumah Madani, Rumah Selangorku, and Rumah Mesra Rakyat may also be affected if located on commercial land. Moreover, some local authorities require commercial elements, such as shop lots, in strata residential developments. These, along with internal infrastructure, would also fall under the SST, further inflating costs. REHDA is urging the government to postpone the implementation, currently set to take effect in two weeks, and to consider a grace period until 2026. Many SME developers have yet to register with the Inland Revenue Board. A delay would provide them adequate time to comply, Ho said. Analysts: SST a negative surprise for the sector Maybank Investment Bank (Maybank IB) said the implementation of a 6 per cent SST on construction services is expected to weigh on property developers, particularly those with ongoing commercial and industrial projects that offer limited room to pass on rising costs. It cautions that for projects already sold or under construction, developers may be forced to absorb the additional tax burden, especially in cases where contracts include regulatory change clauses. This could lead to margin compression across various segments of the property development value chain, the bank said in a note. Maybank IB views the tax measure as a negative surprise for the sector and notes that it introduces further uncertainty at a time when the property market is already navigating soft demand and elevated costs. It highlighted that developers involved in data centre construction, such as Eco World Development Group Bhd (Eco World Malaysia) and Sime Darby Property Bhd (SD Property), could see project cost escalations that may erode internal rate of return (IRR). With data centres forming a strategic growth area for several developers, the added SST could reduce long-term profitability, the firm said. Moreover, Maybank IB said that developers with a significant exposure to investment properties such as malls could face dual pressure. It said that while the 8 per cent SST on rental income is typically borne by tenants, the ability to negotiate higher rents may be constrained in a subdued economic environment. Maybank IB also pointed out the lack of clarity around how the tax will be applied to ongoing contracts signed before 1 July 2025 but billed after that date. This ambiguity could further complicate financial planning and contract negotiations over the coming months. Developers may attempt to pass on the added costs in future or unsold projects. However, pricing power is likely to be limited by slower economic growth and cautious buyer sentiment, the bank said. In this context, it estimates a reduction of about 4 sen in the revised net asset value (RNAV) of Eco World Malaysia and SD Property due to increased construction costs associated with data centre projects. Despite the near-term headwinds, Maybank IB maintains a neutral stance on the overall property sector, pending further policy clarity. RHB Investment Bank Bhd believes the revised SST will have a limited overall impact on the property sector, thanks to sustained demand for industrial properties. In a research note, the bank said the ongoing US-China trade tensions and shifting global tariff policies are prompting more companies to relocate to Southeast Asia, benefiting industrial hubs like Iskandar Malaysia. "Sales of industrial properties as well as projects in Iskandar Malaysia remain strong year-to-date. Hence, although property companies will likely record a slight margin compression, the demand for industrial and commercial properties should stay healthy over the medium term," it said. RHB noted that the SST's inclusion of construction contracts and leasing income could slightly dent developers' profit margins. It said that developers with greater exposure to industrial and commercial segments are expected to bear higher costs, as contractors are likely to factor in the 6 per cent SST in future project bids. Projects already under construction will also face cost increases for remaining works. "Eventually, we expect developers to pass on the incremental costs to buyers, so new industrial and commercial property prices will likely be more expensive and market forces (demand and supply) will continue to play their role." MBAM: SST could strain construction sector The Master Builders Association Malaysia (MBAM) has urged the government to review the upcoming 6 per cent SST on construction services, warning that the move could severely strain cash flows and disrupt ongoing developments. The association said that the construction industry is already grappling with numerous financial burdens, including taxes on materials, labour, and equipment. With most contracts being fixed-price and time-bound, the imposition of SST, particularly if applied retrospectively, could lead to breaches of existing agreements, project delays, and escalating costs. The industry operates on tight margins and already bears statutory costs such as EPF contributions for foreign workers, CIDB levies, stamp duties, and HRD Corp contributions. Adding a new layer of tax at this stage could compromise project viability, MBAM said. To minimise disruption and ensure fair implementation, MBAM proposed several key measures. It urges the government to postpone SST application to new contracts signed after Jan 1, 2026, instead of July 1, 2025. The association also proposed reducing the tax rate from 6 per cent to 4 per cent and excluding the tax on ongoing projects to prevent unforeseen cost burdens on contractors bound by pre-agreed budgets. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency.
New Straits Times
6 days ago
- Business
- New Straits Times
Revised SST could push property prices higher
KUALA LUMPUR: Malaysia's property prices, especially in the commercial and industrial segments, are likely to rise as the revised Sales and Service Tax (SST), effective July 1, 2025, is set to increase construction and development costs. The sector may see some developers delaying project launches to reassess pricing strategies, safeguard profit margins, and re-evaluate overall project viability amid the evolving cost landscape. Olive Tree Property Consultants CEO Samuel Tan said the non-residential segment will likely bear the brunt of the tax hike, though broader ripple effects across the entire property market cannot be ruled out. Developers facing rising input costs are expected to pass these on to buyers, especially in commercial sectors like retail, office buildings, and industrial facilities, he told Business Times. Although residential properties are exempt from SST, Tan noted that indirect effects, such as shared infrastructure costs and inflation across a developer's portfolio, could still impact pricing in the housing segment. Under the revised SST framework, selected non-essential goods will be taxed at 5 per cent to 10 per cent, while construction services related to infrastructure, commercial, and industrial buildings, where taxable value exceeds RM1.5 million annually, will face a 6 per cent service tax. Tan warned that the SST's potential retrospective application could disrupt ongoing contracts, project timelines, and budgets, raising financial uncertainties. Tan urged the government to reconsider applying SST to the construction sector, which already bears multiple layers of taxation on materials, labour, and equipment. He also argued that the current timeline gives insufficient lead time for stakeholders to adapt. Tan suggested lowering the SST rate for construction services from 6 per cent to 4 per cent and limiting the tax to only the service portion of a project, excluding hardware and building materials. He also questioned the appropriateness of applying SST to construction, arguing that sales tax is meant for tangible goods sold by manufacturers, not services. "The construction sector involves labour and materials. Therefore, to impose SST on the construction sector is wrong. Construction is not providing a sale or service," he said. Tan highlighted that many pre-construction activities, like site clearing, planning, and regulatory approvals, already incur service taxes. Adding another layer risks double taxation, increasing project costs and ultimately burdening end purchasers. Residential exemptions and policy clarifications Housing and Local Government Minister Nga Kor Ming clarified on Sunday that residential properties sold under the Housing Development Act (HDA), including serviced apartments on commercial land intended for residential use, will be exempt from the revised SST. The exemption follows discussions with Finance Minister II Datuk Seri Amir Hamzah Azizan, in response to concerns from property developers about potential cascading tax effects. To prevent double taxation, the government will implement business-to-business (B2B) exemptions, ensuring that the service tax is applied only once in the transaction chain, Nga said, according to Bernama. The Finance Ministry also clarified that basic construction materials such as cement, sand, and aggregates will remain zero-rated. Of the 400 tariff codes for building materials, only eight will see a tax increase, affecting items like laminated glass, netting, and vats, representing just two per cent of all codes. Contractors may also separate material and service components in billing, ensuring SST applies solely to the service portion of the work. Nga reaffirmed the government's commitment to balancing fiscal reforms with housing affordability. Despite reassurances, analysts warned that the residential sector could see knock-on effects from higher non-residential construction costs. "For current commercial and industrial projects, developers may be locked into pre-agreed pricing and unable to shift the additional tax burden to buyers. But in future developments, cost transfers will depend on market demand," one analyst said. "In a weaker market, developers may absorb the added costs, compressing margins and delaying launches. In a stronger market, prices will likely be adjusted upward." Analysts also flagged a lack of clarity over how the SST will apply to existing contracts, leaving developers and contractors exposed to unexpected tax liabilities and project risks. "Without clear transitional guidelines, managing costs and contracts will become increasingly complex," said one expert. "Even if residential units remain tax-exempt, rising overall development costs may still push prices upward, especially in integrated or mixed-use projects." Malaysia's residential property market has been gradually stabilising over the past three years following pandemic-related disruptions and inflationary pressures. The market began to recover in 2023 after a sluggish 2022, with the national average home price rising by 3.3 per cent year-on-year to RM467,000, an increase of about RM15,000. The House Price Index (HPI) also showed positive momentum, with nationwide house prices growing by 3.2 per cent. Certain states outperformed the national average, with Negeri Sembilan posting the highest price growth at 6.5 per cent, followed by Johor at 6.2 per cent, suggesting rising demand and development beyond the Klang Valley. This uptrend was supported by improving market confidence, ongoing economic recovery, and renewed activity in both the primary and secondary markets. In the first half of 2024, the HPI reached 218.7 points, with the average home price edging up to RM471,918, a 0.9 per cent year-on-year increase. However, by year-end, the market began to show signs of cooling. The HPI reached about 222 points in Q4, with annual growth slowing to 1.4 per cent in December from 4.3 per cent in September. The slowdown was most notable in the high-rise and high-end segments in urban areas, where supply outpaced demand. In contrast, landed and suburban properties remained resilient, supported by sustained demand from families and owner-occupiers. As of early 2025, Malaysia's average home price stood at RM486,070, up 3 per cent from the beginning of 2024, indicating continued, albeit moderate, market stability. REHDA warns new SST will push up home prices The Real Estate and Housing Developers' Association (REHDA) Malaysia has raised concerns that the 6 per cent SST on construction services will raise developers' costs and likely lead to higher home prices. While acknowledging the Ministry of Finance's intention to boost government revenue through the revised SST structure, REHDA cautioned that the added tax burden could slow down the property sector. REHDA president Datuk Ir Ho Hon Sang said the association is still assessing the full impact, but the new SST could prompt developers to delay or revise projects, ultimately dampening market momentum. He noted that the industry already absorbs indirect taxes on materials and labour and warned that retroactive application of the SST could result in significant cost overruns. Contracts signed before the effective date should not be subject to the new tax. Developers may be forced to absorb costs, which is unsustainable, he said in a statement. Although residential and public housing projects are exempt, REHDA remains concerned about developments built on commercial land, especially serviced apartments within mixed-use projects. "In city centres, where residential units are often part of mixed developments due to land scarcity, subjecting these units to SST will inevitably lead to increased housing prices, ultimately impacting homebuyers who will have to bear the brunt," Ho said. He added that affordable housing schemes like Rumah Madani, Rumah Selangorku, and Rumah Mesra Rakyat may also be affected if located on commercial land. Moreover, some local authorities require commercial elements, such as shop lots, in strata residential developments. These, along with internal infrastructure, would also fall under the SST, further inflating costs. REHDA is urging the government to postpone the implementation, currently set to take effect in two weeks, and to consider a grace period until 2026. Many SME developers have yet to register with the Inland Revenue Board. A delay would provide them adequate time to comply, Ho said. Analysts: SST a negative surprise for the sector Maybank Investment Bank (Maybank IB) said the implementation of a 6 per cent SST on construction services is expected to weigh on property developers, particularly those with ongoing commercial and industrial projects that offer limited room to pass on rising costs. It cautions that for projects already sold or under construction, developers may be forced to absorb the additional tax burden, especially in cases where contracts include regulatory change clauses. This could lead to margin compression across various segments of the property development value chain, the bank said in a note. Maybank IB views the tax measure as a negative surprise for the sector and notes that it introduces further uncertainty at a time when the property market is already navigating soft demand and elevated costs. It highlighted that developers involved in data centre construction, such as Eco World Development Group Bhd (Eco World Malaysia) and Sime Darby Property Bhd (SD Property), could see project cost escalations that may erode internal rate of return (IRR). With data centres forming a strategic growth area for several developers, the added SST could reduce long-term profitability, the firm said. Moreover, Maybank IB said that developers with a significant exposure to investment properties such as malls could face dual pressure. It said that while the 8 per cent SST on rental income is typically borne by tenants, the ability to negotiate higher rents may be constrained in a subdued economic environment. Maybank IB also pointed out the lack of clarity around how the tax will be applied to ongoing contracts signed before 1 July 2025 but billed after that date. This ambiguity could further complicate financial planning and contract negotiations over the coming months. Developers may attempt to pass on the added costs in future or unsold projects. However, pricing power is likely to be limited by slower economic growth and cautious buyer sentiment, the bank said. In this context, it estimates a reduction of about 4 sen in the revised net asset value (RNAV) of Eco World Malaysia and SD Property due to increased construction costs associated with data centre projects. Despite the near-term headwinds, Maybank IB maintains a neutral stance on the overall property sector, pending further policy clarity. RHB Investment Bank Bhd believes the revised SST will have a limited overall impact on the property sector, thanks to sustained demand for industrial properties. In a research note, the bank said the ongoing US-China trade tensions and shifting global tariff policies are prompting more companies to relocate to Southeast Asia, benefiting industrial hubs like Iskandar Malaysia. "Sales of industrial properties as well as projects in Iskandar Malaysia remain strong year-to-date. Hence, although property companies will likely record a slight margin compression, the demand for industrial and commercial properties should stay healthy over the medium term," it said. RHB noted that the SST's inclusion of construction contracts and leasing income could slightly dent developers' profit margins. It said that developers with greater exposure to industrial and commercial segments are expected to bear higher costs, as contractors are likely to factor in the 6 per cent SST in future project bids. Projects already under construction will also face cost increases for remaining works. "Eventually, we expect developers to pass on the incremental costs to buyers, so new industrial and commercial property prices will likely be more expensive and market forces (demand and supply) will continue to play their role." MBAM: SST could strain construction sector The Master Builders Association Malaysia (MBAM) has urged the government to review the upcoming 6 per cent SST on construction services, warning that the move could severely strain cash flows and disrupt ongoing developments. The association said that the construction industry is already grappling with numerous financial burdens, including taxes on materials, labour, and equipment. With most contracts being fixed-price and time-bound, the imposition of SST, particularly if applied retrospectively, could lead to breaches of existing agreements, project delays, and escalating costs. The industry operates on tight margins and already bears statutory costs such as EPF contributions for foreign workers, CIDB levies, stamp duties, and HRD Corp contributions. Adding a new layer of tax at this stage could compromise project viability, MBAM said. To minimise disruption and ensure fair implementation, MBAM proposed several key measures. It urges the government to postpone SST application to new contracts signed after Jan 1, 2026, instead of July 1, 2025. The association also proposed reducing the tax rate from 6 per cent to 4 per cent and excluding the tax on ongoing projects to prevent unforeseen cost burdens on contractors bound by pre-agreed budgets. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency. MBAM is also seeking that the government extend the exemption period for non-reviewable contracts from 12 to 24 months and expand the scope to include all contracts. Additionally, it is hoped that the government would limit SST to service elements only, excluding building materials and hardware, and align tax payments with certified progress claims rather than invoice dates, to better reflect actual work and ease liquidity issues. MBAM cautioned that most contractors are not financially equipped to shoulder these tax costs upfront, and doing so could derail projects or lead to insolvency.
New Straits Times
12-05-2025
- Health
- New Straits Times
Johor poised for major hospital expansion amid rising healthcare demand
KUALA LUMPUR: Johor is set for a major expansion in both public and private hospital developments, driven by rapid population growth, accelerating urbanisation, and increasing demand for high-quality healthcare services. According to Samuel Tan, founder and chief executive officer of Olive Tree Property Consultants, the state's growing population—driven by local expansion, migration, and its close ties with Singapore—is generating an urgent need for additional hospitals. "The expanding population is putting pressure on existing healthcare infrastructure. We're seeing a growing demand for hospital beds, medical specialists, and advanced treatment facilities," Tan told Business Times. He further noted that Johor's economic diversification, continued industrialisation, and enhanced cross-border connectivity are reinforcing the urgency of healthcare infrastructure development. "While each district has at least one hospital, the increasing number of workers, tourists, and investors in Johor makes it clear that more healthcare infrastructure is necessary," he said. Tan added that strategic planning and sustained investment will be critical to ensure Johor's healthcare system can meet future public health needs and support long-term socio-economic development. "As Johor continues to grow, ensuring equitable access to healthcare across both urban and rural areas is essential. This is not just about adding more hospitals—it's about building a modern, integrated healthcare ecosystem that can support the region's future growth," he said. Johor's healthcare landscape and the role of JS-SEZ Tan pointed out that Johor already has a relatively well-developed healthcare landscape, featuring a balanced mix of public and private institutions. The private healthcare sector, in particular, is known for its efficiency, quality of care, and appeal to medical tourists. Johor's healthcare profile is further elevated by the Johor-Singapore Special Economic Zone (JS-SEZ)—a strategic cross-border initiative formalised on Jan 7, 2025. The agreement, signed by Prime Minister Datuk Seri Anwar Ibrahim and Singapore's Deputy Prime Minister Lawrence Wong, included six memoranda of understanding and a letter of intent. As part of the JS-SEZ, the Johor state government is actively inviting international healthcare and pharmaceutical companies to invest within the zone. Several stakeholders have already expressed interest in developing hospitals, clinics, and pharmacies. "Medical tourism will be a key growth driver under the JS-SEZ," said Tan. "Singaporeans and international patients are increasingly choosing Johor for medical treatment due to its lower costs, availability of skilled professionals, and state-of-the-art medical technology." He added that rising healthcare costs in Singapore further enhance Johor's appeal as a cross-border healthcare destination. Ongoing and upcoming hospital projects Urbanisation and industrial development across Johor, especially in Johor Bahru, are amplifying demand for modern healthcare facilities. This is compounded by rising incidences of chronic diseases and an ageing population requiring long-term care. Johor Bahru currently hosts several established private hospitals catering to both local and international patients, including KPJ Johor Specialist Hospital, Regency Specialist Hospital, Columbia Asia Hospital, and Gleneagles Medini. On the public side, Hospital Sultanah Aminah (HSA) remains the largest government hospital in the state, while Hospital Sultan Ismail (HSI) functions as a major referral centre, particularly for cancer and specialised care. To alleviate pressure on these facilities, new hospitals are in development. Among them is the 304-bed Pasir Gudang Hospital in Bandar Seri Alam, Masai—slated for completion in June 2025 at a cost of RM380 million. It is expected to significantly ease patient congestion at HSI. Another major initiative is Hospital Sultanah Aminah 2, a public-private partnership project set to begin construction in 2026. The new hospital will offer 1,500 beds and will be developed on a 28.33-hectare site provided by the Ministry of Defence. "With these developments, Johor is not only enhancing its healthcare system for residents but also positioning itself as a hub for medical tourism, elderly care, and wellness," Tan said. Future outlook: Elderly care and preventive healthcare Looking ahead, Tan believes Johor is well-positioned to become a centre for elder care, rehabilitation, and retirement living. He also highlighted a shift toward preventive healthcare, with trends like genome sequencing and lifestyle-based disease prevention gaining traction. "These emerging approaches are expected to reduce long-term medical costs and help ease the burden on healthcare facilities," he said. According to the Department of Statistics Malaysia (DOSM), the percentage of Malaysians aged 65 and above is projected to rise from 8.1 per cent in 2024 to 14.5 per cent by 2040. This demographic shift underscores the urgent need to expand healthcare infrastructure and services to meet the demands of an ageing population. Malaysia continues to be recognised globally for its robust healthcare system. Tan pointed out that in the 2019 International Living Annual Global Retirement Index, Malaysia scored 95 out of 100 and ranked first in the "Best Healthcare in the World" category. "Malaysia remains a top choice for international patients seeking affordable, high-quality medical care—and Johor is emerging as one of its most important healthcare frontiers," Tan concluded.
The Star
05-05-2025
- Business
- The Star
Office market stable amid hybrid work, ESG trends
PETALING JAYA: The Malaysian office market is expected to remain stable this year, underpinned by demand for newer high-grade offices featuring sustainable designs and up-to-date specifications. Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong said older Grade B and Grade C offices would struggle with major tenant retention issues and would continue to rely on lower rentals to stay competitive. 'Overall market stability is underpinned by moderate incoming supply, a steady performance in the prime market rents and a gradual uplift in occupancy,' he told StarBiz. On a micro level, Khong said shifts in workplace dynamics and the growing focus on corporate social responsibility have pushed organisations to right-size and consolidate into high-quality spaces. 'Flexible office space is gaining traction as evolving work habits reshape the market. 'Post-pandemic, hybrid work, flexible leases and modular layouts drive demand and create more opportunities for co-working operators with landlords.' Looking ahead, Khong expects demand for new offices to remain strong, supported by tenants' growing appetite for modern high-quality buildings with ESG (environmental, social and governance) features. 'The ageing office segment will need major refurbishments to continue staying relevant,' he said. Meanwhile, Knight Frank Malaysia believes the outlook for the next 12 months suggests continued stability in Malaysia's office sector, with a tenant-favourable market environment expected to persist as businesses reassess long-term space needs and embrace more flexible, future-ready office strategies. 'With an annual change of 2.6% and a quarterly increase of 0.8%, Kuala Lumpur's (KL) office market is showing signs of steady, measured recovery.' However, Knight Frank noted that high supply levels and evolving workplace expectations may continue to weigh on rental growth. 'Occupiers are likely to prioritise flight-to-quality strategies, while landlords may focus on improving building specifications and sustainability features to remain competitive in an increasingly discerning market.' Olive Tree Property Consultants founder and chief executive officer Samuel Tan remains cautiously optimistic on the outlook for Johor's office sector in 2025. 'Strategic initiatives like the Johor-Singapore Special Economic Zone (JS-SEZ), ongoing infrastructure projects such as the Rapid Transit System, elevated automated rapid transit and the influx of data centres are all key catalysts driving the demand for office spaces.' Moving forward, he said multinational corporations (MNCs) and service providers are expected to set up regional or representative offices in Johor Baru to ride on the promising growth within the state. 'Some Singapore-based companies and startups, capitalising on lower operation costs, could be keen to set up offices in the JS-SEZ.' Meanwhile, Olive Tree Property Consultants director Tan Wee Tiam said the escalating trade war triggered by the US' reciprocal tariff is another key consideration for companies intending to set up or expand their office space within the JS-SEZ. 'The risk is compounded by the extremely fluid trade policy adopted unilaterally by the United States. 'Investors do not like uncertainties. 'As a result, while many companies may be keen to use the JS-SEZ as a platform to ride on the growth, many would adopt a wait-and-see stance, at least in the short term, for more clarity to unfold.' Wee Tiam added that tenants, especially MNCs, are increasingly looking for high-quality office spaces that adhere to ESG standards. 'In general, office tenants, especially MNCs, are increasingly seeking offices with modern amenities, energy efficiency and sustainable features.' Meanwhile, Tan said the adoption of hybrid work models has led to increased demand for flexible workspace solutions. 'Companies are looking for adaptable office environments that can accommodate fluctuating occupancy levels and foster collaboration. 'Landlords of older buildings would need to consider refurbishments or repositioning strategies to attract and retain tenants.' On the sector's performance for the first quarter of this year (1Q25), Knight Frank said KL's prime office market continued to improve, as occupier activity strengthened in select sectors despite headline vacancy rates remaining elevated at 24.6%. 'The city's rental levels held steady at RM6.01 per sq ft per month, with no quarter-on-quarter change – underscoring market resilience in the face of ongoing global and regional uncertainties. 'Notably, improving occupancy has been observed, bolstered by expansions from technology firms and MNCs aiming to reinforce their regional footprint in Malaysia.' Khong said the general office sector in Greater KL moved positively during 1Q25, with good improvements in both net absorption rates and office rentals. 'This was well driven, mainly by demand for high-grade office spaces due to improved investor sentiments. 'Greater KL continued to record a net absorption of 0.46 million sq ft in 1Q25, a strong performance compared to an annual absorption of 1.2 million sq ft for 2024.' Khong highlighted that the key drivers during the quarter were 'flight-to-quality' in tenant movements, right-sizing efforts and a growing emphasis on ESG trends.
