‘Property prices to keep rising’
By SHAREN - 1 August 2014 @ 12:11 AM
http://www.nst.com.my/node/19012

REAL Estate and Housing Developers Association (Rehda) president Datuk Seri FD Iskandar Mansor says property prices will continue to rise because of the supply and demand factor and high land cost.

According to National Property Information Centre, the average annual housing completion was 100,000 units against the average annual household formation of 140,000.

Iskandar, who is Glomac Bhd managing director and chief executive officer, said the public still have the misconception that developers are to blame for escalating property prices.

He said it is not possible for developers to reduce or maintain the selling price for new launches because of land cost, coupled with high conversion premium which has risen by up to 300 per cent recently.

“Glomac bought 80ha in 2009 in Puchong and paid almost RM15 million premium for conversion. In 2011, we bought an additional 80ha to expand the development and paid almost RM49 million,” Iskandar told Property Times.

On the cost of doing business, Iskandar said it has been increasing every year and developers are not enjoying the 30 per cent profit margin like before.

According to him, developers make around 15 per cent profit margin now because of high compliance cost, development and infrastructure charges, quit rent and stamp duty.

“Some 20 years ago, when we develop a piece of land, water and electricity is supplied to the area. All we need to do is connect the supply to the development. Today, we have to get water and electricity from the main source and this is costing us more.”

He said for landed properties, utility cost in terms of gross development cost (GDC) has risen by five per cent to 19 per cent in the past two years.

For strata title properties, the cost has increased by six per cent, and or townships, between nine and 25 per cent.

“The public should not blame developers for the increase in house prices.

Utility companies are making money from both consumers and developers.”

Iskandar said Rehda has been engaging with the government and companies like Tenaga Nasional Bhd, Telekom Malaysia and Indah Water Konsortium Sdn Bhd, among others, to find ways to resolve the matter.

He also said land is also getting scarce and more expensive.

“In early 2007, when Glomac bought land nearby the Petronas Twin Towers, the seller asked for RM1,000 per square feet (psf) but we wanted to pay only RM600 psf. I knew what we wanted to build on it so we paid RM1,000 psf.

“A few research houses downgraded Glomac because of that. Now, that same piece of land is worth RM3,500 psf and the value of the building has risen. Land cost has tripled in the last seven years.”

Iskandar said there are many issues that need resolving soon in the local property market, which is one of the pillars of growth for Malaysia.

“We are in an industry which is highly regulated. We are governed by three different authorities, namely the state government, the Federal Government and the local authorities. If we don’t comply, we won’t be able to get development approvals.

“Rehda has around 1,200 members, who directly and indirectly employ close to one million people. Last year, total loans given to the real estate industry was 40 per cent. It was the highest on record.

“In terms of compliance cost, the contribution to the local authorities is between four per cent and 18 per cent for landed properties, around five per cent for strata title properties, and as much as 20 per cent for townships.

“If we keep having issues such as rising cost of doing business, delays in approvals and more cooling measures, the sector will become stagnant,” Iskandar added.

This post has been edited by accetera: Aug 1 2014, 10:33 AM

Don't worry. Next year after GST is implement, price crash will happen. Just wait for next year.





This post has been edited by gogo2: Aug 1 2014, 10:39 AM

2014 - Property cool
2015 - Property price crash
2016 - ???

I agree that property prices will keep going up due to to rising developemen tcost , construction costs, rising land prices etc, greedy developers, greedy property owners... But will the normal consumer be able to cope with the rising prices and continue to buy buy buy when their income are not increasing in tandem with the rising cost of living and property prices?

This post has been edited by TOMEI-R: Aug 1 2014, 10:43 AM

Btw the article says Government and Authorities is actually increasing the costs for property developers not developers want to suka2 increase.

I agree compliance costs is SOOOO CRAZY now.

Of course not. That's why in 2014 now, we have downturn (transaction fall).

So in 2015, due to unable to sell for 1 year, price will keep falling which we note it as Property Price Crash.

In 2016, what will happen?

as long as there is a demand. there would be a supply. But I dont agree with recent hike in blr.

previous rate is moderate and current rate is slightly high which is not acceptable in a developed country.

Who cares? If buyer unable to buy, seller need to sell lower or building cheaper condo.

Yeah, but unfortunately there's no demand now. That's why transaction drop.

Developers are required to make more contributions to Utilities and Infrastructure today.

And best of all, Conversion Premium whack everybody.

I think prices will not simply drop because ppl are so creative in getting fund to support their monthly installment if can't sell upon VP for those flippers, renting based investor will not have problem, premium grade owner will not have problem as well as they are loaded. In short, It's a rich man world...

Government doesn't care. It was mentioned that we need to increase Supply many more times!

True. Hahaha

Good luck to all DDD & WWW...wait longer n you shall be rewarded...

my point of view, price wont be drop.
If i am a business man. I would rather no to do this business and doing it cheap.
I rather can use my money to venture other businesses.
So if people hoping market to drop in near future, chances is low. But if crisis happens. Everything is gone cheap.

I see a lot of high value properties, Semi Ds, bangalows, high end teracces, condos are still up for sale after a long time on the market. I dont think the buying mood in there or there is no such demand like previous which I think its not good for the property market.

Simple economics, because the goverment wants the public to cut down on spending and loans, that is why the increase in BLR. It is also called the Deflationery Monetary Policy. Don't you notice that many Malaysians generally overspend beyond their means and are only depending on loans, credit cards etc to continue feeding their greed and glutony?

BBB turn DDD

If demand reduced, developer will not build because they cannot sell at prices which they can make money. So supply also reduced. Lesser new launch, hence buyers have to go for sub-sale. All about supply and demand curve and equilibrium shift. If at a certain point, demand < supply, then price will fall. If supply < demand, then price will increase

The Rehda chairman is just telling people the developer's margin is very thin now that if price decrease instead of increase, they will not build and the supply will decrease

True or not, depends on different individual lah

spending is good for economy.
If you want to be developed. You may be active in the market.
Well, we have a vision 2020. just mere less than 6 years from now.

People who are willing to take up loans and spent the future money would strike more chance to be successful like American thinking compared to the traditional Chinese thinking of use whatever money you have in your pocket only and continuing saving for the seek of unintentionally depreciating the value of your money day by day...

Of course money must be well spent and good loan instead of bad debt like credit card!

I would also agree that prices wont drop much, except that maybe some owners who cannot afford to continue to service their loans or need cash or some other reasons and are desperate to sell. Most important right now would be the willingness of financial institutions on willing to give out loans to new customers as these are the main people contributing to the overall buying mood on the property scene. But the issue is right now, bankers are being very careful and selective in giving out loans which will in turn affect buying of properties which in turn will definately affect property prices in the near future.