BT : Developers expect hike in M'sia housing prices in H2

Business Times - 11 Aug 2010

Developers expect hike in M'sia housing prices in H2

Rising raw material costs, inflationary pressure are among key reasons: Rehda

By PAULINE NG
IN KUALA LUMPUR

MALAYSIAN developers expect housing to cost up to 20 per cent more in the second half of this year, as raw material prices increase and supply tightens in popular areas.

The price of landed property in particular is expected to rise in two hot spots - the Klang Valley and Penang, where recent launches have drawn strong interest and set new price benchmarks.

Mid-year launches of terraced and semi-detached houses and bungalows have sparked huge turnouts.

For example, at the launch of the latest phase of Desa Parkcity - a new township development in the Klang Valley about 35 minutes from central Kuala Lumpur - all 147 units were snapped up in just five hours despite record prices of RM1.7 million (S$731,100) to RM2.1 million for two and three-storey link homes.

More than 650 registrants were reportedly present for the balloting exercise - each armed with a bank draft of RM50,000 to RM100,000.

Developers ramped up the supply of landed homes in the first half of the year. Launches of terraced houses were unchanged at about 35 per cent of all launches. But there was a 9 per cent jump in the number of semi-detached and bungalow launches compared with H2 last year, according to the Real Estate & Housing Developers Association (Rehda).

Even so, most homes are in the low to middle cost segment, with those priced between RM25,000 and RM250,000 accounting for 80 per cent of all units.

Rehda says homes will cost more for several reasons, including ample liquidity, reasonable mortgage rates, appreciating land prices, continuous population growth, urbanisation and demand for a better lifestyle.

However, it rates inflationary pressure, rising raw material costs and the removal of subsidies as major reasons for price increases.

About 40 per cent of Rehda members expect prices to rise as much as 10 per cent in the current half year - and a similar number project a 10-20 per cent rise.

As the population of the Klang Valley and Penang continues to grow - mainly because of inter-state migration - land is costing more. For example, Singapore's City Developments Ltd is reportedly looking to dispose of a parcel plot in Kuala Lumpur's golden triangle for RM3,000 per square foot, or 15 per cent more than the last transacted price in the area.

In comparison with Singapore and UK developers, Rehda says Malaysian developers make an average profit of only 15 per cent. It says land accounts for a mere 15 per cent of total costs in Malaysia, while construction costs make up a whopping 70 per cent.

Rehda pegs the average profit of Singapore developers at 20 per cent, with land and construction costs each accounting for 40 per cent of total costs.

Because the Malaysian authorities require local developers to meet various obligations - such as building a percentage of low-cost houses and providing sewerage and roads - overall construction costs are high.

On top of this, mandatory discounts of 5-15 per cent for bumiputra buyers further bump up costs.

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