Rehda: Developers Cannot Be Blamed For Rising House Prices

Datuk Seri Michael Yam, President of Rehda Malaysia

Property developers say that the increase in Malaysian house price cannot be fully pinned onto the developers themselves. Construction and compliance costs are the main factors for the rising prices, according to the Real Estate and Housing Developers’ Association Malaysia (Rehda).

Explaining the development costs involved when a developer undertakes a project, Rehda President Datuk Seri Michael Yam says that there are five costs involved, namely construction cost – which include labor and material, land cost, compliance cost, interests for borrowings and developers’ profit margin.

While construction and land costs are restricted to economic movements, developers are calling for a reevaluation of the compliance cost placed on them, which include levies paid to authorities as well as requirements to build infrastructure for utility companies such as power substations, pipes, manholes, and even to the extent of building a reservoir.

According to Rehda Vice President Datuk Ricque Liew, one has to take into consideration the many requirements and costs placed by state authorities and not simply point the finger at developers for the high prices of houses.

 “Compliance cost can amount between 15% and 25% of the property price. These additional costs have to eventually be passed on to the home buyers,” he said at Rehda’s 2013 first-half property industry survey.

The survey which is based on a sample size of 150 member companies from all 12 states across Peninsular Malaysia revealed an increase in the number of launches in 1H 2013 along with the number of respondents reporting improvement in sales performance as compared to the previous corresponding period. Feedback from the respondents reported that 95% of their buyers are locals buying for the first time, mainly for own occupation.

The survey has also indicated an upward trend for future launches with strata properties expected to dominate 2H 2013 launches in Selangor, Kuala Lumpur and Johor.