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REHDA Members Concerned about Escalating Building Costs

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REHDA Panel of National Council Members

The escalating costs of building materials is a cause of concern among REHDA members, many of whom are facing challenges in rising prices of bricks, steel, cement and sand – which are major construction components. At REHDA’s media briefing on 26th September, REHDA revealed that its Property Industry Survey results for 1H 2011 showed that members are also facing shortages in brick supply and labor.

“This does not bode very well for property developers, who from the survey also understood that house buyers are looking for inexpensive houses, even in more urban areas where land is scarce and costs are higher. It places developers in a difficult situation trying to contain costs to select a marketable price, and at the same time juggle the plethora of costs related to building materials, compliance and numerous contributions, among others,” said Datuk Seri Michael KC Yam, President of REHDA.

47% of respondents planned to increase selling prices for their own launches by 15% and above. 65% of respondents expect general prices to move up by up to 20% in 2H 2011.

Datuk Seri Michael Yam

“We are happy to note via the survey that our members have shown prudence in their launches, understanding their market and offering housing that satisfactorily matches demand, as can be seen by keen bookings that quickly translate to sales,” said Mr NK Tong, Chairman of the Communications and PR Committee and Branch Chairman of REHDA Wilayah Persekutuan (Kuala Lumpur). He also said that the Malaysian property market is still largely dependent on the domestic market which consists of mostly owner occupiers and has therefore been able to be insulated from external shocks in the face of global uncertainty – making the property industry a comparably safe and stable environment compared to other countries.

The REHDA Property Industry Survey 1H 2011 reported by REHDA Institute also felt that the My First Home Scheme has yet to fully take off in terms of the mechanisms on ground, as some members have cited lack of information, higher interest rates and overall difficulties by house buyers in obtaining the loan. REHDA members also reported that the effects of the Loan-To-Value measures were being felt, even more so in the Klang Valley region.

NK Tong

The survey report also highlighted that many developers were experiencing unsold stock from six months to up to three years post-launch, saying that most of these properties were bumi lots that were not yet released. Secondary reasons for unsold stock include market conditions and lack of interest. However, most of these respondents said that unsold stock were at manageable levels of below 20% of overall units.

In conclusion, REHDA felt that Malaysia’s property market launches shall remain healthy with encouraging demand for both 1H 2011 and 2H 2011 with 41% of respondents having optimistic sentiments. Property prices however will see an upward trend as construction costs increase. Building materials and labor costs too will continue to be major challenges in the housing industry. On market forces, the Association acknowledged that the Malaysian market is driven by domestic buyers with significant number of first time owners who purchase for their own dwellings. It is also comforted by its members’ prudent stance towards market conditions.