Friday, March 11, 2011

M'sian developers say new launches will cost more

NEW properties launched in the first half of the year will cost 13 per cent more on average owing to higher material costs, with terrace houses in the Klang Valley and Penang facing increases of as much as 50 per cent because of land scarcity, a recent survey of developers reveals.

'Suffice to say, prices will be trending upwards,' Real Estate Housing & Developers' Association (Rehda) president Michael Yam declared at an outlook briefing yesterday.

He also said it would be 'very challenging' to build units for less than RM350,000 (S$146,000) in the Klang Valley and Penang as land prices were already at a premium. The point was made in reference to a government announcement on Wednesday that it would guarantee loans under a new scheme aimed at helping single adults earning less than RM3,000 a month, to purchase units costing between RM100,000 and RM220,000.

Rehda expects its members to review planned launches so they fall within the guideline cap, in the Klang Valley perhaps building much smaller apartments of 500 sq ft. But unless the plot densities are increased and more government land allocated for such housing, Mr Yam said such 'starter kits' might still not be feasible in Kuala Lumpur.

On the need for more affordable housing, Rehda maintained cost increases are not within developers' control as raw material prices had shot up in the past two months, steel bars for example rising by up to 40 per cent to RM2,580 per tonne. It also pointed out that land can still be acquired for less than RM2 psf in Sungei Petani, Kedah, but in land scarce Kuala Lumpur costs about RM2,000 psf.

Because of the differentials, the average cost of a terrace house nationally is RM290,000 but RM430,000 in the Klang Valley. Although there are terrace houses in Selangor priced below RM350,000, they are located further from the city in Rawang, Klang, Sg Buloh, and Semenyih.

Mr Yam said prices were still reasonable when compared regionally, 'but wages need to rise.'

Three out of every four homes in the country is priced less than RM200,000 - and ironically it is where the housing overhang is greatest, its relative affordability notwithstanding. Most of the units are located away from the main cities, however, and unlikely to be sited in the Klang Valley.

But Rehda stressed the greatest impediment to lower housing costs are the 'CSR' or corporate social responsibilities placed by the government on developers who are required to allocate a significant portion of their planned development for roads, drains, utilities, schools, and religious structures, among others.

In addition, there are quotas on how much of a development has to be low cost housing, plus under affirmative action policies, a certain percentage of the development - up to 70 per cent - has to be reserved for bumiputra buyers.

Discounts of up to 15 per cent are also not uncommon. These cross subsidies ramp up the costs considerably especially if there are insufficient bumiputra buyers and a developer has his capital tied up because he is holding on to the unsold lots, sometimes for years.

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