Inflation could push property prices up by double-digit, says Rehda

• “Globally, we have been in 40 years of inflationary environment, and it will remain inflationary for a while. So I think that is why we have no choice but to consider price increases.”

KUALA LUMPUR (Feb 22): Inflation and a higher cost of doing business are likely to push property prices up by double-digit this year, Rehda president Datuk NK Tong (pictured) has cautioned.

"On average it will be a double-digit (increase in property prices)," he said, but noted that in the past six months the anticipated price increase has not materialised.

"I think this is also reflected in the moderation of (prices of) construction materials.

“Globally, we have been in 40 years of inflationary environment, and it will remain inflationary for a while. So I think that is why we have no choice but to consider price increases. This is also to protect the homeowners whom developers are selling these units to. This is to make sure they (developers) have enough revenue to complete the project,” he said at the Rehda Property Industry Survey 2H2022 and Market Outlook for 2023 media briefing on Wednesday (Feb 22).

According to Rehda’s survey, three out of four developers surveyed reported an average increase of 13% in the overall cost of doing business against an average increase of 17% in the first half of 2022 (1H2022).

Meanwhile, 94% of respondents said they are affected by the current economic scenario, and have taken various cost-cutting measures including freezing recruitment, reducing salary, rescheduling the launch of planned projects and reducing the scale of launches.

“Similar to 1H2022, respondents reported that the three main cost components affecting cash flow were material and labour cost, compliance cost (including but not limited to policies, contributions, planning requirements and so forth) and land cost,” Tong said.

However, he added that Bank Negara Malaysia is doing a good job in managing inflationary pressure in the country by keeping the overnight policy rate (OPR) relatively stable.

“In Malaysia the interest hike is much more moderate. With the economy opening up and the new government which is very focused on doing right by the Rakyat, I think at some point people will have to make a commitment into certain assets that protect themselves against inflation in the long run, one of which will be real estate."

He observed that an investment in real estate would remain a good hedge against inflation, noting properties tend to hold better value should inflation remain sticky.

He said that although the rising OPR may be seen as a headwind, he believes that people will eventually recognise that real estate helps protect the value of their assets and to keep up with inflation.