Rehda members expect property prices to increase 20% in 2H

KUALA LUMPUR: A majority of the developers expect property prices to rise by a further 20%. However, the price increment is not so much because of strong demand but the rising cost of building materials.

According to a survey by Real Estate and Housing Developers' Association of Malaysia (Rehda), 65% of respondents expect general property prices to increase by up to 20% in the second half  (2H) of 2011 due to higher cost of building materials, and 47% of respondents were planning to increase selling prices for their own property launches by 15% or more by year-end.

At a media briefing on Monday, Sept 26, Rehda revealed that property developers were faced with increasing prices of bricks, steel, cement and sand, in addition to the labour shortage problem.

The association also said the lack of transparency and inefficiency of local state governments in handling bumiputera housing quotas also added to the property developers' cost burden.

According to Rehda, the price of bricks has increased 27% to 42 sen this year from 33 sen last year while steel reinforcements prices grew 13% to RM2,589 per tonne this year from RM2,285 per tonne last year.  The prices of cement, sand, bricks and steel sections have likewise increased 46.2%, 81.1%, 47.2% and 69.5% respectively since July 2002.

Apart from rising costs, members of Rehda's National Council Panel called for the bumiputera quota to be reassessed as it was among the causes for increased costs to developers. At present, developers must reserve between 30% and 70% of housing units for bumiputeras and unsold units can only be released after applying to the state. They are then required to pay the 7% bumiputera discount as a levy to the state.

"It's [adding] insult to injury," said Datuk Seri Michael K C Yam, president of Rehda Malaysia.

Bumiputera units are seen as unattractive even to bumiputera buyers as units can only be resold to other bumiputeras, he added. This leads buyers to prefer buying non-bumiputera units as a result of this "restriction-in-interest". This impinges on the developer's margins.

Yam stressed a review of the bumiputera quota release system had to be done because he was concerned that the property industry could possibly be used as a political tool by those in power.

Commenting on the prospects of the property market, NK Tong, branch chairman of Rehda Wilayah Persekutuan, said the country's property market was still dependent on the domestic market which comprises mostly owner occupiers. This has led the local property market to be insulated from external shocks emanating from the developed economies.

"There will always be demand as we are still a growing nation," he added.

According to Rehda's Property Industry Survey Report 1H11, only 52% of developers, compared with 55% from 2H10, were cautiously optimistic as 1H saw a slight drop in the number of property launches.

Although there were fewer property launches, the average size per launch increased to 150 units per project from 100 units in the previous half. This suggests that developers that launched projects were more confident of the units being sold.