Property prices may jump 20%

KUALA LUMPUR: The Real Estate and Housing Developers’ Association (Rehda) Malaysia expects property prices to increase by up to 20% in the next six months on higher material and land costs, its president Datuk Seri Michael Yam said.

Yam noted that building material cost increased by between 5% and 10% annually. Steel bars, for instance, were priced at RM2,350 to RM2,580 per tonne at the end of last month, an increase of 30% to 40% from RM1,800 at end-2010. The average property price rise this year is expected to be about 13%, he added.

“The increase will range between 2% and 50%, depending on the location and the development type. With higher property prices, condominiums are a good buy in Kuala Lumpur compared with terraced homes,” he said at a media briefing on 2011’s property outlook yesterday.

The estimates are based on a half-yearly survey by Rehda among its members, comprising housing and property development companies, as at December last year. Some 135 out of 972 members from all states, or 14%, responded.

Yam noted that 58% of the respondents indicated that they have increased their launch prices by an average of 11% (minimum: 5%; maximum: 40%) in the second half of last year, compared with launches in the first half of last year.

He said a majority of the respondents were optimistic of the property market in the coming six months, while they anticipate the number of new launches to rise in the first half of this year.
Yam (left) and Rehda Malaysia immediate past president Datuk Ng Seing Liong at the media briefing.
According to the survey, launches in the first half of this year in Kuala Lumpur will be mainly apartments/condominiums, terraced houses and serviced apartments. In Selangor, launches for the same period will generally offer terraced houses, semi-detached homes/bungalows, followed by apartments/condominiums.

Both Kuala Lumpur and Selangor are expected to see more commercial property launches from January to June as 26% of the respondents said they will be having commercial property launches. Only 17% of the respondents offered commercial properties in the second half of last year.

Rehda exco member and treasurer Teh Boon Ghee said property prices in Kuala Lumpur will shoot up at least 15% this year due to the higher land cost and land scarcity. He is also head of property development at IGB Corp Bhd, the developer of Mid Valley Megamall and The Gardens Mall in Kuala Lumpur.

In general, properties launched last year were mostly terraced homes, semi-detached/bungalows, condominiums/apartments, serviced apartments as well as townhouses, the survey showed. Properties ranging from RM100,000 to RM500,000 were the most sellable, the survey stated, whilst properties priced between RM250,000 and RM500,000 were the most in demand. The Valuation and Property Services Department under the Finance Ministry had earlier forecast the property sector to contribute 19.6% to the 2010 GDP from 15.5% the previous year.

On the government’s My First Home Scheme announced recently, Yam said Rehda would appeal to the government to have a separate mechanism for properties in Kuala Lumpur and Selangor.

“There are not many properties priced below RM220,000 in Kuala Lumpur and Selangor, which are the urban centres of population growth and migration. Rehda appeals to the government to review the property price limit to RM350,000, or even RM400,000, for the Klang Valley, as well as increase the household earning cap,” he added.

In partnership with 25 financial institutions and banks, My First Home Scheme is designed for single adults and households earning no more than RM3,000, intending to purchase houses priced between RM100,000 and RM220,000.

Yam said many developers may need to review their future developments by building smaller units, where the condition may include higher plot ratio to encourage the construction of more affordable units, and ensure convenient transportation nearby.

This article appeared on the Property page, The Edge Financial Daily, March 11, 2011.

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