Rising cost a challenge to Malaysian property developers

Updated: Monday December 30, 2013 MYT 12:43:51 PM

Rising cost a challenge to developers

BY EUGENE MAHALINGAM

PETALING JAYA: Guocoland (M) Bhd sees the rising cost of development a growing challenge that is facing many developers within the local property sector. “The external market factors and Bank Negara’s stringent lending guidelines aside, the biggest factor will be the current rising cost of development,” said managing director Tan Lee Koon.“The trends and the chain effect of the recently announced electricity tariff hike (effective Jan 1) are likely to cause another round of increase in the cost of construction materials,” he added.

Under Bank Negara’s responsible lending guidelines, which were implemented on Jan 1 last year, loans are now approved based on net income compared with gross income previously.

Tan also said workers would likely demand higher wages due to the higher cost of living.

“There are also perennial problems like labour shortage and inconsistent supply of materials that the industry faces from time to time,” he said.

On the property-sector related measures announced under Budget 2014, in particular the real property gains tax (RPGT), Tan said he did expect some near-term impact on the local property sector.

“The property market cooling measures announced at Budget 2014 have remained a topical subject until today. Views have been mixed and many have expressed concerns over some of the measures. Some immediate knee-jerk reactions are not unexpected, especially among property flippers.

“Excessive speculation is bad for the market as it will only destabilise the market and the economy. On a more positive note, I reckon it will be business as usual in the coming months when the dust has settled. Genuine buyers, upgraders and long-term investors will be back in the scene in no time.”

The RPGT rate for property disposed within three years is 30%, disposal within four to five years is 20% while no RPGT will be imposed for property disposed in the sixth and subsequent years.

Looking ahead, Tan said as land becomes scarcer in Kuala Lumpur and Petaling Jaya, the spotlight would continue to be on hot spots in suburban areas, such as Rawang, Semenyih and Puchong South.

“As a matter of fact, we have received quite a number of enquiries about our upcoming launches in Emerald, Rawang and we are optimistic the market will pick up after the year-end holidays.”

With the local property sector getting increasingly competitive, Tan said having product innovation and the usage of new building and construction technologies would help steer the company through.

“In an increasing competitive market environment where buyers are spoilt for choice, developing homes that meet their expectations during good or challenging times are no longer good enough. We need to offer compelling products that exceed their expectations.

“And this explains why we are enthusiastic with our upcoming launches – the integrated Damansara City development in Damansara Heights and Emerald in Rawang.”