Rehda shouldn’t have announced hike in house prices

The Real Estate and Housing Developers Association (Rehda) should not have announced that the price of houses would increase by up to 10% before discussing the matter with the Urban Well-being, Housing and Local Government Ministry. Its minister Datuk Abdul Rahman Dahlan said he was disappointed with the announcement of the hike, purportedly due to the decrease in petrol and diesel subsidies announced by the government last Monday. "To me, this is an irresponsible statement. We have our own formula and we feel that the reduction in oil subsidy by 20 sen per litre cannot be translated into a house price increase of up to 10%. "I too know about cost structure - even if there is an increase of price of houses, we expect the maximum to be five percent. The people will be more worried as they are already facing rising cost of living, especially in the urban areas," he said after attending a community gathering, here, Sunday. Abdul Rahman was commenting on the reported statement by Rehda president Datuk Seri Michael Yam Kong Choy on Thursday that the fuel price increase of 20 sen per litre was expected to contribute to price increase of houses by up to 10%. On the housing lab held recently, he said the Ministry was compiling the facts and important input. "We are in the midst of preparing a report for the Prime Minister and we will be having a meeting this coming Thursday, specifically to discuss how to reduce the price of houses," he added. - Bernama

Hot issues for consideration

OF late, there has been talks that the real property gains tax (RPGT) may be be reinstated in the coming Budget 2014 to be tabled next month. Real Estate and Housing Developers Association (Rehda) has written to the authorities to state their views. Bank Negara is also studying the possibility of banning interest bearing schemes. The Developers’ Interest Bearing Scheme (DIBS) is said to encourage speculation as buyers need only to pay 5% or 10% downpayment and need not pay anything until the property is completed. The return of RPGT and the possible removal of DIBS are signs to prepare the property sector for the challenging times ahead, as seen by the volatile stock markets in South-East Asia. While Malaysia has to tackle a number of issues in the greater framework of the economy, there are three issues befuddling the property sector – bubbles, speculative elements and affordability. Developers want a benign RPGT regime and the DIBS to be maintained while certain quarters want the return of the old tax structure of 30% tax on profits on disposal in the first year. The RPGT is both an anti-speculative and revenue-generating measure. RPGT will play its role to curb speculation, says property consultant Elvin Fernandez of Khong & Jaafar group of companies and the House Buyers Association (HBA). During the last two budgets, HBA had anticipated a tax regime with more bite and was sorely disappointed. There was a time when not all developers offer interest absorption schemes. Today, most are pressured to do so. Says Rehda president Datuk Seri Michael Yam: “It helps people get on the house-ownership ladder.” “It also nurtures speculative tendencies,” says Elvin. Incidentally, interest absorption scheme was the first to be banned by the Singapore government as early as 2009 in a series of measures to cool the property market. DIBS aside, the larger issue is transparency, says Elvin. When developers offer DIBS plus a host of other incentives – rental guarantee, cash back payment, free furniture, free stamp duty and legal fees – banks and lending institutions provide mortgage loans based on the larger headline figure inclusive of these discounts. A mortgage based on the real price, without discounts, would reduce the loan amount and lessen household debt. Discounts tend to bloat up the loan amount by another 10% and 20%, says Elvin. The provision of the real price, without the discounts, gives a true and real picture of the housing market. DIBS and discounts have also resulted in a buoyant primary market. In 2009, the National Property Information Centre recorded a total of 211,600 residential transactions, of which 12.24% were purchases from developers and 87.76% from the secondary market. Three years later, in 2012, out of 272,669 transactions, slightly more than a fifth (22.09%) were purchases from developers. “This has never occurred before. This is an extraordinary jump, and this is because of DIBS and the discounts given,” says Elvin. The shift in the market is clear and this represents risk, he says. On the issues of housing beyond the reach of many, about a third of housing in the country is below RM150,000. Some of them are in enviable locations, for example near Jalan Maarof in Bangsar Kuala Lumpur. But these are not well-maintained and young professionals do not want to live there. It boils down to an overall property management issue. PR1MA Corp Malaysia CEO Datuk Abdul Mutalib Alias says more than 20,000 homes will be built under 15 affordable housing projects in Greater Klang Valley, Johor, Penang, Sabah and Sarawak in Phase 1. - The Star

Malaysia Property: Buyers of 1H 2013

Half of the buyers were first-time homeowners. Local buyers outnumbered foreign buyers at 95% against 5%. These locals bought predominantly for the purpose of self-dwelling (62%), followed by for investment (28%), for family members (7%) and for rental yield (35%). Some 55% of the developers reported unsold units, with 16% saying their cash flow were severely impacted as a result. These are the ones who had upwards of 21% unsold units, all the way to above 50%. The reason cited: unreleased bumiputera lots (30% respondents), low demand (20%) and odd units (15%).

Malaysia Property: Price Range of Unsold Units

49% of the developers said they had unsold units above RM500,000 in Selangor, Kuala Lumpur and Penang.

New homes to cost 10% more

People looking to own a house any time soon will have to pay at least 10% more for their dream home, according to developers. They said the increase was due to the double whammy that has hit the construction industry – higher costs of building materials resulting from the 20 sen rise in the price of RON95 petrol and diesel and absenteeism among foreign workers because of the nationwide crackdown on illegal immigrants. Real Estate and Housing Developers Association of Malaysia president Datuk Seri Michael Yam Kong Choy said the failure of foreigners to turn up for work was causing delays, thus adding to costs which contractors were certain to push to consumers. He added: “The raids on construction sites have frightened even legitimate migrant workers who are staying away. “This also happened in past raids, Legitimate migrant workers simply did not turn up for work or delayed their return from their country until the storm blew over. “Because of the shrinking supply of workers, developers have to pay more for labour to meet contractual deadlines, failing which they will be penalised.” Developers are bound by the Sales and Purchase Agreement and will have to pay compensation to buyers for late delivery, Yam said, adding that contracts in the private sector were awarded with no provisions for price adjustments. While acknowledging the need to flush out illegal immigrants, he said any reduction in the number of workers would hurt developers. On the fuel price hike, Yam said it affected the supply chain of the construction industry, involving more than 100 types of business. Master Builders Association of Malaysia president Matthew Tee said members were complaining that their legal workers whose documents were being processed were staying away for fear of being arrested. “Our understanding is that all foreign workers will be detained unless they can prove that they have proper documentation,” he said. “This can be difficult as their documents may still be with their employer or immigration pending the affixing visa of stickers by the authorities.” He added that there had been cases in the past of legal workers being detained for up to 14 days. Tee hoped that there would be no recurrence of such instances, and warned against a repeat of the situation in 2002 when the construction industry was brought to a standstill due to a shortage of workers. In George Town, the Penang Master Builders and Building Materials Dealers Association says it expected construction costs to rise by 3% to 5%. Association president Datuk Lim Kai Seng said the cost of transportation was likely to rise 10% to 20%, and the prices of sand and cement by between 5% and 10%. - The Star He said that cement now cost RM17.50 per 50kg while sand sold for RM70 per cubic metre.

Commercial Property Launched Price in 2013

The majority of properties launched in the period surveyed were priced at around RM500,000-RM1mil throughout the Peninsula, with Kelantan and Perak being the exception. Perak had four developers launching property in the RM250,000-RM350,000 range; Kelantan saw four who launched property below RM250,000. This pattern will, more or less, hold in the second half. The most popular commercial properties among the developers are in the RM500,000-RM1mil range – 43% of the developers offered such property in the first half, with 50% expected in the second half. On a brighter note, the percentage of developers that is expected to increase prices in the second half dropped to 45% from 69%.

Malaysia Residential Property in 2013

To the prospective residential property buyers, the prices most popular among developers in the period surveyed were in the RM500,000-RM1mil price range (47% of developers sampled), above RM1.5mil (11%) and RM350,000-RM500,000 (11%). While the percentage of developers selling residential properties in the RM250,000-RM500,000 price range hovered at around 40% from the second half of 2011 through to the second half of 2012, it was at only 23% in the first half of this year. It is, however, anticipated to inch slightly higher to 25% in the second half.

Malaysia Property: The Most Popular Areas in the Klang Valley

The most popular areas in the Klang Valley are 1) Puchong, 2) Cheras, 3) Kota Damansara, 4) KLCC, and 5) Shah Alam. The Top 3 residential units by type were 1) 2-3-storey terrace houses (3,104 units), 2) serviced apartments (2,208), and 3) condominium/ apartments (1,863). However, condos/apartments (6,689) will nudge terrace houses (2,920) to second place in the second half, with serviced apartments in third (2,436). In terms of trends, the penchant right now is for 1) properties with smaller, affordable units, 2) more green features in housing, 3) higher density of high-rise development, and 4) niche developments with multi-use zones.

Malaysia Property: Future Launch in 2H 2013

The outlook for the second half of 2013 is positive, with more respondents launching projects and more units being launched. While the first six months saw a total of 10,985 units of property launched, the following six will see the number climbing to 18,181 units.

Malaysia Property: Number of Landed Property Launched in 1H 2013

Malaysia property prices are not getting cheaper, sales remain robust, locals far outstrip foreigners in purchases, and the number of landed property coming on the market is declining as strata properties trend upwards – these are some of the patterns revealed by a survey of the first six months of 2013 by the Real Estate and Housing Developers’ Association (Rehda) indicated. According to the survey, which saw the participation of 150 out of the 1,030 Rehda members, 59% of respondents reported similar or improved sales in the first of 2013 compared to the second half of 2012.