High construction cost prevents developers from offering cheaper homes


The increase in construction and development costs have prevented developers from lowering the prices of various properties despite the excessive building, glut of selected properties and disjointed reality between demand and supply.

Rahim & Co International Sdn Bhd director of Petaling Jaya office Choy Yue Kwong said many developers can’t reduce their house prices due to the hefty fees incurred throughout the construction period.

“One of the ways to solve this problem is to reduce the cost of development. This will simultaneously reduce the overall asking and selling house prices,” he said at a media briefing in Kuala Lumpur yesterday.

Consumers complained that residential property prices have skyrocketted beyond the means of many Malaysians, especially in key areas like Kuala Lumpur, the Klang Valley, Johor and Penang.

The high residential property prices have forced many to rent their house, or escaped far from the cities in search for affordable accommodations.

Choy said among the ways to reduce development cost are to release more land for affordable housing, reduce or waive compliance and legal fees, and reduce related expenses during approval.

“If all of these measures are able to be granted by the government, I am sure developers would be more inclined to push their products to a lower-based selling price.

“Both sides need to look at this matter in order to solve the housing affordability issue in Malaysia,” he added.

On the mismatch of income levels and the rise of house prices, Choy said it would be difficult to strike a balance in the short term, as to achieve a significant increase in income, productivity must also rise and that will take a longer period to achieve.

Rahim & Co director of research Sulaiman Akhmady Mohd Saheh said between 2014 and 2017, there were some improvements in housing affordability, supported by the higher overall household income.

“But ever since, income levels are growing at a slower pace compared to the growth in house prices,” he added.

Meanwhile, Rahim & Co executive chairman Tan Sri Abdul Rahim Abdul Rahman said the high-end residential segment particularly in central business district areas is expected to experience continued pressure in terms of prices and rentals.

He said that based on recent figures, many of the high-end residential plots have witnessed a price drop of between 5% and 10%.

“These units have seen prices dropping from RM2,000 per sq ft (psf) to between RM1,500 psf and RM1,700 psf.

”I do not think pricing points of RM2,000 to RM2,500 psf bracket, which took centre stage three years ago would happen again, especially in the current climate,” he added.

As such, the consulting firm noted that the residential sector is expected to see more projects within the affordable range defined by prices of up to RM500,000 in the Klang Valley and lower in other less urbanised states. Competition is expected

to intensify with many developers shifting their focus within this segment.

Statistics released by the Valuation Property Services Department saw a lower transaction volume being recorded in the first nine months of 2017 (9M17) at 229,529 for all property types against 9M16 (239,916).

The fall went at a much softer 4.3% than the previous period’s 11.9% (9M15/9M16). Notably, total value of transactions pulled through with a total of RM102.29 billion in transactions recorded in January to September 2017, an increase of 7% from RM95.57 billion in the same period a year ago.

Looking ahead, Rahim & Co expects 2018 will be another challenging year for the property market.