House buyers to shoulder burden of impact of fuel price hike, crackdown on illegals, say developers

Prospective house buyers face forking out at least 10% more for their dream home, with developers bound to push additional costs caused by an increase in fuel prices and worker absenteeism.

The Star reported that the construction industry had been hit by a double blow, higher costs of building materials due to the RM0.20 increase in the price of RON 95 petrol and a nationwide crackdown on illegal immigrants by authorities.

The Star quoted Real Estate and Housing Developers Association of Malaysia president Datuk Seri Michael Yam Kong Choy as saying the failure of foreign workers to turn up for work was causing delays, which added to costs.

He said developers had experienced this in the past when continuous raids by authorities resulted in legal migrant workers not turning up for work or delaying their return to Malaysia.

Yam said migrant workers, even those with proper documents, were intimidated by these raids.

"The shrinking supply of labour will force developers to pay workers more to meet contractual deadlines. Failure to meet these deadlines will result in financial penalties as developers are bound by the sales and purchase agreements signed," Yam added.

The Star reported that sales and purchase agreements stipulated that compensation will have to be paid by the developer to buyers if delivery of the said property is late. Contracts in the private sector also have no provisions for price adjustments.

Despite the call by Prime Minister Datuk Seri Najib Razak last week for businesses and traders not to increase their prices following the increase in petrol prices, Yam said it had affected the entire supply chain of the industry, involving more than 100 types of businesses.

Master Builders Association of Malaysia president Matthew Tee warned of a scenario similar to 2002, when the construction industry grounded to a standstill due to a shortage of workers.

He said their members were already complaining that their legal workers whose documents were being processed hadn't turned up for work.

"Our understanding is that all foreign workers will be detained unless they can prove that they have proper documentation. This can be difficult as their documents may still be with their employer or immigration pending the affixing visa of stickers by the authorities," Tee said.

In Penang, the Penang Master Builders and Building Materials Dealers Association says it expected construction costs to rise by 3 to 5%. The cost of transportation was likely to rise 10 to 20% and the prices of sand and cement by between 5 and 10%. - The Malaysian Insider

... But it is beyond our means, say youngsters

KUALA LUMPUR: Malaysian youths, who have been encouraged by the Real Estate and Housing Developers Association to buy a house before a car, say houses are too expensive and beyond their means.

Marketing executive Omar Islam Akhiruddin, 26, bought a second-hand car last year and lives with his parents in Puchong.

“I need a car because I need to move around and houses are expensive,” said Omar, adding that since he lived with his parents, a house was not a necessity yet.

Omar said he would prioritise buying a house if there was an LRT station nearby, adding that he would not depend on buses as a form of public transportation.

SEGi University lecturer Alex Chan, 28, says that even with the 1Malaysia Housing Programme (PR1MA), houses were too expensive for fresh graduates.

“As the Government has raised the ceiling price for PR1MA houses, they are too costly for fresh graduates who have loans to pay and other living expenses to meet,” he said.

Earlier this year, the Government raised the ceiling price of PR1MA homes to RM450,000 while the maximum household income eligibility was increased to RM7,500.

Chan, who bought a car earlier this year, said a vehicle ranked higher in necessity than a house in Malaysia.

“I can always rent a place but my house can’t take me places. People need transport,” said the Ipoh native, who has been renting rooms since he started working in 2010.

According to Chan, the public transportation system here was unreliable.

“KTM is not that good. The LRT is okay but it doesn’t go everywhere.

“When we have an efficient transportation system, which is also affordable and easily accessible, people can perhaps prioritise where their financial responsibilities lie,” he said.

Broadcasting student Joshua Nicholas Aeria, 24, said he was looking forward to moving out from his relatives’ house and buying a car once he finds a job.

“I want to rent a place and slowly save up for a car but finding a job is the top priority at the moment and having a car helps,” said Joshua. - The Star

Buy house first, youths told

PETALING JAYA: These days, it has become a trend among the young who enter working life to place priority on owning a car instead of a home.

Perhaps buying a vehicle which gels with their current lifestyle is cheaper for them, compared to purchasing a house.

Nevertheless, Real Estate and Housing Developers’ Association’s (Rehda) immediate past president Datuk Ng Seing Liong said the trend should be reversed.

“Buying a property, such as an affordable house, should be the main priority for youngsters and they should not wear out their salary on owning a car,” he told Bernama when met at Wisma Rehda here yesterday.

Thus, he suggested that youngsters begin buying property early in their careers, especially for those located in hotspot areas.

“I understand that a car is a necessity for the younger generation, but bear in mind that property prices will always go up. Take this as an investment and in the meantime commute via public transportation,” advised Ng.

He said there were affordable houses away from the city centre which were in high demand.

“Higher prices are only in the hot-spot areas, but it seems to reflect the whole market.

“If they look at the bigger areas, such as in Malacca, Pahang and Kelantan, the prices are still affordable.”

He also explained that the property value rise could be attributed to “people are not just buying a house, but they are purchasing the lifestyle that comes with the property”.

According to Rehda’s Property Industry Survey for the first half of this year, the top five hotspots in the Klang Valley are Puchong, Cheras, Kota Damansara, Kuala Lumpur City Centre and Shah Alam, with landed property ranking at the top followed by condominiums and serviced apartments. - The Star

Rehda wants monitoring of buyers of affordable homes

KUALA LUMPUR: The Real Estate and Housing Developers’ Association (Rehda) has called on the government to monitor buyers of affordable housing, saying there is no mechanism for this at present.

Rehda president Datuk Sri Michael Yam said while developers have done their best to provide houses in an affordable price range, it is also the government’s duty to monitor house buyers to make sure that affordable houses are going to the right people.

“I think as a responsible organisation, our developers have provided a million low- to medium-cost houses. But there has been no monitoring of the sub-sales of subsidised housing, and something has to be done in order to prevent profiteering.

“Under the context of the social housing system, developers are being responsible. But who monitors who gets the houses later? Going forward, if the government wants to reach the target audience for affordable housing, there has to be a body to control  subsequent transfers,” he told a media briefing yesterday.

Rehda immediate past president, Datuk Ng Seing Liong, said there has been a misconception among buyers in general with regard to rising house prices.

“There have only been a few hotspots where property prices have gone up. However, it must be understood that people are not buying homes, but rather a lifestyle. There are many second-hand houses that have not seen much of a take-up rate due to financing issues,” said Ng.

According to recent Rehda research findings, residential selling prices averaged between RM500,000 and RM1 million during the first half of the year, mostly in Selangor, Kuala Lumpur, Johor and Penang.

The survey, which sampled 150 Rehda association members across 12 states, found that the number of respondents that will be offering houses priced within the RM250,000 to RM500,000 range is expected to increase to 25% of total units in the second half of 2013 after falling to 23% in the first half.

Yam: ... something has to be done to prevent profiteering.

The survey also showed that some 95% of buyers were local, whose main purpose was for their own occupation. The remaining 5% were foreign buyers who purchased the units  for investment purposes.

The survey respondents were optimistic of the outlook for the second half of 2013, with the sentiment expected to continue into the first half of 2014.

Future launches are expected to increase to 63% or 18,181 units year-on-year for the second half of 2013, with strata properties expected to dominate launches in KL, Selangor and Johor.

The survey also found that the local property market is facing its fair share of challenges, which could change sentiment.

Yam said rising labour costs and shortages, inconsistent supply and the increasing cost of building materials were the main challenges plaguing the construction side of the industry.

Almost half the respondents have reported a 5% to 10% increase in the cost of doing business.

“There was also a significant increase in the buyers (about 62%) reporting to our members that they were having issues with end-financing, as a result of the stricter borrowing requirements imposed by the banks,” Yam said.


This article first appeared in The Edge Financial Daily, on September 03, 2013.

Looking after the affordable housing community

PETALING JAYA: Measures to curb speculation in the property market and cross-subsidisation do not make for a healthy property sector in the medium to long term, according to the Real Estate and Housing Developers’ Association of Malaysia (Rehda).

Rehda president Datuk Seri Michael Yam drew attention to the affordable housing segment, which suffers the brunt of such measures like the real property gains tax (RPGT) as well as the impact of cross-subsidisation from the low-cost segment.

“Property speculation is in hotspots, not among the affordable housing community, but if the Government continues to have tightening measures, then it could affect 95% of the market,” he said at Rehda’s 2013 first-half property industry survey, noting that the secondary property market, for example, would not be able to sell well.

“We need to examine carefully the various categories of buyers and speculators and prescribe a more focused action plan against the right people,” he said, explaining that the broad brush-stroke approach of dealing with speculators had unjustly impacted other asset classes as well.

Past president Datuk Ng Seing Liong added that the hoo-hah about property price hikes was not reflective of the whole market, as steep rising prices occurred only in certain hotspots.

“Price hikes in these hotspots were reflected in the media and then caught by house buyer associations, which started asking the Government to clamp down on property speculation via the RPGT and other tightening measures,” he said, “Remember, these people are buying into a lifestyle, and hence, the price has to go up.” Ng noted that there were reasonably priced basic houses out there and that there was supply in the secondary property market. “The choice is still with the buyer, they should not just claim that prices keep going up.”

He also commented on the build-then-sell (BTS) mechanism, which he believes will negatively affect house buyers in the end, as supply falls subsequently.

“With BTS, when we start restricting supply, house prices would go up.”

Aside from the curbing measures, Yam also pointed out a need to revise the cross-subsidisation, which has also led to swelling property prices across the board.

“The low-cost subsidised housing is sold for RM42,000 when the building cost is RM100,000. So, who is paying the difference? The subsidy is passed through to other housing categories and subsequently, those who buy in these other categories,” Yam said, adding, “Thus, prices have gone up.”

To address this issue, he recommended that the Government focus on affordable housing, which could be built without a loss so that developers need not pass the cost to other buyers. “Now that low-cost housing is no longer required, the Government should focus on affordable housing, be it through the 1MalaysiaHousing Programme, or PR1MA, or even developers,” he said. - The Star

More property launches expected in H2

PETALING JAYA: The number of property launches expected in the second half of 2013 will be higher compared with the first half, trending towards smaller and affordable units according to Real Estate and Housing Developers’ Association of Malaysia’s (Rehda) property industry survey.

The survey showed that 63% of respondents have product launches in the coming months with 18,181 units in the pipeline, which is 11% higher than the first half of this year.

Rehda’s findings also found that smaller and affordable units are expected to be the trend of the future as landed property launches drop from 53% in the first half to 38%.

“There are more strata property in upcoming launches in the second half of 2013, with 15% increase in numbers compared with the first half, coming from Kuala Lumpur, Selangor, Penang and Johor,” Rehda president Datuk Seri Michael Yamsaid.

“This is because as property prices go up, developers have to shrink the unit sizes so that the absolute value is within the reach of first-time homeowners and young professionals,” he said. While two and three-storey terrace houses were the most popular property types launched in the first half, condominiums and apartments will take the lead in the coming period.

In the commercial segment, 48% of upcoming launches will be SoHo (small office home office), SoFo (small office flexible office) or SoVo (small office versatile office) units. - The Star

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‘Minimum RM1m property purchase not a blanket policy’

KUALA LUMPUR: Raising the minimum purchase price for foreign property buyers to RM1 million is not a blanket policy, said Minister of Urban Wellbeing, Housing and Local Government Datuk Abdul Rahman Dahlan.

Speaking at a press conference yesterday, Rahman stressed that the ministry would not implement it as a blanket policy throughout the country, “because it’s not going to be fair to developers.”

He said the government would advise developers or state governments to increase the minimum purchase price for foreign buyers to RM1 million if there is a chronic problem with affordability issues in the particular areas.

“There are areas where the RM500,000 minimum purchase price for foreigners does not have a direct impact on the issue of affordability in the local market,” he said after giving a keynote address at the 16th Malaysia Housing and Property Summit 2013 organised by the Asian Strategy & Leadership Institute (ASLI).

Overall, only 5.5% of property throughout the country are owned by foreigners, he said.

“I don’t think we should deprive developers of the potential business they can get from foreign buyers,” he added.

Meanwhile, he said the ministry may consider raising real property gains tax (RPGT) to stabilise the price of houses in the country.

Nevertheless, its effectiveness as a measure to curb housing speculation has been questionable, he said.

He noted that the current low RPGT has not been effective in stabilising house prices, although it has been raised from 5% to 10% in 2011 for properties sold within two years. In 2012, this rate was further increased to 15%.

The house price index by the National Property Information Centre (Napic) recorded the highest increase for the last five years, showing the ineffectiveness of the current RGPT mechanism.

On the progress of the one million affordable housing units by the government, Rahman said the ministry has established a coordination committee to monitor its implementation by 1Malaysia People’s Housing Program (PR1MA), Syarikat Perumahan Negara Bhd (SPNB) and other agencies.

What’s in store... Asli chairman and Sunway Group chairman Tan Sri Dr Jeffrey Cheah (right), Minister of Urban Wellbeing, Housing and Local Government Datuk Abdul Rahman Dahlan (centre) and Asli CEO Tan Sri Dr Michael Yeoh at the 16th National Housing & Property Summit 2013 in Kuala Lumpur yesterday

“Under the first-time home buyer scheme, there is a huge demand but the supply is not there. PR1MA is our answer to that problem,” he added.

PR1MA is a programme dedicated to providing affordable quality housing for the middle-income group living in the country’s urban areas.

In his keynote address, Rahman said that the one million affordable housing units include 500,000 units under PR1MA Corp Malaysia, which will be 20% cheaper than similar units in the market.

“The proposed one million affordable housing units announced by the government would have an impact on market supply and would affect prices of affordable houses in the market,” he added.

He pointed out that the committee aimed to coordinate the efforts by all the government agencies and state governments to ensure that the target of one million housing can be achieved.

“It’s not so easy to pinpoint problems with regard to the runaway prices, it’s not fair just to simply point at property developers. There are many other reasons including some policies of the government that need to be looked at,” said Rahman.

“It cannot be resolved by one party alone, it has to be a collaboration involving everyone.”


This article first appeared in The Edge Financial Daily, on August 28, 2013.

‘Higher RPGT does not work’

KUALA LUMPUR: Imposing higher real property gains tax (RPGT) will not be effective in arresting rising property prices, say industry players.

Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan said on Tuesday that his ministry is studying the imposition of a higher RPGT next year to stabilise housing prices.

Currently, an RPGT of 15% is imposed on properties sold within two years of ownership and 10% if sold within three to five years. Properties sold after five years are exempt.

“Politically, the government needs to be seen as doing something about property prices. The RPGT is a good hint to speculators that the government plans to cool the property market without affecting genuine homeowners,” said DTZ Malaysia director Eddy Wong.

“Singapore has so far imposed eight rounds of cooling measures. It can mean that the previous seven rounds did not quite achieve the intended effect and that’s why there is an eighth round. But this time, the Real Estate Development Association of Singapore is saying the Singapore property market is approaching ‘inflexion point’, so perhaps this time it will work?

“Two of the fundamental drivers of property prices are a growing young population who are setting up their own households and income growth. Some people may speculate but so long as these drivers are there, prices will go up,” he said. 

CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen proposed some changes to the existing RPGT structure and additional measures to curb rising prices.

“The government may want to consider raising the RPGT quantum and period, and impose a stamp duty on property sellers who have a lot of transactions in a certain timeframe,” he told The Edge Financial Daily.

“I am in favour of a further 5% increase in the RPGT and stretch the disposal period from two years to three years. For example, the RPGT on disposals made during the first three years is raised to 20%. 

“Most speculative transactions happen around the second and third year. The third year is when most properties are completed. So this longer period will cover a wider basket of speculators,” Foo explained.

On the imposition of stamp duty on sellers, he said: “For example, you can impose a 3% stamp duty on sellers who have sold more than four properties in the last five years.”

Foo urged the government to monitor other trends in the primary market. These are bulk purchases, group discounts, rebates and freebies such as waiving legal fees and offering partially furnished units, which are usually included into the price tag.

“I think there is a need to make sure property prices are sustainable and affordable. If prices are sustainable, in line with the income of the rakyat, there is no need to reduce prices,” Foo said.

Real Estate and Housing Developers’ Association national treasurer Datuk NK Tong said raising the RPGT may work in the short term but will backfire.

“To introduce cooling off measures, including raising RPGT, at a time like this will slow down the construction of houses. While this will stabilise prices in the short run, the shortage of supply will further drive up prices in the medium to long run,” he said.

Tong said cities in Australia — Melbourne, Adelaide, Sydney and Perth — are ranked among the top 10 most livable cities in the EIU Global Livability Survey 2012. Kuala Lumpur ranked 77 out of 140.

Australia has 22 million people living in 9.1 million homes in the city, while Malaysia has 20 million people living in only 4.8 million homes in urban areas.

“If we are to be a truly developed nation, Malaysia needs more houses.

“There will be a higher number of people per household, which could also be due to multi-generational homes rather than married couples moving out,” Tong said.

Assuming no further population growth, he estimated that Malaysia would need 8.3 million homes or a new supply of 100,000 homes per annum over 35 years for the 20 million urbanites in Malaysia for the country to be as livable as Australia.

“Everywhere in the world, the need for affordable housing has been one of the key responsibilities of the government. Malaysia tried to address this through many agencies in the past but the numbers are still way behind. Hopefully with the advent of PR1MA [1 Malaysia Housing Programme], it can finally catch up with the demand of the people.

“Governments are also challenged to find ways to increase the incomes of people in order to keep up with inflation. Artificial price controls are not sustainable in the long run. What should be done is to address the need for us to move ahead to be a high-income nation, and this is in line with Malaysia’s aspiration to be a truly developed nation,” said Tong.


This article first appeared in The Edge Financial Daily, on August 30, 2013.