Expect property price hikes: REHDA survey

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Real estate remains as a good hedge against inflation.

Real estate remains as a good hedge against inflation.

The rising inflation rates may potentially lead to an increase in property prices for home buyers, disrupting the federal government’s plans to provide more affordable housing particularly for the lower-income groups.

Malaysia’s national inflation increased by 2.3% in January 2022 against January 2021. Property stakeholders were expecting the recent inflation rates to decrease with the revitalisation of the economy, further compounded by the reopening of borders. However, inflation rates have only continued to rise. 

The rising inflation rates might not necessarily be bad news for the real estate industry, Real Estate and Housing Developers' Association (Rehda) acting president Datuk NK Tong said.

In such an environment, Malaysians look to assets that might mitigate the negative impacts of inflation, one such asset being property. It is similarly possible that property developers may see an increase in sales because of inflation.

However, findings from Rehda Property Industry Survey 2H2021 have revealed that the overall costs of doing business have increased by 18% in 2H2021. The increase includes material and labour cost, compliance cost and financing and land costs.

Average percentage of increase in business operations

Average percentage of increase in business operations

Source: Rehda 

In 2021, the Home Ownership Campaign (HOC) boosted property sales by providing incentives to developers and buyers, but with its termination, developers are no longer shielded from rising costs. Findings from Rehda’s analysis revealed an expected increase in construction cost by 19% in 2022. 

“We are very much aligned with the government in our nation-building role to house the rakyat. We would be happy to do that. The question now is can we even do that with the uncertain reality of rising costs?” Tong said.

Asked if the increase of construction cost will lead to an increase in prices, Rehda vice-president Datuk Ho Hon Sang said that despite the efforts of developers, the total cost of the products will go up, and any price increase will depend on the developers in question.

With these uncertain circumstances, Tong advised companies to walk a fine line on pricing. They must take care not to price themselves out when trying to factor for inflation, and at the same time, refrain from undervaluing their projects.

“In business, it is about striking a balance,” added Rehda vice-president Datuk Zaini Yusoff said. 

“Because the prices are really hiking up, and it will reflect on our decision in the next 12 months, whether we want to launch the projects. Some of the low hanging fruits that we are very certain will sell, of course, we will launch. But if you go for strata development, it’s very high risk so we really have to measure or monitor the risk factor before we launch.”

Meanwhile, developers are urging the government to work closely with industry leaders to mitigate rising costs, increase access to home financing and assist in managing construction costs.


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