Reducing construction costs will help manage property price hikes: Rehda

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(From left) Rehda deputy president Datuk Ho Hon Sang, president Datuk NK Tong, chairman Dato' Jeffrey Ng Tiong Lip and research general manager Rusnani Abdul Rahman at the press conference after  the roundtable discussion for the Housing Forward report.

(From left) Rehda deputy president Datuk Ho Hon Sang, president Datuk NK Tong, chairman Dato' Jeffrey Ng Tiong Lip and research general manager Rusnani Abdul Rahman at press conference for the roundtable discussion on Housing Forward report.

PETALING JAYA: Prices of homes will be pushed up in 2023 by higher construction costs, stemming from rising raw material prices, labour shortage and compliance costs, among others. 

Real Estate and Housing Developers' Association (Rehda) president Datuk NK Tong said that it is not yet clear what will be the quantum of increase in property prices due to these factors. 

“While the evidence certainly points to higher construction and development costs that will push prices up, it isn’t clear to what extent prices will continue to rise in 2023.

“This very much depends on each developer’s portfolio of projects, their outlook on inflation and the economy, and their ability to absorb some of the rising costs on behalf of the people,” he said.

Construction cost accounts for 50% to 60% of the gross development value (GDV), according to the Housing Forward: Understanding Costs and Sustainable Prices research conducted by Rehda Institute. It also noted that there is hardly room to reduce the construction costs given the existing construction standards, quality requirements and materials prices. 

The report also found that compliance cost accounts for 22% to 32.5% of the GDV in township development and from 13% to 24.5% of the GDV in strata development. Compliance cost is defined as expenditure in conforming to government policies, legislation and regulation. The cost can also be time-based such as delays and uncertainty of approvals including at pre-, during- and post-development stages, which results in increased risks and holding costs. 

A roundtable discussion on the report findings and recommendations was attended by industry players such as IOI Properties Group Bhd, UEM Sunrise Bhd, Gamuda Land Sdn Bhd, Sime Darby Property Bhd and Tropicana Corporation Bhd, government agencies such as the Special Task Force to Facilitate Business (Pemudah), Ministry of Works, Ministry of Local Government Development and various other professional bodies. 

As the costs are eventually passed down to house buyers, Tong said there is an urgent need to keep compliance costs in check so that the rate of house price increase is more sustainable.


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