PUBLISHED MAY 15, 2012
M'sian property price surge set to continue
Rise driven by scarce prime sites, material and labour costs
BYPAULINE NG IN KUALA LUMPURPRINT |EMAIL THIS ARTICLE
A SOFTENING in demand notwithstanding, Malaysian property prices are expected to continue on an uptrend this year, owing to the scarcity of prime land and higher building material and labour costs.
Prospective buyers are likely to be forking out more for their dream home if the all-house price index is anything to go by. Last year, it gained 10 per cent year-on-year, or a marked increase to the 7 per cent rise in 2010.
Indeed, the index has been increasing steadily over the past years, and breaking new records. In 2011, RM138 billion (S$57.5 billion) worth of properties were transacted, representing a 28 per cent jump over 2010's RM 107.5 billion.
Based on industry checks, ECM Libra said demand for property - particularly residential - remains stable.
In the Klang Valley and Penang, they remain "highly sought after", the investment bank said, noting this was also true of areas with potential growth such as Johore's Nusajaya, as well as those that are well connected to expressways and amenities.
New condo launches in the suburbs of Petaling Jaya are being marketing at some RM700 psf - some even up to RM1,000 psf, matching prices in Bangsar and Mont Kiara. Even in the IT township of Cyberjaya, prices are rapidly scaling up, state government agency Perbadanan Kemajuan Negeri Selangor recently launching its 90 degrees condo project at RM475 psf.
Prices have climbed despite a number of developers opting to defer some launches and projecting lower sales target on anticipation of weaker demand owing to stricter lending guidelines as well as a 70 per cent maximum loan-to-value ratio for third house financing.
But as ECM observed in a May 11 report, "Meanwhile, property prices are expected to continue to escalate due to the scarcity of prime land and as land prices, building materials and labour costs increase."
Many potential house owners who did not buy a few years back hoping prices would dip have been shell-shocked by the sharp run-up in prices and signing up now for fear it will cost even more in future.
Consider, residential loans fell by about a fourth in January month-on- month when the new guideline was implemented, but the momentum reversed sharply in February and March as residential loans rose 25 per cent (RM6.8 billion) and 19 per cent (RM8.1 billion) respectively. The situation is expected to become clearer in the coming months, but developer Alan Tong - nicknamed the "Condo King" because of his pioneer developments in Mont Kiara - believes the swirling liquidity is to blame.
"In reality, we are facing a situation where there is too much money in the system, causing a decrease in the real value of money and pushing up prices of goods and services including construction materials," he wrote in a column in The Star over the weekend.
"For example, in early to mid-2000, a condominium in Mont Kiara which was sold around RM500,000 would now cost us about RM800,000, equal to a 60 per cent increase.
"However, if property prices are not allowed to rise, it is not possible for developers to build below cost when construction costs are constantly rising. This will cause a shortage of supply which will further push up prices in five to 10 years time."
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