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Monday, December 3, 2007

Fewer property launches?

Will the rising cost in building materials contribute to fewer property launches? Or, since property development has more of an impact on consumers, will demand - which according to developers, consultants and realtors has generally been sustainable - play a bigger role?

Will there be a more cautious mood next year among potential house buyers, especially given the less than robust outlook of the global economy? Will inflation play a role? Will property developers, already burden by higher operational cost as well as having to put in the public amenities, low-cost housing for projects of a certain size and the discount for the bumiputra quota, be able to absorb anymore of the costs?

Real Estate and Housing Developers' Association president Ng Seing Liong said developers who had locked in the sales would just have to absorb the cost.

“Next year it would be different, where developers and contractors can pass on the cost, they will,” he said, adding that this would depend on location, market demand and supply.

Ng echoed Master Builders Association of Malaysia president Patrick Wong's estimation that construction cost would go up by 20% to 30% next year.

According to an analyst with a local investment bank, the bank's in-house projection showed an average increase of 10% in the price of building materials such as tiles, glass and bricks next year.

The analyst said there was a demand for higher cost building material for high-end residential property developments while there was less demand for medium-cost building material products.

He attributed the slower growth in mass-market residential property demand to the build up in over-capacity in recent years.

He added that the bank's in-house projection showed a downtrend in property launches next year by private developers.

However, projects under the Ninth Malaysia Plan (9MP) may not be much affected because of the Government's commitment to build low-cost and medium-cost housing.

“Operating cost margins for building material producers have been going up gradually since last year due to raw material prices and they're operating in a cut-throat environment where its difficult to pass on the cost to consumers,” the analyst said.

By The Star

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