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Friday, June 20, 2008

Housing sector in challenging times

KUALA LUMPUR: The housing and construction industry will soon be facing a “crisis” if oil prices and the current inflationary trend continue to soar unchecked, warns Real Estate & Housing Developers’ Association (Rehda) vice-president Datuk F.D. Iskandar.

Datuk F.D. Iskandar

Iskandar, who is also Glomac Bhd group managing director, said construction costs had increased by more than 30% recently and many projects might be postponed or halted.

“How long can developers hold on as they would eventually have to pass on the higher costs to the consumers. Prices of houses will definitely go up before year-end,” he told StarBiz.

Iskandar said Rehda’s 1,000-plus members were experiencing “very challenging” times and many of them were withholding the tendering of new contracts until prices stabilised.

Contractors, he observed, were also not keen to take on new projects as they too were adopting a “wait-and-see” attitude.

In fact, some of the construction firms were only too happy to get out of an existing contract, as they did not want to be caught by the spiralling prices of raw materials since there was currently no cost fluctuation clause in their contracts.

“They (contractors) are crying out to the developers to revise their contract prices. As many smaller developers cannot revise the prices, the contractors will just walk off while others will not even take part in the tendering of new projects,” he said.

Projects might be stalled, contractors go broke and the market for houses priced at RM300,000 and below would be the hardest hit, he warned.

With shrinking disposal income, many potential house buyers, particularly civil servants who were trying to make ends meet, might postpone their purchase.

Iskandar said unlike in the past, when only one or two items had gone up in price, now everything – from food, petrol to raw materials – was more expensive.

“If the Government does not take positive action now, it will lead to a crisis for the industry. We have to increase the purchasing power of Malaysians.

“We must also re-brand and look at our economic model as we are losing our best brains to countries like Singapore and the Middle East,” he said, adding that Glomac lost two project managers over the past six months.

Iskandar said Malaysia was “very good at starting something like the Multimedia Super Corridor” but failed to follow up and later got beaten by other countries.

Malaysia should also strive to be an Islamic financing hub, he said.

On the Malaysia My Second Home programme, he felt it should not be placed under the Tourism Ministry but directly under the Prime Minister’s Department, as this would make it easier to manage things.

“Malaysia is a beautiful country, is politically stable and our things are cheap. We do not have any natural disasters and our workforce is one of the best. However, we have not done enough to sell Malaysia properly,” he said, adding that the country also needed more foreign investments.

On the “phenomenal” increase in property prices in the Kuala Lumpur City Centre development area, he said the current prices of high-end condominiums of RM1,500 to RM2,000 per sq ft were still relatively cheap compared with other countries.

Iskandar said Glomac’s 10 ongoing projects should increase to 14 by year-end. However, with the current economic situation, it was reviewing and re-strategising its project launches. “Initially, we wanted to launch very fast, but now we want to re-look at our costs and (profit) margins,” he added.

By The Star - StarBiz - (by S.C.Cheah)

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