2022-01-21

Government intervention is required to alleviate cost pressures on property development

Government intervention is required to alleviate cost pressures on property development



Government intervention may be required to relieve cost pressures on the property development industry and ensure that house prices remain stable, according to the Real Estate and Housing Developers Association (REHDA) Institute chairman Datuk Jeffrey Ng Tiong Lip.

Ng said the recent increase in the costs of building materials, labour, and unplanned stop-work measures due to Covid-19 had impacted project cash flow planning in 2021.

He said that the increase in material costs directly impacts the cost of doing business, resulting in a 13 per cent to 20 per cent increase in construction costs.

"For instance, the price of mild steel has gone up by 41 per cent and the price of sand has risen by up to 20 per cent since October 2020. These factors have distorted construction costs in aggregate," he said during his keynote speech at the REHDA Institute CEO Series 2022 conference here today.

Ng said that property development is already mired in cost-push inflation, and the market cannot absorb any further cost increases.

"There is no more room for price increases in a sluggish market. At the same time, margins have already been squeezed and are continuing to erode," he said.

Meanwhile, according to Bernama, Ng said that increased financing for younger Malaysians who may not save enough for down payments would help them get into the housing market.

The other option is to "reduce the initial acquisition costs" by making the down payment directly from Employees Provident Fund (EPF) Account Two.

"Note, however, that for new houses in the primary market, additional provisions in the standard Sale and Purchase Agreements (SPA) may be required," he said.

According to Ng, stamp duty exemptions for the SPA, transfers, and loan-related instruments are other ways to reduce the initial acquisition cost.



Source: NST.com.my

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