September 20, 2014

Housing and Construction: Future Views

Pricing in the Higher Costs?

Will prices of real estate go up in 2015 and thereafter?
Let us look at some issues.
Now that the issue of water may be settled soon with the impending water transfer from Pahang and the building of the Langat 2 reservoir in tow, let us look at the closer-to-home issues.
Apart from water which constitute about 45% of the woes for developers in the utilities category, higher costs has impacted development of new projects generally.
Developers have now cited the higher cost of doing business in the first half of 2014.  The increase is 20% higher than before.
What are the causes?
The increase cost has been attributed to such items as higher compliance cost, scarcity of land, higher infrastructure contribution funds and higher conversion premium.
There were also claims that building material steel bars, cement, bricks, sand and river sand and wages have risen in the first six months of 2014.
The latest REHDA survey paints this picture:
Overall, 45 percent of the respondents are neutral of the property market in 2H 2014, while 33 percent are pessimistic.
Moreover, 41 percent of the respondents are pessimistic for 1H 2015.
What’s in store for 2015?
Currently, developers are holding back new launches.  Take up rates have dropped to 49%.
Despite this, with the looming GST imposition comes April 2014, many experts have predicted that prices will continue to increase, not discounting the 8% rise already experienced in 1H 2014.
Thought residential properties may be GST-exempt, higher building costs will inadvertently be passed on the buyers via higher launch prices.
So, it does not look too good for house and real estate buyers comes 2015. 
What say you?

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