Rising building material prices can pose challenges to the recovery of the property sector in Malaysia this year.
According to experts, house prices may go up as a result of costlier building material prices, as developers pass the cost to buyers.
“We expect that the property market will do better than the past two years, but it will remain challenging due to uncertainties such as the Omicron variant, persistent high overhang units, labour shortages and increasing building material prices,” Socio-Economic Research Centre executive director Lee Heng Guie said last week.
Lee was speaking at the panel discussion at the annual CEO Series Conference organised by the Real Estate and Housing Developers’ Association Malaysia (Rehda) Institute.
He expects the property sector to be supported by the country’s economic recovery.
Lee has forecast the economy to grow 5.2 per cent in 2022 compared with 3.4 per cent in 2021.
Mah Sing Group Bhd CEO Ho Hon Sang, who was among the panellists at the event, said he hoped the government would extend the Home Ownership Campaign (HOC).
He said under the HOC, the property sector saw more than 90 billion ringgit ($21.5 billion) in sales over the last two years.
“The HOC is something we need to continue as the property sector is still faced with uncertainties, such as the emergence of a new Covid-19 variant. We are still in the stage of recovery.
“During the movement control order [MCO], we lost five to six months of sales. We need to compensate for the time lost during the implementation of the MCO,” he said at the panel discussion.
Rehda deputy president NK Tong said the agency had submitted a request to the government to extend the HOC.
“We want to thank the government for actually extending it from the end of May last year to the end of December.
“However, in the interim, as you know, there was an MCO period of five months.
“Showrooms were closed. While there were some sales online, I think we missed the opportunity as well.
“So, we have written to the government but we have yet to hear from them,” he told reporters on the sidelines of the conference.
Rehda Institute chairman Jeffrey Ng said increases in material costs had impacted the cost of doing business, which has resulted in a 13 per cent to 20 per cent hike in construction costs.
“For instance, the price of mild steel surged by 41 per cent and sand has risen 20 per cent since October 2020,” he said during his keynote speech.
According to Ng, among the challenges faced by the real estate and property development industry were the rising cost of building materials, an increase in labour costs affecting project cash flow planning, as well as the MCO that had temporarily halted construction work.
“As the real estate and property development sector is already in a ‘cost-push inflation’ market, further cost increases cannot be absorbed by the market, as prices have been fixed beforehand.
“A lacklustre market dictates no further room for price increases while margins are already squeezed and continue to be eroded.
“Hence, government intervention may be necessary to ease the cost pressure on the real estate and property development industry to ensure that house prices remain stable,” he said.
In addition, Ng suggested the country relook at expanding its Malaysia My Second Home (MM2H) Scheme to spur the property market.
“An expansion of such schemes could also encourage international business migration into the country, and attract more businesses and talents compared to a purely retirement programme,” he said.
THE STAR (MALAYSIA)/ASIA NEWS NETWORK