GEORGE TOWN, Dec 10 — Penang property prices will continue to rise due to a worsening labour shortage, a developers group predicted today while warning of slowdown in the sector.

Penang Real Estate and Housing Developers Association (Rehda) chairman Datuk Jerry Chan added developers would also be unlikely to discount properties aggressively, citing lower profit margins despite the reduced supply.

“There will be a slowdown in the industry because we have a serious labour shortage problem and we expect it to get worse,” Chan said in a media briefing on Penang property outlook this morning.

Leading developer IJM Land’s northern region general manager, Toh Chin Leong, concurred with Chan that property prices will continue to rise.

“This is because landowners will put high price tags on their properties, and on top of that, material costs have increased between 40 to 50 per cent,” Toh said.

He noted that developers now are facing higher compliance costs that have increased three times in the last five years.

Developers are required to pay the state government a default compensation of RM120,000 for each low-cost unit the developer choose not to built as all developers are required to build low cost housing units for every approved housing project.

In addition to this, developers will have to pay a car park contribution of RM35,000, which was previously RM15,000, and RM50,000 for drainage contribution, up from RM10,000 for each property development.

“We also have to get a housing development licence by paying a deposit of three per cent of the projects’ estimated cost as prove that we have sufficient financial ability to build the houses,” Toh said.

He added that the subsidy cuts, six per cent GST in 2015 and new levies introduced by the state government will also drive property prices up.

Toh was referring to the recently announced three per cent levy on foreigners purchasing properties in Penang and a two per cent levy on all properties that are re-sold within three years from the date of the Sales and Purchase Agreement.

The state government had also introduced other housing policies to prevent a property bubble in the state, including an affordable housing policy that restricts affordable housing from being re-sold in the free market within five years from the date of the Sales and Purchase Agreement.

Owners of affordable housing, classified as units priced below RM400,000 on the island and RM250,000 on the mainland, must re-sell their units only to eligible first time home buyers in the state housing department’s list.

Chan does not agree to the possibility of a property bubble in the state.

“The market here is still healthy so it is unlikely to see a property bubble but we hope the state will take time to implement these new measures as we will need time to see how it affects the market,” he said.