As sales decline, developers concentrate on high-end homes

Rehda president Datuk Seri FD Iskandar (pictured) said developers have tried to increase new affordable launches but there were no buyers. ― Picture by Choo Choy May
Rehda president Datuk Seri FD Iskandar (pictured) said developers have tried to increase new affordable launches but there were no buyers. ― Picture by Choo Choy May

PETALING JAYA, Sept 14 — Property developers continue to favour upscale houses despite repeated calls by the government to focus on the affordable segment.

Data provided by the Real Estate and Housing Developers’ Association Malaysia (Rehda) showed more than half (49 per cent) of their new launches for 2016 were those priced above RM500,000 compared to 41 per cent of launches of units below RM500,000.

The first half of 2016 saw the primary property market slump as sales dropped by 13 per cent to 38 per cent compared to 52 per cent in the last half of 2015.

Rehda president Datuk Seri FD Iskandar insisted that developers have tried to increase new affordable launches, pointing to the 14 per cent increase in launches of houses priced at RM200,000 and below.

“We are building, we are launching [affordable houses] but there are no sales whatsoever,” he said at the association’s media briefing here.

But the total number of houses under the affordable segment was still 8 per cent lower than the overall upscale launches.

Rehda said most developers point to high land price as the primary obstacle to building affordable housing, an assertion repeated consistently in the past.

But a recent report by state think-tank Khazanah Research Institute on the state of the Malaysian household has refuted this argument. Its managing director Datuk Charon Mokhzani instead blamed high house prices as the reason for the increase in land price.

When this was pointed out, FD Iskandar said developers must also factor in the rise of overall costs in doing business and most importantly, the rise in “compliance cost” charged by the government.

"The compliance cost alone has increased from eight per cent to 25 per cent. Land cost itself is still about 15 to 25 per cent," he said.

Despite this, the takeup rate of properties priced below RM200,000 for the first half of 2016 was almost 100 per cent. Only three per cent were unsold.

The higher-segments market on the other hand posted a take up rate of 70 per cent while those priced between RM200,000 to RM500,000 deemed as mid-range — and which has the most demand locally and in other major cities nationwide — had a take up rate of 75 per cent.

FD Iskandar said demand remains high, which is why house prices have not decreased despite the drastic slowdown in the property market.

But stricter lending terms by banks have made it harder for developers to sell, which is why Rehda members recently proposed a lending scheme financed by developers.

The idea drew widespread criticism from economists and bankers who said the proposal could lead to a debt crisis.

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