This article is from The Malaysian Insider, Thursday, 12 May 2011.
My comments is that the margin based on turnover of developer is very misleading gauge. This is because purchasers fund a lot of the costs via progress payments that therefore their returns from capital is very much higher than others.
In addition, in the Kajang area, high residential launches are becoming the norm now with Nadayu 92 and Naza TTDI launcing double storey link houses between RM450,000 to RM 500,000.
Semi D by Metro Kajang and others are now above RM 950,000.
Looks like at last house prices in Kajang will be moving up to catch up with other areas in the Klang Valley. However, it is bad for buyers.
May 12, 2011
The rapid rise in house prices has put home ownership beyond the reach of a whole generation of young adults, says the HBA. — world-stay.com pic
KUALA LUMPUR, May 12 — The National House Buyers Association (HBA) says greedy developers are behind rising property prices that put housing out of the reach of many, dismissing a host of reasons given by industry to justify pricing levels.
Real Estate and Housing Developers Association (Rehda) president Datuk Michael Yam had denied developers were to blame for increasingly unaffordable property, attributing it to high land prices, social responsibility obligations and “indirect taxes”.
But HBA secretary-general Chang Kim Loong said the social responsibilities such as building low-cost houses and reserving Bumiputera quotas that Yam mentioned have been in existence for years and were nothing new.
“Our argument is about the current phenomena of unbridled escalation of house prices that bears serious adverse repercussions to the rakyat,” he said, responding to Yam’s remarks. “To justify the mad escalation of house prices by bringing in arguments about these decades-old social responsibilities is to be out of sync.”
Chang also cast doubt on the low profitability of developers as claimed by Yam, saying that developers were free to exit the industry if it was so difficult.
Yam had cited the example of property giant SP Setia which reported full financial year 2010 net profit of RM251.8 million, representing about 14 per cent of its revenue of RM1.7 billion, which he said was not a very attractive margin.
“We are in no position to comment on the accounting principles of SP Setia but taking Yam’s words, a net profit of 14 per cent is still a very attractive profit!” said Chang. “But then again, if the profit margin is low, they are at liberty to venture into greener pastures.”
He also tackled the issue of high land cost, saying that it was a question of chicken and egg.
“Landowners, of course, look at the prevailing prices of properties before they demand what they think should be the market price,” he said. “Property valuers’ role also comes into play, hence our statement about the unholy alliance. If existing property prices have not been pushed up so much, then landowners would similarly not demand such high prices for their land.”
Yam had told The Malaysian Insider that the issue of high property prices needed to be looked at holistically but Chang insisted that some “wayward” industry players acting within an “unholy alliance” were responsible for the situation due to the urge to lock in as much profit as possible.
“Whichever way one looks at it, holistically or otherwise, in a situation of a seller’s market, it is always the industry players who set the market mood,” he said. “This applies across the board of all trading activities. In the case of the property market, the main players are the ones mentioned in the article.
Each party has the common objective of cashing in on the prevailing situation to reap as much profit as possible within legal boundaries, and sometimes even beyond, if the likelihood of getting away with it is good.”
The HBA secretary-general said the border between greed and profit was often hazy and profitability often overlaps with greed in hot market situations.
“Again, we would put it that developers are more interested in huge profits rather than social responsibilities. Thus they stack upwards and build pigeon holes rather than conducive housing,” he said.
He admitted, however, that there were also some developers and bankers who were acting responsibly.
On Yam’s assertion that a re-introduction of the full real property gains tax (RPGT) after it was suspended would deter foreign investors and be taken as more government policy inconsistency, Chang said: “We like to see it as the prompt reaction of a responsible and caring government.”
He said, however, he sympathised with Rehda over “indirect taxation” which came in the form of developers having to build public utility infrastructure which added to the cost of residential property.
“We too have lobbied for such infrastructures to be carried by the respective public-listed utility companies because they are business ventures,” he said. “But having said that we are also apprehensive as to whether such savings would be passed to house buyers or simply go towards padding up developers’ profits!”
Property prices in urban areas such as Penang and Kuala Lumpur rose by up to 40 per cent last year fuelled by low interest rates and a surge in speculative buying.
The average price of a KL residential property is now about RM485,000, or roughly nine times the average urban household annual income of about RM54,000.
The Demographia International Housing Affordability Survey rates markets, whose property prices are 5.1 times median income or more, as “severely unaffordable”.
Chang said the rapid inflation of assets risks putting house ownership beyond the reach of a whole generation of young adults.
Until the next time, cheers.
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