Fewer new houses in Penang, but prices not going down, say developers

BY LOOI SUE-CHERN

DECEMBER 10, 2013

Property buyers can expect fewer developments in Penang next year but prices will remain high, according to Real Estate and Housing Developers Association, or Rehda.

Its Penang branch chairman Datuk Jerry Chan (pic) said there will be fewer projects with banks and investors being more careful with the property market.

"But we will not see prices going down because the (profit) margins are not big enough for us (developers) to take cuts," Chan told reporters during a briefing on the state's property outlook for 2014.

He said Penang is unlikely to see a property bubble, saying the market is still healthy.

"We do not want to do anything to weaken the market. Rehda has told the state not to administer all the medicine in one go.

"We still need some time to see how new measures imposed on property will affect the market," he said, referring to a slew of new rulings by the state government on property purchase.

Chan said land prices in Penang will continue to rise, citing the state government's land swap deal with Consortium Zenith BUCG, the developer for the ambitious RM6.3 billion undersea tunnel and three highways.

The deal involves 110 acres in Sri Tanjung Pinang, Tanjung Tokong, which Chan said cost RM1,200 per square foot, since the state is not pay the developer for the multi-billion ringgit projects.

He said the deal would be a yardstick for land owners and developers when fixing prices on their properties.

"If the state takes that kind of valuation, what do you think other land owners and developers will do?

"And remember the project construction cost (RM6.3 billion) was from six month ago, which has not taken into account additional costs due to the higher electricity tariff and the Goods and Services Tax (GST). If cost goes up, so will property prices," he said.

Chan also predicted that the industry would slow down due to a labour shortage that could get worse.

He said workers have been pulled to the Klang Valley and Iskandar, Johor for big infrastructure projects.

"Contractors also do not want to take on projects because they fear they will not have enough skilled workers for the job," he said, adding that most of the workers are foreigners.

Toh Chin Leong of IJM Land said property prices in Penang would continue to go up as landowners put big price tags on their properties.

He said costs of construction material had not gone down in recent years but had increased 40% to 50% following inflation.

"Developers are also facing higher compliance costs. Charges have been upped three times in the last five years or so," he said.

He said developers pay the government a default compensation of RM120,000 for each low-cost housing unit they choose not to build in their projects.

Car park contribution is now RM25,000 instead of RM15,000 while drainage contribution is up five times from RM10,000 to RM50,000 for property developments.

Developers also have to obtain a housing development licence by paying a deposit of 3% of their project's estimated cost to show they have sufficient financial ability to begin building houses.

"The 6% GST in 2015, subsidy cuts and new levies imposed by the state government will also drive property prices up," Toh said.

New state measures

The Penang government has announced a 3% levy on foreigners buying property in Penang and a 2% levy on all properties sold within three years from the date of the sales and purchase agreement.

Effective February 1 next year, the government will also introduce a new policy for affordable homes that stipulates that such properties (first purchased at below RM400,000 on the island and at below RM250,000 on the mainland) cannot be resold in the open market for five years, unless the owner obtains state consent and the new buyer is passed as qualified on the state housing department's list.

The listed buyer must be a first-time buyer and belongs in the right income category to be eligible to buy the affordable home at the price agreed with the house seller.

Meanwhile, all public housing units priced up to RM42,000 (low-cost) and up to RM72,500 (low-medium cost) cannot be resold within the first 10 years of purchase.

This ruling will cover all past and future purchases. The balloting of houses will be subject to oversight by an auditing firm.

The government's consent must be obtained if the owner of such a unit wants to sell the house in less than 10 years and the new buyer must be a "listed buyer" with the state housing department, certified as a low-income earner qualified to purchase low or low-medium cost houses.

The measures are introduced to help deserving people buy homes and to curb the risk of a property bubble. - December 10, 2013.