Cost transfer: Property developers may shift diesel subsidy rationalisation costs from construction and transportation to luxury dwelling projects, says an insider. — Photo from Bernama
PETALING JAYA: Property developers will have no choice but to transfer the extra costs from the diesel subsidy rationalisation for the construction and transportation industries to high-end housing projects, says an industry member.
Former Perak Real Estate and Housing Developers Association (Rehda) chairman Tony Khoo said for the state’s housing policy, housing projects must comprise 10% low-cost houses, 20% medium-cost houses, and 10% “Rumah Perakku” houses.
The rest will be made up of open-market houses priced over RM700,000 and high-end properties.
“Low-cost housing projects will also be affected. Developers will likely increase prices in the high-end market to subsidise the construction of affordable homes,” he said.
Khoo predicted that new housing prices could rise by 10% to 15% next year.
“Affordable house costs will also be affected, and we will have to see what measures the government will implement,” he said when contacted.
After the government announced the removal of diesel subsidies, he said developers received notices from various suppliers and contractors on price adjustments the next day, causing the cost of existing projects to increase by 20%.
“The whole sector is in a dilemma. We don’t know what to do because the prices of houses under construction are already fixed in the sales and purchase agreements with buyers, and the prices cannot be changed,” he said.
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Mah Sing Group Bhd property subsidiaries chief executive officer Benjamin Ong said the construction sector was expecting a rise of 3% to 5% in costs, which will affect all types of properties.
For ongoing projects, there are effective cost-control measures in place.
Ong said those who had already purchased properties would not be affected by the increase in diesel prices because construction costs had been contracted and factored into agreements with contractors.
“For future projects, yes, (price increases will be) mitigated by slight rises in the selling price,” he added.
Master Builders Association Malaysia president Oliver Wee said the industry was expecting at least 2% of contract sums to be impacted in typical building projects.
“For already awarded contracts, it seems the main contractors will have to absorb the cost difference, as most contracts lack provisions for VOP (Variation of Price) or price escalation for materials.
“It’s challenging for contractors to submit tenders nowadays because supply chain quotations are valid for only one to two weeks, while construction periods span months or even years,” he added.
National House Buyers Association vice-president Tan Chong Leng expressed concerns about young people’s ability to afford houses.
Ensuring affordable housing for Malaysians would be a significant challenge for the government in the future, he said.
In Melaka, the CEO of PDG Property, Jojo Gwee, said suppliers also issued notices on the new rates of construction materials soon after the diesel rationalisation exercise was announced.
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“Suppliers have set new rates for construction materials, making it challenging for the developers to navigate the rising costs in the industry,” she said.
Gwee said as a responsible developer, her company would try its best not to pass the burden to the buyers by absorbing the costs.
But she said the government needed to ensure mechanisms were in place so that there was no cost increase in the whole supply ecosystem that could prevent higher property prices.
She urged the government to introduce additional measures to assist developers as well as supporting homeowners with a focus on housing affordability, like reinstating the MyDeposit scheme.
The scheme was first introduced in 2016, which helped the middle-income group secure homes and also provided incentives for developers of affordable homes, Gwee said.
“This initiative will help to offset the impact of the diesel price hike on developers as well as property buyers,” she added.
