Developers expect property prices to rise by up to 20% in 2H

KUALA LUMPUR: A majority of housing and property developers expect property prices to increase by up to 20% in the second half of the year (2H10), according to a July 2010 survey conducted by the Real Estate and Housing Developers' Association (Rehda).

The survey found 41% of the 133 respondents expected an up to 10% hike in prices in 2H10, while another 40% predicted a 10% to 20% rise. Some 4% of the respondents predict prices to rise by over 20%.

The findings were unveiled at a Rehda-RAM Holdings Bhd media briefing here on Monday, Aug 9. The 133 companies represent 14% of the 963 Rehda members. Almost half of the developers surveyed were from Johor, Selangor and Penang. Interestingly, a significant portion or 69% of the respondents aimed to launch projects in 2H10.

Aside from the 85% who had forecast property price increases of 1% to more than 20%, 12% of the developers expected prices to stay stable in the next six months, while only 3% predicted property prices to decrease.

Moreover, based on National Property Information Centre (NAPIC) reports, new planned supply appears to be on a decreasing trend, falling from 17,689 units in 4Q09 to 16,812 units in 2Q10.

"Tightening of supply will lead to increased prices. Furthermore, we are in the early stages of the next economic upcycle, and most do not see a double-dip recession approaching," said an analyst.

The analyst added that movements in the prices of steel and cement would also be contributing factors to the projected price hikes.

"Cement prices increased last week and the price of steel appears to be on an upward trend since last month," he said.

Based on a price index compiled by The Steel Index Ltd, the prices for iron ore, the main component of steel, reached a six-month high of US$186 (RM584) per tonne in April and a low of US$117 in July. on Monday, the price of iron ore closed at US$145 per tonne.

Referring to the case of terrace houses in Desa Park City, Kuala Lumpur, that had sold for RM2.1 million, Rehda president Datuk Michael Yam said price increases were generally not extreme and that each property should be considered on an individual basis.

"I understand that particular residence was valued at less than RM400 per square foot, which is not very different from similar properties. The selling price was high as it covered 5,400 sq ft, whereas the typical terrace house measures 1,500 sq ft," he told reporters at the Rehda-RAM briefing here on Monday.

Yam added that although the largest increase in property types launched were for semi-detached houses and bungalows, this did not mean that the lower-to-middle income earners would be in short supply of housing.

"Our unsold housing units in Selangor are generally in the RM250,000 to RM500,000 price range," he said.

This article appeared in The Edge Financial Daily, August 10, 2010