Malaysian Housing Price set to rise

Source: Bloomberg in Singapore Business Times, 16/04/2004

Asia Pacific Land Bhd and rival Malaysian property developers plan to raise home prices by 2%-3% to counter the higher cost of building materials. Yesterday, the government raised steel-bar and bullet prices by as much as 48% after the price of scrap iron, the raw material used to produce still billets, soared in global markets by 45% to US$260 a tonne in January.

“People will buy, not withstanding such cost increases because we’re not looking at a big jump in prices,” said Jeffery Ng, President of Real Estate and Housing Developers’ Association, which represents 1,200 members.

Property developers in Malaysia are passing costs to consumers who are taking advantage of record low interest rates and an expanding economy to buy homes. Malaysia’s economy is expected to grow as much as 6.5% this year, its fastest in four years.

Developers have “actually been able to price the selling price at a higher rate than the increase in the overall cost,” said Geoffrey Ng, who helps the equivalent of US$342 million in assets at Pacific Mutual Fund Bhd.

An increase of RM400 a tonne in steel-bar prices would lead to an additional RM1,400 in building costs for a typical two-storey home, which needs as much as 3.5 tonnes of steel, Mr Jeffrey Ng said. That is an increase of between 2% and 4% in overall construction cost, he said.