PROPERTY developers said high compliance costs and charges are to blame for their inability to reduce the prices of houses.

Compliance costs were tying up developers’ cash flow, and a portion of these costs such as development, utilities, land conversion and infrastructure improvement charges have to be passed on to customers, said Real Estate & Housing Developers’ Association (Rehda) president Soam Heng Choon.

“Cash flow is like blood to all of us. No cash flow, no blood, (so) what happens to business?” he said at a press conference today.

He said Rehda has been engaging various stakeholders including the National Water Services Commission (Span) and state governments to discuss the matter.

“We have submitted (a proposal) to the government but the difficulty is that a lot of it are under the state government’s purview. If it was only the federal government it will be easier,” said Soam.

“For example land matters and local authorities are under the state government… there is a lot of compliance cost related to the state.”

The association today released it’s Property Industry Survey 2H2018 which revealed that apart from high compliance cost, developers also cited material and labour cost, as well as land cost as the cost components affecting their cash flow.

Soam said while material cost remained stable following the introduction of the sales and service tax, labour cost rose following the introduction of the new minimum wage policy.

About 27% of the respondents said the cost of doing business have increased by 10%.

Freezing new recruitment, reducing benefits and perks, rescheduling launches and reducing the scales of launches have been some of the cost cutting measures taken by developers.

Only 62% of the respondents said they still have unsold stock compared to the 75% in the previous half of the year.

Unreleased bumiputera units, low demand and end financing rejection were attributed to the unsold units.

Meanwhile, end financing continues to be an issue, with 54% saying that they have experienced loan rejection 30% of the time. Properties priced between RM700,001 – RM1 million saw the highest number of rejections at 24%.

Ineligibility due to buyers income, lower margin of financing and adverse credit history were cited as the reasons for loan rejection.

The survey, which polled 121 developers, found that 11,463 residential units were launched in the 2H2018 as opposed to 13,233 units in the first half of 2018, of which 43% have been sold.

About 52% of the units launched in the second half of last year were priced below RM500,000 compared to 65% in the previous half of the year.

Around 41% of the developers planned to launch a total of 8,991 units in the first half of this year. – March 14, 2019.