THE construction sector has been slow to pick up under the recovery movement-control order, largely due to lack of robust consumer demand, said industry players.

The situation has also been made worse by increment in transport costs and shortage of manpower due to the government’s foreign labour policy, they added. 

Many developers have also taken a wait-and-see attitude before launching new real estate projects. 

As such, they said, the likelihood of home-building and construction material suppliers demanding higher price for raw materials was unlikely.

This is after consumers expressed fears that a price hike in raw materials, especially in cement, would be passed on to them by developers. 

The domestic cement price has been rising continuously in the past year. In the middle of last year, cement price soared by 40% despite attempts by the Domestic Trade and Consumer Affairs Ministry and the developers to prevent such hikes. 

Mah Sing Group chief operating officer Benjamin Ong told The Malaysian Insight it was unlikely construction material costs will increase soon.

He said this was because the market had a low demand for real estate, which did not allow building material suppliers the ground to adjust prices.

“Plans for new projects in the next few months will begin to slow down. The market demand is not high, and developers are not actively launching new real estates, so the demand for building materials will decrease. 

“Many contractors are now very ‘hungry’. They would rather lower prices or undertake projects at a loss, because if they do not undertake projects, they will only face further heavy losses. 

“If the economy does not recover soon, the market situation will get worse,” he said.

He said developers have reduced their plans for high-end properties, adding that home buyers are opting for mid-range properties. 

“Cement and steel account for 25% of the total cost. Suppliers are unlikely to increase prices due to low market demand.”

Developers play waiting game

Meanwhile, industry veteran Steve Chong Yoon On said developers were unlikely to pass the additional cost of building materials such as cement to buyers as they want to stimulate the market and encourage more people to buy real estate. 

Chong, who is the former chairman of Johor Real Estate Developers Association of Malaysia, added that home buyers can be divided into four categories. 

“The first category is those who buy for investment, the second is personal homeownership, the third for status, and the fourth is foreigners who come to live here. 

“However, amid the Covid-19 pandemic, real estate is mainly for homeownership. 

“Most owners prefer landed houses ranging from RM600,000 to RM800,000, with space for planting, and a complete transport network nearby to schools, golf courses, shopping malls and business hubs,” he told The Malaysian Insight.

He said local real estate was expected to recover, depending on when the coronavirus vaccine is successfully developed. Otherwise, developers will continue to observe and wait.

Developers will focus on improving the quality of houses. Even if new projects are launched, the area will be small for affordability, he added. 

He believed construction materials would not see a price hike until next year, which will only make it difficult for the country’s real estate to recover.

Manpower shortage

Master Builders Association Malaysia president Foo Chek Lee also agreed that building material suppliers have no reason to adjust prices at this stage. 

“At present, we have not heard of any cement price increase,” he told The Malaysian Insight. 

He said builders were facing a serious manpower shortage, resulting in construction projects unable to complete on schedule. 

“Our country’s borders are still closed and new foreign workers cannot enter the country. Foreign workers who have returned to the country cannot return to work. 

“The construction site can only depend on foreign workers at hand. Although local unemployment has increased, locals are not willing to engage in 3D (dirty, difficult, dangerous) work.

“The majority of unemployed in our country are business executives or white-collar workers. They are not ordinary workers. 

“The construction industry needs workers. Even if the monthly salary reaches RM3,000, we still cannot manage to hire anyone,” he said. 

On the other hand, Ong from Mah Sing called on the government to discuss with banks to relax restrictions on lending to those in need. He said many people intend to purchase real estate, but are awaiting bank loans to be approved. 

“Bank Negara intends to help the people by lowering interest rates, but banks are tightening loan approvals. During the most difficult times, financing should be relaxed so that there is cash flow in the market,” he said. – September 28, 2020.