PROPERTY prices may go up if the price of raw building materials continues to rise for a prolonged period of time, Real Estate and Housing Developers’ Association president Heng Choon Soam said today.

Prices of commodities have gone up due to a disruption in the global supply chain stemming from the Covid-19 pandemic.

Despite the hike in building supplies, Heng said developers have been absorbing the extra costs.

“Developers are responsible, most of them are absorbing the cost. From the house price index, property prices have moderated,” he said at a media briefing held via Zoom.

“Going forward, if this phenomenon continues, the developer will have no choice but to pass on the cost.

“Everyone in the supply chain will feel this, their margin will be compressed and they will have to pass it on.”

However, Heng cautioned that it was hard to determine by how much the property prices might rise, adding that the association will keep monitoring the market.

The price of iron ore has risen by 70% from RM2,000 to RM3,400.

“If the prices of iron ore, which is used for steel bars, and copper for wiring continue to be high for a prolonged period of time, the impact on the sector will be serious.

“However, these are global commodities, just like crude oil, we can’t control the prices. If it gets too out of control maybe some intervention from the government may be needed.”

In terms of local materials, Heng said there was currently a shortage of bricks because the factories were not allowed to operate during the lockdowns.

“Bricks are produced locally but they were not allowed to operate during the lockdown. Infrastructure construction such as the MRT continued, which led to a depletion in stockpiles.

“This led suppliers to hike up the prices, but it will normalise soon.”

Property overhang

Speaking on the property overhang currently in the market, Heng said in-depth research needs to be carried out on where these properties are located and why they have not been sold.

“We need to look at the reason why these properties are unsold. Converting (into affordable housing) and getting the government to buy them is a good exercise, but this involves taxpayers’ money, so an in-depth study as to where and why they are not sold and what actions can be taken needs to be done.”

Heng said properties in strategic locations where there is high demand for rent can be considered for purchase by the government.

“Whatever initiative taken must be good for the industry and buyer. For higher end property, this overhang cannot be turned into affordable housing, such as those in the KLCC area.”

He also warned that if the number of overhang units comes down, there is a chance that this might also push up property prices. – October 21, 2021.