REAL estate prices nationwide are expected to go up by 5% to 10% next year as costs of construction materials remain high, property developers said.

Some construction companies are also facing legal issues over delays to project completion caused by higher costs, they added.

Mah Sing CEO Benjamin Ong said developers and contractors will eventually have no choice but pass on costs to buyers.

However, this is not just a Malaysian problem with real estate all over the world expected to cost more, he said.

“I estimate that for new projects that will start next year, prices will increase by 5% to 10%,” Ong told The Malaysian Insight.

The price of steel, aluminium and copper wire has gone up drastically, putting contractors under pressure, he said.

Ong said Mah Sing uses third party developers for their projects, so the costs of building materials is borne by them.

Tony Khoo Boon, national council member of the Real Estate and Housing Developers’ Association (Rehda) said contractors are having to pay 10% to 15% more for construction materials.

He also expects that property prices for newly launched projects to cost an additional 10% next year.

Khoo, who is also the director of property developer Tumbuh Merata Sdn Bhd said, steel bars have gone up in price by more than 70% to 80%, cement by 30%, PVC by 50%, and aluminium by 30% to 40%.

“No one can tell when the prices will stabilise. Items such as cement cannot be stockpiled because it will harden.

“Contractors have to order new batches every three months, but the prices keep changing and the developers also don’t know how to set prices.”

Even though raw materials cost more now, Ong said new projects cannot be sold at too high a price.

Before the pandemic, houses in cheaper locations in the Klang Valley used to cost between RM500,000 and RM600,000. Now, they have gone up to more than RM1 million.

“Just like clothes, food and transport, real estate is essential, so people will still buy. The trend now is for people to buy to live in, rather than buying for investment.”

Ong said the rising cost of raw materials, manpower shortages and inflation signals uncertain times ahead for the real estate market.

Meanwhile, Khoo said contractors and the developers find it hard to set project prices.

He hoped that the government can formulate a variation of price (VOP) clause so contractors and developers can renegotiate prices, or contractors won’t be able to bear increasing costs.

If the projects cannot be delivered in time, developers may also face litigation and may be asked to pay compensation to buyers, Khoo added.

“Construction sites couldn’t operate during the lockdowns. We’ve lost six to seven months of construction time. There is also a shortage of manpower in the construction sector. All these factors put us in a tough spot.

“We can’t see an end to the ever-increasing prices either. We hope the government can intervene and control the situation.”

Former Master Builders Association Malaysia (MBAM) president Foo Check Lee said increased prices of construction materials have pushed building costs up, prompting negotiations between contractors and developers.

“Contractors can slow down on the project and wait for prices to fall, but this will delay completion of the project and buyers will get their properties later than expected.”

The higher prices are felt worldwide as global shipping and production lines have been affected by the pandemic.

Foo said the current price of steel is RM2,800 a tonne, a slight drop from RM3,100 a tonne, but the price of other items such as aluminium, PVC, sand, bricks and copper wires have gone up.

Another problem contractors face is the manpower shortage that has resulted in delays and jockeying between various construction sites over a limited number of workers.

Recently, the MBAM, Rehda, Persatuan Kontraktor Melayu Malaysia, Persatuan Kontraktor Bumiputera Malaysia, Guild of Bumiputera Contractors Wibawa, The United Malaysia Contractors Association and Persatuan Kontraktor India Malaysia asked the government to step in to control the prices of construction materials.

They said key factors affecting the price increase for building materials include the cost of raw materials, shortage of migrant labour and rising prices in logistics, crude oil and energy costs.

To ease the situation, the groups urged the government to consider their proposals, which include enforcement against profiteering and anti-competition practices along the whole supply chain.

They said the government should also start allowing migrant workers back into the country, and extend the variation of price clause on contracts for government projects. – December 16, 2021.