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HBA: Regulate profit margins, property prices down significantly

Reported in SunBiz. According to the House Buyers Association (HBA) secretary-general, Chang Kim Loong, if the government regulates the profit margins of property developers for the ‘affordable’ category, this will reduce property prices significantly. He quoted an example of a ‘crazy’ Cheras terrace house which is priced at RM750,000 today. He said that if his proposal is taken, the prices can go down to just RM350,000 – RM400,000. He said this price can be easily verified by the many professional quantity surveyors in the country. This is possible because the many alleged ‘hidden costs’ or ‘grease money’ currently being paid could be stopped.
In fact, the calculation can be derived at easily too. He explained further. Today, prices of building components like cement, steel per square foot and sand are regulated by the government. Besides this, the professional fees (architects, lawyers, engineers and surveyors) are also regulated with standardised processing fees to the local council. Compliance cost can also be pre-determined. Land prices can be identified by the Finance Ministry’s Property and Valuation department too. When all these have been factored into the cost of the property development and 20 percent is added, it will allow the prices of these properties to go down significantly as per the example of the Cheras home above.
Chang said that the possibility of a “homeless generation” is very real and the current push for affordable homes from RM500,000 to RM1,000,000 should also be looked at from the size and location perspective as well. It is not enough that the prices are low but the size is too small for a family simply because it is in a hotspot. Read my comments here: Property Prices too high? You might be the main reason. The current housing programmes which focusses on just price are simply not holistic enough. The property prices has also risen so much that is is beyond the reach of the majority. I think Chang is talking about those in the hotspots. This is because any check in any property portals would reveal lots of choices below RM400,000 but the location may not be within the hotspots that everyone wanted.
Assuming Chang is right and somehow the prices really do go down to RM350,000 from current RM750,000 as per his example, I would hope that there are also mechanisms for check and balance. RPGT alone may not be enough because if I need to queue up for 2 days to buy a property for RM350,000 which is already worth RM750,000 today, I would. In fact I would have no issues to hold it till the RPGT period is over because we are talking about the potential profit of at least RM400,000 here. How can we ensure that the most deserved get the home and not able to profit from such a property? This is very important and should be transparently drawn up too, probably with assistance from HBA and other concerned parties. Happy buying or renting and thus becoming a homeless generation.
written on 22 Sept 2015
Next suggested article: Will property prices ever come down, realistically? 
 

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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