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Land price going higher, home price going higher, right?

Do we believe property prices are going up because developers had to pay ever higher prices for the land which the development is to be built? I do not think so but my opinion does not matter. Let’s look at some numbers. The below is a very clear image showing how land price increase seem to also be a major reason why property prices are increasing too. At least for Selangor. Numbers are fromCIDB, NAPIC and www.brickz.my (Yes, I refer to this site a lot for information.)

Image source: iproperty.com.my

The image is part of a Very comprehensive article. Happy reading it in iproperty.com.my here. I love what the writer, Dr. Foo Chee Hung said in this following few lines. He has explained is very briefly and yet so easy to understand that the current prices are not primarily due to just land costs yeah, not even other material costs for example.

He wrote, “Based on Figure 1 (below), we can see that costs for the elements of development such as labour, materials, machinery and equipment have increased only slightly in the same period. Such disproportionate increases have led to the conclusion that – the developer’s profit margin increase and the inefficiency of the country’s housing construction industry are directly responsible for the skyrocketing house prices. While this is inevitable, one should not overlook other elements of development cost, particularly the impact of land cost on house price.”  

Image source: iproperty.com.my

Please do refer to the long and comprehensive article for reference reading yeah. the article in iproperty.com.my here.

Of course, we must also note that property prices could also rise during those periods of 2008 – 2012 because prices then and the prices now are worlds’ apart too. In 2007, I bought a condo of 1,258 sq ft in Penang for RM247,000. Then, in 2008, I bought a condo of 1155 sq ft in Kelana Jaya for RM183,000. See those prices? Today, it’s more like 2.5 times higher. It’s really not possible to expect it to be another 2.5 times higher because salary did not rise suddenly over a couple of years yeah. Yes, I am very happy if prices could just follow the salary increment % moving forward. (Read here) Happy understanding.

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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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