Passing on the cost of building to buyers? I don’t think so.

Recently, Credit Suisse said that developers’ cost of doing business has risen 20% in the first half of 2014. Thus their margins are being compressed and this cost will be passed on to the buyers. It said property sales, especially in the affordable segment has slowed since the start of the year due to cooling measures by the government. Yet, with all these, the property prices went up 8% in the first quarter of this year. It is also supportive of DIBS for first-time home buyers or those below a certain income level as this would be positive for the market. Though market transactions are still down and sentiment remain negative, Credit Suisse believe that prices would continue to rise due to GST. Property developers would definitely launch properties at higher prices as their costs have increased.
It’s not stated what has risen but I think the land price might be playing a part. Land prices has risen many times when compared with a few years ago. Of course as usual the material prices, the labour shortages due to the booming construction sector. Do not be surprised that developers tell you that it’s hard to get a good sub-contractor and the sub-contractor tells you that its tough to get a good worker these days. Many Indonesian workers are home because Indonesian construction sector is also booming. They may earn lesser than here but there, they are with family, friends and nice food. Here, they are without any loved ones and even the food, they have to eat the cheapest possible. As for non-skilled ones from other countries, it would already slow down the whole process.
Okay, with all these increases, would house prices be increasing and the costs passed on to buyers? Seriously, under the current circumstances, I do not think so. I think the likelihood is higher that the developer will manage their margins and their costs and perhaps do more value add things like built in renovations etc to try and maintain what they wanted to charge in the first place. Reason? I just logged in to my facebook page, within the first 20 posts, I saw no less than 10 advertisements of NEW properties. Everyone of them saying something which every buyer wants to hear. Seriously, competition is heating up. Transactions remain slow. Buyers are still unsure or pessimistic about the many bad news prevalent in the market. Just my personal opinion. I am certainly not an analyst with an international company. We shall see when the stats for the whole of 2014 is out.
written on 23rd Sept 2014.
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