PETALING JAYA, 3 November: The Urban Wellbeing, Housing and Local Government Ministry’s move to standardise quota and prices for affordable homes is a move in the right direction, said Rehda Institute chairman Datuk Jeffrey Ng Tiong Lip.
“It is definitely a move in the right direction. Even on REHDA’s side, we would very much support this idea,” he told reporters on the sidelines of Rehda Institute’s Budget Commentary 2017 yesterday.
Ng said reducing house prices is not easy, as there are many variables involved including land, construction and compliance costs but the ministry’s initiative can help to slow down the increase in house prices.
He said the public has a misconception that developers enjoy very high-profit margins.
“If you said this in the 70s and 80s and even in the 90s, I agree. But in the last five to eight years, a lot of the cost have moved up,” he said.
He said that profit margins used to be 30-35% during the 70s up till the 90s and up till 2010, it fell to 20-30%. Today, profit margins range between 10% and 20%.
Ng said margins are squeezed by increasing land, construction and compliance costs while sellable areas are also reduced.
“For example, if you do township of 1,000 acres, if you were to get planning approval, 10 years ago you would have gotten about 50-60% sellable area. The rest would go to infrastructure, parks, roads, draining, septic tanks, religious venues. If you do the same 1,000 acres today your sellable area is probably around 40-45% so you have lost at least 10-15% of your total sellable area.
“The developer has to allocate this for compliance requirements when previously the developer can develop it and sell. Who is going to pay for those costs? That’s why cost keeps going up,” he said.
— THE SUN