Developers Find It Hard To Build Affordable Homes And Protect Margins

Pavither 15 Feb 2019


Developers struggle to offer affordable homes priced at RM30,000 and below, especially in the Bottom 40 percent (B40) group, and still make a profit return that is commensurate with the risks and capital investment involved, reported The New Straits Times citing CBRE|WTW managing director Foo Gee Jen.

This comes as building affordable homes is profitable only in scale. Developers should come up with a plan to finish the project quickly and efficiently, as well as ensure that there is financing for the buyers, who are usually first-timers.

As such, developers have taken a more cautious stance since 2016, and the sentiment is expected to continue until they have ensured that the market has bottomed out, said Foo.

“Developers will also be more conservative in luxury developments in the near future. While the selling prices of houses may not be reduced across the board, buyers could expect more promotional packages,” he added.

Meanwhile, Foo expects the property market to witness some recovery this year.

“While demand for residential units is likely to be soft and selective, ‘the right product selling at the right price’ (notion) could still be well received.”

The industrial and hotel/tourism segments are expected to perform better since these are significantly driven by expenditure and investments.

Foo noted that the industrial sector will remain in the spotlight with diversification or new stream of demand for logistic properties, warehouses and data centres.

“Foreign direct investment into the manufacturing sector has persisted which will sustain the existing demand at the least, if not expand,” he said.

“The fact that majority of significant deals in 2018 involved industrial properties underlines the market interest and confidence on this sector.”

He also believes that the prospects of other property segments (retail and residential) are primarily determined by the spending power of Malaysian households and the health of economy.

“Infrastructure is a significant factor in dictating property developments. The new government has since scrapped or put on hold a few major infrastructure projects… this will incur uncertainty on the planning decisions of developers as well.”


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