Rising property prices


  • Community
  • Tuesday, 19 May 2015

Growing: An aerial view of Ipoh with its many development projects.

THE 10% development charge on developers will be included in the price of properties.

The charge, to be paid to the local government, took effect in January this year.

The only consolation is that it was initially pegged at 25% before the Perak state executive council decided to lower it to 10% during a meeting in February.

The charge is a tax imposed on developers by the local government when granting approval for projects that increase the value of the land,

The development charge is 10% of the price difference of the land after it is converted for development.

“The development charge is an additional cost that would be included into the price of properties,” said Pyhomes Realty Sdn Bhd managing director Chan Hoong Mun.

He, however, said the 10% was not unreasonable if compared to the 25% initially.

The reduction, Chan said, had softened the blow on developers who were already facing rising development and construction costs.

He said any additional charge such as the development charge would only push up the price of properties further.

Chan’s opinion was shared by Kaizen Holdings Sdn Bhd chief executive officer Dr Tan Chin Yong.

He noted that the development charge was just one of several charges.

“Developers are also paying the premium, water and sewerage contributions to the National Water Services Commission, apart from the contribution to Tenaga Nasional Bhd,” he said, adding that the rate of these charges had also gone up.

“All these charges will be passed on to the buyers in the form of high pricing for properties,” Dr Tan said.

However, he said developers had to strike a balance — make properties as affordable as possible to bring in sales and keep their business viable at the same time.

Dr Tan said property transactions and new developments had gone down because of economic uncertainties.

He cited the 6% Goods and Services Tax (GST) that was implemented on April 1 as one of the factors hurting the development industry.

Dr Tan said many developers were feeling the pinch and banks were also pulling back their bank credit.

Total Investment Sdn Bhd executive director John Chong, who welcomed the reduction, however said it would not help lower property prices.

“Property prices will still go up. The price of land, building materials and overall construction costs have all gone up,” he said.

That’s not all.

Chong said the authorities, by imposing on developers the type of housing to be built on a plot of land, had further compounded the situation.

“For a 8ha project, we are required to build 10% of low-cost houses, 20% low-medium cost, 20% affordable homes and an open category for high-cost homes.

“Developers are making losses by building low-cost homes. Developers can increase the prices from the open category but it will burden the buyers,” he said.

Meanwhile, Andaman group managing director Datuk Seri Dr Vincent Tiew, who welcomed the reduction, described the development charge as “not really an issue in the first place”.

The reduction on the rate of the developement charge was announced by Perak executive councillor Datuk Dr Mah Hang Soon during the annual general meeting of the Real Estate and Housing Developers Association Malaysia (Perak branch) and dialogue in Ipoh on May 9.

Dr Mah said the move was meant to assist the developers.

“We forsee difficult times ahead with the current economic scenario” he said.

Developers who paid the 25% development charge earlier this year would be eligible for refunds.

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