Well managed property development companies are unlikely to drastically drop the prices of their properties as they have comfortable profit margin buffers already in place, said MKH Group group managing director Tan Sri Eddy Chen said.
Speaking at the sidelines of the 18th Malaysia Strategic Outlook Conference 2016, Chen, who is also a patron of the Real Estate & Housing Developers’ Association Malaysia (Rehda), told StarBiz that most local developers worked on the basis of having profit margins of between 15%-18%, or even 20% if their projects were in choice locations. Hence it is unlikely for such developers to have to drop their prices very much.
“The only reason for them to lower their prices would be for the generation of cashflow perhaps to finance land cost commitments or other such priorities.
“There may be some developers who reduce their prices for this purpose but I don’t see many doing so in the next 6 to 12 months,” he said.
He agreed that a growing secondary market of properties will have an impact on primary market prices by capping price increases in the latter this year.
“But many in the secondary market were bought at prices lower than what’s available in the primary market today, perhaps at what the developer is selling. They too cannot reduce their prices by much, marginally below developers price at best,” Chen said.
Currently, Malaysia has one of the highest rates of household debt in the world, leading to housing loans being rejected. - By The Star
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