The recent announcement of a salary increase for civil servants could potentially breathe new life into Malaysia’s property market, according to the Real Estate and Housing Developers’ Association Malaysia (Rehda). This development comes at a crucial time as both consumers and developers grapple with the rising cost of living and escalating prices of building materials.
Potential Impact of Salary Increases
Rehda president Datuk NK Tong expressed optimism that the salary hike, slated for this December, will enhance the purchasing power of civil servants, thereby creating more demand for residential properties. “While this increase may not solve the affordability crisis overnight, it is a step in the right direction that could stimulate the property market,” Tong stated. He also highlighted the role of the Employees’ Provident Fund (EPF), noting that contributors could still use up to 25% of their savings from Accounts 2 and 3 to invest in real estate, despite recent restructuring that increased Account 1 allocations to 75%.
Challenges in the Construction Sector
Addressing the issue of rising construction costs, Tong mentioned that developers need to innovate to manage expenses without compromising on quality. This includes possibly reducing profit margins, using alternative materials that are equally durable, and designing smaller, more cost-effective housing units. “The weakening of the ringgit has made building materials more expensive, which is why innovation in material use and property design is more important than ever,” he explained.
Compliance and Quality Concerns
Tong also touched on the burdensome compliance costs that developers face, which include delays in approvals and the expenses associated with adhering to government regulations. He advocated for a reduction in these costs, provided that it does not compromise the safety and legality of construction practices.
Furthermore, he acknowledged the issues with some developers using subpar materials and workmanship. “Not all developers maintain high standards, which is why it’s crucial for buyers to be discerning and consider properties from reputable developers or explore the secondary market,” he advised. According to Tong, approximately 85% of property transactions occur in the secondary market, where buyers can see exactly what they are purchasing.
Industrialised Building System (IBS) Challenges
On the topic of adopting more efficient construction methods, Tong was less optimistic about the immediate viability of the Industrialised Building System (IBS) in Malaysia. He cited the lack of a sufficient economy of scale as a significant barrier to its adoption. “IBS could improve quality tremendously, but it remains cost-prohibitive for lower-volume projects. It is ideally suited to large-scale government housing projects that can standardize designs and achieve the necessary volume,” he explained.
Looking Forward
As Malaysia’s property market navigates these complex challenges, the upcoming salary increase for civil servants could provide a much-needed boost. With careful management of building costs, innovative construction practices, and strategic government support, there is potential for significant growth in the sector. Buyers are encouraged to remain vigilant about quality and seek properties that meet their long-term needs and budget, ensuring a wise investment in Malaysia’s evolving real estate landscape.
