A LOT HAS been said about how much it costs now to buy a house or an apartment.

For someone who is just starting out, or for a newly married couple looking to buy their first home, it can mean making a huge sacrifice elsewhere just so there is enough money for the down payment and then the monthly instalments on the home loan.

Many people have chosen to attribute the high cost of new properties to developers or, more precisely, the perceived penchant of builders to raise prices for every new project launched.

Rightly or wrongly, fairly or otherwise, developers do bear most of the brunt for the “high” prices of new properties.

But just like any other business people, developers know that pricing their properties out of the targeted market’s price range will surely put them out of business.

Prices of new properties are determined by how much it costs the developer to put up these structures in the first place, and the prices of land and building materials have been rising over the years.

The price of land, especially in or close to urban centres, has gone up exponentially. As an example, let us look at one locality in Kuala Lumpur and compare the prices from 2005 and 2011. In September 2005, a terrace house on Jalan Terasek 2, Bangsar Baru, was sold at RM363 psf. In February this year, another house on the same street was sold for RM668 psf, an increase of more than 80% in just over five years.

The cost of building materials has also gone up as the demand for more homes expands with population growth, improving standard of living and widening affordability.

The ratio between the construction cost and the price paid for the land varies from country to country. In Malaysia, it can be safely assumed that the ratio is about 70:30, with the construction cost taking up the bigger portion.

What are the materials that go into building a home, and how significant a portion of the total cost do they account for? Items that come to mind quickly are cement, sand, bricks, concrete, roof tiles, etc.

Also significant but hardly visible in any completed structure are steel bars, fabric reinforcements and numerous other components that are essential in the construction of a building.

For instance, steel bars may account for up to 20% of the total construction cost, while concrete takes up another 15%. Another significant component is masonry works, which can account for about 10% of the cost.

One only has to check the prices of these items over the past five to six years to realise that they have gone up significantly, some by more than 70%.

To illustrate this argument, let us take a look at the prices of some of these items from say, 2005, and compare them with today’s prices.

To ensure the figures we use are reflective of industry levels, we have opted for numbers compiled by the Construction Industry Development Board (CIDB) of Malaysia.

According to the CIDB figures, the cost of 10mm-12mm mild steel round bars rose from RM1,647 per tonne in 2005 to RM2,608 in January this year, an increase of just over 58%.

In the same period, the price of the 16mm-32mm mild steel round bars rose from RM1,563 to RM2,534, an increase of 62%.

The price of 10mm-12mm high tensile deformed bars went up from RM1,685 to RM2,608, a 55% rise. The 16mm-32mm high tensile deformed bars cost RM2,493 in January this year, up 56% from five years before.

Fabric reinforcement, another important component of construction, has also seen significant price increases. According to the CIDB figures, the price of A7 fabric reinforcement has risen from RM1.79 to RM3.08 per kg up 72%. That for the A10 type went up from RM1.86 to RM3.07 or 65%.

Sawn mixed hardwood and waterproof plywood, which are essential in building the moulds into which concrete is poured, have seen similarly high increases in price. A cubic metre of sawn mixed hardwood cost RM1,290 early this year, up 57% from RM820.

Less substantial, though not less significant, are increases in the prices of sand, bricks, concrete and waterproof plywood. The price of a metric tonne of river or mining sand went up from RM14 to RM20.17, or 44%. A consignment of 1,000 pieces of bricks now costs RM200 against RM140 before, up 43%.

The price of a cubic metre of G25 ready-mixed concrete went up from RM140 to RM191.20, up 37%, and that of G30 ready-mixed concrete was up from RM147.67 to RM201.17, up 36%. The 13mm thick waterproof plywood costs RM49.90 per sheet, up from RM44.50, or 12%.

The only item that has seen a drop in price is the 10mm-40mm diameter granite aggregate, which sells for RM23 per metric tonne, down RM1 from the 2005 price, or a decrease of 4%.

As stated earlier, the cost of land does make up a substantial portion of the cost of a project. Changes in the price of land, on the other hand, vary from place to place. Price increases are usually more substantial in the larger urban centres than in small towns.

With every new project, the demands of buyers also change.

Changing tastes call for changes in designs. Aesthetics are becoming more important, new demands to meet environmental requirements and concerns can result in higher costs. Added to that is the cost of labour and equipment, which is also on an uptrend. Given this scenario, the only way a developer can set itself apart from the rest is to be more innovative in its designs, ensure high quality and offer excellent after sales service.

That, understandably, also comes at a cost. But that’s another story.

Souce: The Star

MARRIED couples in Penang will have the opportunity to purchase their first home at RM67,500 in Paya Terubong.

State Town and Country Planning, Housing and Arts Committee chairman Wong Hon Wai said that buyers who fulfilled the criteria would be eligible to buy the low medium-cost Suria Vista apartments.

“Interested buyers have to be Malaysian citizens above the age of 18 who have never owned a home, with a monthly household income that must not exceed RM3,500,” he said.

Wong said the project had 123 LMC units but only 90 units were opened to the public because the remaining 33 units were meant for relocating squatters from the Air Itam area.

“Interested buyers can fill up the application form which will be submitted to the online portal of the state secretary’s office (SUK) for screening and assessment,” he said.

OHM Group marketing executive Saw Chong Seng said each of the 700sq ft units had three bedrooms and two bathrooms and did not come with a parking space.

“Parking space and renovations come with an optional price of RM22,500,” he said, adding that the project was 68% completed and expected to be ready by year-end.

He said eligible buyers could visit the show unit in Suria Vista Apartment at Paya Terubong between 10am and 6pm, from now until this Sunday, and fill up an application form there.

They can then go to http://erumah.penang.gov.my to check the status of their application.

Source: The Star

THE Pearl City new township project in Simpang Ampat is the pride of Tambun Indah Land Bhd, boasting of a mixed development that would cater to the future needs of the population in mainland Penang.

The project consists of Pearl Garden, with 152 double-storey terrace units and 164 semi-detached double-storey units, and Pearl Villas with 19 bungalows catering to the middle and high income group.

Tambun Indah executive director Teh Theng Theng said the project is expected to be completed in 2013.

She said there is a growing demand for the project, which is located in south Seberang Prai, as the second Penang Bridge linking Batu Kawan on the mainland and Batu Maung on the island would also be completed around the same time.

She added that the project would have 24-hour security, CCTV, exclusive clubhouse and swimming pool.

Their two other projects are Tanjung Heights, a 12-storey condominium in Jalan Raja Uda, and the Capri Park 15-storey luxury condominium project located in Jalan Heng Choon Thian in the heart of Butterworth town.

The 142 units would be built with a semi-detach concept of four bedrooms with a built-up area of between 444.6sq m and 513sq m.

The property will be showcased at The Star?s Property Fair 2011. Touted as Penang?s premier property expo, the fair?s ninth edition will be held at Gurney Plaza and the adjoining G Hotel from July 21 to 24.

To date, 28 major developers ? representing almost all the big boys in the industry ? along with several financial institutions, have taken up booths in the fair.

The key exhibitors include IJM Land, Sunway Grand, Vienna Home (Mah Sing), Ideal Property Development, SP Setia Group, Taman Sri Setia (Boon Siew Group), Ivory Properties Group, Nusmetro, MTT Properties & Development, Reka Indah Development, Lembaman Development (Belleview Group), DNP Land, GD Development, Lone Pine Group and Tambun Indah Development.

The RM30,000 worth of prizes for the ?Surf, Click & Win? contest are sponsored by IJM Land.

The fair, which is open to the public from 10am to 10pm daily, is organised by The Star in co-operation with Henry Butcher Penang. Admission is free.

For enquiries, call 04-6473388 ext 3357 (Shirmein) or ext 3418 (Bessie).

SOURCE: The Star

KUALA LUMPUR: Property developer Eastern & Oriental Bhd (E&O) expects to launch four new blocks at its Quayside Seafront Resort and Condominiums project in Penang this year.

Its deputy managing director Eric Chan said the company was optimistic about the project.

"So far, out of the total seven condominium blocks planned under the project, three have been launched with more than 75 per cent taken up," he said, noting that phase one will be completed by 2013.

The Quayside project is also home to Malaysia's largest water themepark.

Speaking to reporters after signing a marketing agreement with Mitsui Fudoson Co Ltd yesterday, Chan said one more condominium block will be launched next month while the rest is scheduled for launch either by the year-end or early 2012, with gross development value at more than RM2 billion.

Mitsui, Japan's largest property developer, through its unit, Mitsui Real Estate Sales Co Ltd, will market E&O properties to its high net worth clientele in Japan.

Chan said the collaboration is the first step that marks the beginning of efforts to bring the homegrown E&O brand to the Japanese market.

"We are honoured and excited by the opportunities presented by this collaboration with a giant like Mitsui," he said.

Besides E&O's Quayside project, other projects to be marketed in Japan include the company's St Mary Residences in Kuala Lumpur, due for completion next year.

"Our products are local but we believe demand can be global, especially if our standards of quality and innovation are international," he said.

SOURCE: Business Times

"I can confirm that we have submitted a bid by responding to the Penang government's request for proposal to develop the land and are now awaiting word from the state authorities," the company's deputy chairman and executive director Datuk Seri Nazir Ariff Mushir Ariff told Business Times after Ivory Properties' first annual shareholders' meeting.

Last Tuesday, Business Times reported that Ivory and SP Setia Bhd are in the race for a multi-billion ringgit development of some 40.47ha land at Bayan Mutiara.

Both companies have already established their presence as property players in the southwestern part of the island via existing developments.

The Bayan Mutiara tender is part of the state government's efforts to unlock the value of the land it owns in selected areas.

Sources had said that of the two companies, Ivory Properties had submitted the higher bid, for which the reserve price was reportedly set at RM200 per sq ft.

Nazir, however, declined to comment on this.

The state government had asked for a request for proposal (RFP) via Penang Development Corp to develop an initial 24.8ha, which is located south of the Pe-nang Bridge, overlooking Pulau Jerejak.

The RFP comes with the potential to develop an additional 14ha via a future re- clamation after the development of the initial 24.8ha land.

Meanwhile, Ivory Properties' operations director Murly Manokharan said luxury condominiums are set to be the group's next offering in Batu Ferringhi, where Ivory has already established its presence as a property developer.

Unlike its Moonlight Bay and Island Resort developments, which are sited on hillslopes commanding ocean views, the proposed The Bay development is set to be located on the beachfront.

Murly said the proposed development will comprise a single block of low-density condominiums, in compliance with environmental and developmental requirements set by the local authorities.

"We are hoping to offer units with large built-up areas ranging from 3,000 to 5,000 sq ft and they will likely be priced between RM600 and RM650 per sq ft," he said.

Ivory Meadows, a wholly-owned subsidiary of Ivory Properties, entered into a conditional agreement last year with Lim Soon Hin and Lim Soon Vin to buy 0.49ha of freehold land in Batu Ferringhi for RM25 million.

The project is expected to be completed three years after construction begins.

Also on the cards for Ivory Properties is the proposed City Mall located in Tanjung Tokong, which is set to be a mixed development project of luxury condominiums perched above a shopping mall.

"We are awaiting approvals from the local authorities before proceeding with this project which we hope to launch by the fourth quarter of this year," Murly said.

The project, with RM433.3 million gross development value, is set to offer 300,000 sq ft of shopping space and is expected to cater to tourists in meeting their dining, rest, travel and information needs.

Murly said the resident component, meanwhile, is set to cover 120,000 sq ft.

Property watchers said the proposed development is set to boost the area's new positioning as Penang island's new lifestyle and commercial hub.

Fronting the Island Plaza shopping mall, Ivory's proposed mall is set to join the ranks of projects that include Eastern and Oriental Bhd's master-planned Seri Tanjung Pinang development, Boon Siew Property Group's Precint 10 food and beverage mall, and IOI Properties' upmarket Fettes Residences condominium project.

SOURCE: Business Times