Are developers passing on rising costs to property buyers?

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Developers are making slight adjustments to prices in response to rising costs.

Property developers are implementing minor increases to both their costs and the prices charged to purchasers. This action is a direct consequence of the depreciation of the ringgit against the US dollar, which affects the cost of imported building materials crucial to the construction sector. The extent to which developers can pass on these increased expenses is limited, as significantly higher prices could deter potential buyers and slow down the rate of property take-up.
Increased Costs Due to Currency Depreciation

The ongoing weakness of the ringgit has a tangible effect on the operational expenses for property developers. Datuk Azmir Merican, group managing director of Sime Darby Property Bhd, indicated that a 1% depreciation of the Malaysian currency against the US dollar translates to a cost increase ranging from 0.15% to 0.25%. This is primarily because many raw materials used in construction are sourced internationally, making the sector sensitive to foreign exchange rate fluctuations.
Limited Capacity to Increase Prices

While developers are absorbing some of the increased costs, they are also making incremental price adjustments. However, there is a clear constraint on how much these prices can be raised before impacting market demand. The concern is that exceeding a certain price threshold could lead to a slowdown in the rate at which properties are sold.
Hope for Ringgit Strengthening

Industry figures are anticipating a potential reversal in the ringgit's trend. Datuk Azmir Merican expressed hope that the currency will strengthen by the end of the year. Such an improvement in the exchange rate would alleviate the pressure on developers to further increase prices, thereby stabilising costs for both the industry and property buyers.
Temporary Weakness Predicted

External analysis suggests that the current depreciation of the ringgit may not be a long-term issue. Stephen Innes, managing director of SPI Asset Management, views the ringgit's weakness as temporary, attributing it to global market rebalancing and potential overreactions. This perspective aligns with the hope for a stronger ringgit, which would be beneficial for the property sector's financial health.

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Are developers passing on rising costs to property buyers?

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