In construction sector, developer always says they can’t lower down their property selling price. Is that true? Actually it’s quite true as their cost is really not within their control. There are few elements of costing that you need to understand when you buy residential property. How developers derive on their selling price? What cost factor that real affecting them? Below are the few major costing that I would like you to know.
Land
The main costing of the developer is the vacant land. The costing is different depending on how prime the location of the land. In Kota Kinabalu, most of the land the located within Menggatal, Luyang, Dongongong, Likas, Kingfisher Sulaman and Putatan are getting more expensive lately due to scarcity and rising demand.
Vacant land within this area mostly transacted not less than RM 45 per sf or RM 2 Million per acre. Few developers that I met told me that they will not build 2 storey terrace house at this few areas as the land cost is too high. That’s why you can see if any developer want to launch property within this area, they will develope at least 3-storey-terrace-house and will price it not less than half a million per unit.
Look at the residential launched by HME Development last 6 month on their 3-storey-terrace-house. It was priced not less than RM570K intermediate with the land area of not more than 2000 sf. So far none of the developer in town I know plan to launch terrace house within all the prime area as most of them are planning for high rise condominium and apartment to spread the land cost further. The land cost is control by landowner. That’s why I always advise my business associates to accumulate more vacant land under their portfolio as this asset generates highest return in the future.
Building material
Another major cost of the constructing property is the raw material like steel bar, cement, wood, aluminum frame, paint, wiring, brick, ceiling, glasses and doors. Last year, a lot of construction site affected due to lack of supply for steel bar, causing them to delay their project and subsequently increase the selling price.
The steel bar price has rise from RM2000 per tonne early 2008 to RM4200 per tonne at the end of 2008. The most obvious is property developed by Wah Mie known as Alam Damai condominium comprising 3 block which they launched block A and B in September 2008 at the selling price around RM240K-RM270K. Not long after the launch, they started feeling the pain of the cost thus they launched their last block C with increase price of RM330K-RM400K to ease their costing. The sales slow down after that but lately the demand is coming back as a lot of people notice supply of property is getting less in the market.
Labour cost
This is an unavoidable cost. Due to rising cost of living and inflated consumer products, developer has to pay additional wages to their construction workers if they want their project to be completed within the given time frame. Furthermore, government also imposes additional fees or stamping for every foreign workers recruited. This adds more costing to developers and they will past the rising cost to the end user by increasing further the selling price of their property.
Management and administration cost
This cost might include architect fees, surveyor fees, and other contributions to SESB in connecting electric supplies to the new development project, JKR to build the road, DBKK for rubbish collection in the future, and Jabatan Air in connecting the water supplies. The developer own administration, promotion and marketing cost also will be calculated and evenly distributed to each property unit.
Profit
The last costing to be borne by end buyer to own their dream property is the profit of the developer. Do you know how much profit the developer really makes? On average they are adding another 30% to their total construction cost. That is a lot of money to end buyer, but for developer they deserve it as they need 36 month to earn the whole amount. Not only that, they are liable for the property they build for another 2 years in the event of defect. So bear in mind, whatever cost they incurred in building and completing your dream home is to be borne by you!
My parent went on few weeks of sleepless night after knowing my brothers are going to purchase property for own stay 2 years ago. Do you know why? Simple, developer took 3 years to complete their project, but end buyer like my brother took at least 30 years to complete paying off their loans. Some banks even more supportive by giving end buyer up to 40 years or up to 70 years old financing.
Is that worth it? Spending half of your most productive life time clearing you debts and owning your dream home? Ask yourself. As whatever major spending you committed now, it will affect your future investment portfolio. My experience teach me not to take a heavy owner occupied home at the early age of our financial life as there is no way you can turn back in the future!!
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last paragraph..it’s true..happening to me now.
I can’t invest in any stocks, unit trust or even save some in ASB because of the burden of paying the so called ’30 years’ investment..but I have to keep my mind proactive..someday it’s worth..
there is no magic in makng money….!!!
Hazmin,
Life is a burden if you don’t start doing thing different from current. Expecting durian seeds to grow mango fruits? There is really no magic on this. Try to “capitalize” on your current resources and see what different you can have. Don’t give up. Happy Investing.
Ck Wong
Seriously speaking, you as a “PREACHER”, need to perhaps spell check your article before posting, so at least poor people such as me will benefit from reading it.
Where do you get your facts? do you do your research before posting it? If what you are presenting in your blog are based on your personal experiences or ideas. Are “we”, as what you categorized as “people that is in financial burden and difficulties” should trust you on the matters of investment? Will it work for us too??
Example : how did you get the fact that developer put up another 30% on top of whatever they have spend on construction and property, in order to get the final selling price??
Do you personally ask each of them?
do you do survey?
or before becoming what you are now, a developer?
I enjoy reading your article and i don’t have any intention to “kill it” for you. Perhaps what i write today will help you, and I’m very sure it will. I bet you will be more careful in posting certain ideas/comments/facts in your blog after reading my comments.
But i doubt you will take me as friend, you are, most likely, will hate me for writing this and wont let my comment posted in your blog.
But then, i will, at the end of the day, succeed in getting my point across to you. Will it not? think about it my friend…
For what its worth, I was just trying to help you out, so you can, in the future show me the way to a better living.
SHOW ME THE MONEY BRO…
Claudius,
Thank you for your comment. I’m writing more so that I can improved my English further:) My point here is writing to be best seller. Not best author..So the most important is you get all the idea I write, understand it, apply it in your life and help you to solve money problems.
Yes. I know most of the developer in town. Some of them even price their property more than 30% as their profit. So watch out when you buy property as you might take 40% of your repayment in your life just to settled their profit.
I’m showing all the money now, so read more as I use money to gain my experience. I’m sharing it for free to you. The money is all over the floor. Can you see it? Appreciate it and you will learn more and earn more. Happy Investing
Ck Wong
i didnt see how ur post ‘help’ all of us or the author.
do u try to verify all the information in the internet? did u write to every author what they write in the internet? we r all grown ups n take info with a grain of salt and intelligence. did u verify STAR newspaper? no, u take it cuz u believe in their credibility. such as this very blog author, we believe due to his ‘credibility’ in sofar has been quite good at the tips but exercise ur own mind process for every content here cuz we’r all adult, arent we
Dear CK,
Everyone seems very quiet today !
Today i read the news. It says Inflation is in the negative for the first time since 1985. The cost of food and transport is softening . In my 2 cents worth of opinoin , I think it won’t make much different in the pricing of property . What do you think ?
Dear All,
. Happy Investing.
Inflation is the main enemy of of wealth growing process. Property price will continue to rise and this is the only tools to hedge against inflation. I always believe land is the best. Do you know why? Let me tell share with you my idea. Whatever thing we eat at the end of the day go it will go back to the land. Imaging we buy and spend so much money for food and clothing. When we throw them out, its like throwing the money back to the land. That’s why land is getting more valuable. So thank you to all of you for making me and landowner richer day by day
Ck Wong
CK,
I don’t look at inflation as an enemy. Because it’s just like compound Interest. It either work for you or againts you . Depends which side of the equation you are in. Infact it’s inflation that help to
push up the property prices and make a lot of the owners very very rich ! Good or good ?? So How can we call it our enemy !!
Ah Fook,
I agree with you. Of course for those who already become property owner they will not feel the pain of inflation. But they are welcoming inflation as this will push up their property price further. Just like this round of economy crisis, its mainly “Cost Push Inflation”. This is worst as the price will definitely not come down. It will push alot of people to the corner. That why at the end of the day for those who did not owned any property will suffer more. Am I right Ah Fook? Happy Investing
Ck Wong
Hello, I am really so disagree with claudius and his comments. He sounded very arrogant and if I may say, a big IDIOT. What CKWong is trying to do here is to share with us some tips and experiences that he had. Is that so wrong?? If you don’t like it go elsewhere. Already it is difficult to find a blog that writes about property investment in KK, why does he want to kill this blog.
A real good for nothing as…..le. Perhaps not all sabahans are like that, but I do find quite a few who are a bit educated, with an attitude problem.
And for CKWong, you have done a good job. Keep it up.
Yong,
I need a lot more improvement on my writing skill. I will improve further by reading more and write more. Thank you for you support. Happy Investing.
Ck Wong
Dear CK,
Of course u r right on the nail !
Cheers
How much would it approximately cost to build a single storey house in KK, not to include the land price. Some people estimated RM60-80 psft. Would that be reasonable for KK standards?
Jeo,
I just ask some developer on ths question last few days. All depend on the quality of material and workmanship that you have. The better quality will definetly cost more. But on average is about RM120-RM150 per sf depending on the location of your land. Happy Investing.
Ck Wong & KH Wong
How d0 you calculate the ROI for constructing residential properties?
Do you include the land price or just the cost of building? or the sum of both?
Do you require piling to build double storey houses?
Yong,
AS I mention to you, cost is the most crucial part in property investment. How can you calculate the ROI without putting all you costing in? Who tell you building Double Storey House dont need piling? Don’t make me laugh you again over your childish question. Happy Investing.
You cannot Grow Land.. Ck Wong & KH Wong
CK, plz don’t laugh at Yong, not all structures need piling, including double storey house if the bearing capacity of the ground is good. Pad footing maybe ok.
HI,
So sorry. I don’t mean it. Happy Investing.
You cannot Grow Land..CK Wong & MY DAD
I just wanted to double check, don’t mean to post a funny question here. After all, we are here to learn something…are we not?
Yong,
I agree we are learning here. But please use your common sense when you ask. Appreciate if you do so. Happy Investing.
You cannot Grow Land.. Ck Wong & KH Wong
CK Wong,
I’m really disappointed with the negative comments by Claudius lately, language is not barrier for us to share information, in fact, it is just a tool.
I personally would like to offer you a help to edit your articles before posting sir. Just mail it to me and I will edit it for u right away.
Hope you will seriously consider my offer sir.
Thank you.
Harin,
Thank you for your offer. Highly appreciate your help. I prefer to learn on my own. I will continue to write as I believe only “practise make perfect”. Happy Investing.
You cannot Grow Land.. CK wong & KH Wong
CK, I’m a salaryman and own a few rental properties. I have a problem with getting more loan from banks although my cashflow is very strong. I’m at a juncture if I want to buy more properties, I would need to pay cash to do so. What’s your advice for people like me? Appreciate your thought
Tommy,
Another thing you can do is to extend your long to the longest as this will lower down your monthly commitment. Of course some of you might want to save interest, by extending the loan tenure you also can save interest through “principles prepayment”. So in summary:
Are you married? Try include your wife or your family name into the loan to make it stronger. Are you bank in your rental into the bank first before make your repayment? If not please do so. Another most important thing you must do is to find a good banker who understand what you want. I have few banker who support me whenever I want to borrow. Be nice to them as they are like “GOD” to you.
1. Join Name
2. Find good banker and be nice to them
3. Bank in all rental before make any loan repayment
4. Extend the loan tenure to the maximun
Happy Investing.
You cannot Grow Land.. CK Wong & KH Wong
Hi CK,
Two week ago, I have been visited KK, I have the intention to buy the land(Native Title Land) nearby KK, using my Wife name (Sino Kadazan, Anak Negeri Sabah). Question :
1) What is the pricing average per sf on (located within Menggatal, Luyang, Dongongong, Likas, Kingfisher Sulaman and Putatan) for native title land ?
2) What kind of document need to submit in order to buy the native land?
3) How long need take on tranfer name on Native title?
4) What kind of thing need to attention to buy the native land?
Thanks to give so advise.
Tham
Hi,
I dont know how to answer so many legal questions here..I think you better find legal advicer to help you on this. You can contact Shelly Yap, Ms Nancy for further action. For:
1. I can’t comfirm to you the value, its all depend on location, zoning, condition of the land and etc
2. Get lawyer advice
3. Depends
4. Legality of your NT Cert!!
Happy Investing.
You cannot Grow Land..CK Wong & MY DAD
hijack ur thread awhile hehe
what do u think of tmn inanam laut ‘s future prospect. or rather the general outlook of that area?
imo , the plus points are: couple of schools in the vicinity, located along the highway, no many construction of terrace (single storey), flood free, <3km from inanam traffic light, imminent opening of metrotown, kk taipan, and probably ascotville huge master project currently constructing sri pelangi and kensington.
however, I still appreciate your opinion on this as my relative is currently eyeing on a 200k inanam laut
I think Inanam Laut along the tuaran bypass is presently a less matured less developed secondary area, and it may take at least 5 years or more to progress. I believe there are more and more new developments coming into this area due to its near proximity to KK and Inanam towns, still plenty of vacant lands along the tuaran bypass, and the other prime lands in KK are heading toward full development and getting too expensive to develop. Am I right, CK?
with or without develpment but lands in tuaran bypass r already very exp. imagine the price of new double storey terrace or single storey terrace if developer wud ever think of developing single storey again since the cost of single terrace doesnt seem to be making sense, that is my thought of Ina Laut. do share what i missed
Agree with you, land prices in Tuaran bypass have also gone up so high that it is make no sense to build medium cost terrace houses. Anyhow, land cost along Tuaran bypass is still lower than those in the prime areas.
HI,
At the end of the day there is limit how far “single” storey can appreciate. I don’t really appreciate Inanam project due to the entrance. Furthermore I believe less chinese is staying at this location which will affect the rental yield and future appreciation. Happy Investing.
You cannot Grow Land…CK Wong & MY DAD
appreciate ur input. I understand what you mean. in the past, we too didnt expect apts to hit the barrier of 220k but today it did, although reluctantly. ina laut was 90k 10 yrs ago, today it broke the barrier of 200k, moreover, with 1700sf land. in addition to ur advocacy toward land property, i do think it holds at least SOME promises being the ‘cheapest’ ‘single’ storey house among the landed property in the future.
secondly, my relative was just doing about average, he cant afford anything more than 200k and insisted on landed which made ina laut quite an easy choice.
appreciate anything else if u’ve sthg to add.
ps/ one of the best prop blog around for free discussion. tx
Hi CK,
May i know, Shelly Yap, Ms Nancy contact number or email, so that, i contact them.
Thanks,
Tham
Hi,
Pls email me your email adress at ckwong@investkk.com, I will forward you the contact no. Happy Investing.
You cannot Grow Land..CK Wong & MY DAD
Hi CK,
My email address is :
tham_fei_loong@yahoo.com
Thanks