Show me an example Shelter Over The Head: Price of new houses and BTS system
Apa kesan pembukaan SKVE seksyen 2 pada prospek pembangunan Kuala Langat?

Tuesday 15 May 2012

Price of new houses and BTS system



Build-Then-Sell ( BTS ) concept in the property development industry will be made mandatory in 2015. Under this concept, house buyers pay 10% deposit and the balance 90% after the project is completed with certificate of completion and compliance ( CCC ). During the 24 months construction period of all these terrace, link, semi-D and bungalow houses (landed property), the developers have to finance the construction with loan from the bank.

BTS concept is mooted to protect house buyers from abandoned projects. It is believed that the developers have very much more to lose if they do not complete and deliver their housing projects on time and according to other related rules.

What's the effect of BTS concept on the price of new houses at Klang Valley, Selangor? Will BTS concept cause the price of new houses go higher or lower? I believe the price of new houses in Klang Valley, Selangor will not be made lower by the BTS concept.

The capital involved under BTS concept is big, and so too is the risk. The developers may not be able to sell the house after completion - buyers can discontinue with the purchase when the economy turns bad ( buyers forfeit their deposit ). The developers will end up with many unsold units and have to pay off their loan. For high risk, the banks will charge higher interest on the developers; the developers want higher profit margin from the sales of the house. These will translate into higher price to be paid by the house buyers.

I believe the price of new house in Klang Valley, Selangor will face another cost pressure with the implementation of BTS. As of now, the demand for terrace houses from the middle to lower income group in Klang Valley Selangor is much higher than the supply. With the implementation of BTS, the supply will be constricted further. Smaller and newer developers will find it hard to get loan to build houses. The interest on the loan, if approved, will be higher. So we are going to have  a situation of higher interest rate to do business, bigger amount of money involved and lesser developers participation in the building of new houses. All these point to the price going higher ( i.e more expensive houses ) than otherwise.



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