Developers mindful of cost increase due to weak ringgit — Sime Darby Property

KUALA LUMPUR: Property developers are currently mindful of possible cost increase in building materials due to the weak ringgit to ensure that any increase in cost is within limits.

Sime Darby Property Bhd group managing director Datuk Azmir Merican said that every 1 per cent depreciation by the ringgit against the US dollar will cause an increase of 0.15 to 0.25 per cent for one “precision,” referring to an architectural term.

“We are monitoring this (foreign exchange) space. Like it or not, you have seen property developers overall are slightly increasing costs and increasing prices to purchasers as well,” he added.

As raw materials in the construction sector are imported, the exchange rate impact would be felt, and therefore would impact margins going forward, he said.

“There is only so much we can do to increase the prices until it reaches a point where the take-up rate slows down,” he told a virtual media briefing following the release of the group’s 2023 financial results.

“I hope the economics remain stable and with positive reports that the ringgit is expected to strengthen by the end of this year, I don’t think we will have the problem of passing prices or increasing prices.

“Barring any unforeseen situation, I think that (scenario) should play out and a stronger ringgit will be good for us in the property sector,” said Azmir.

Previously, SPI Asset Management managing director Stephen Innes said the current weakness of the ringgit is temporary as global markets, especially Malaysia’s largest trading partner China, are rebalancing their inflation trends.

He considers the present depreciation of the ringgit to be an overreaction. “Still, the broader context of many Asian countries struggling under tight financial conditions, especially those reliant on US dollar-denominated funding, makes accessing external funding prohibitively expensive,” said Innes. — Bernama