Rahim & Co International Sdn Bhd is one of the estate consultancy firms in Malaysia that provides a comprehensive range of services encompassing all aspects of real estate like valuation, estate agency, research and property and facilities management.

StarProperty.my interviewed Rahim & Co founder and executive chairman Tan Sri Datuk Abdul Rahim Abdul Rahman on trends regarding the property industry.

Do you think Bank Negara was intervening at the right time by tightening the lending guidelines?

It is quite challenging to say it is the right time or not. Bank Negara says they are not being strict to prevent the bank from lending. But, they want the bank to be prudent in their lending so that the bank doesn't get into trouble.

These are things which are fundamental to the country and the banking institution as they are very important economic generators for the country.

Do you think the stricter regulations on lending guidelines will continue for a few years? Do you see any changes in the trends? Will it loosen up will it remain the same?

First of all, I think the bank institution in this country is doing great. A lot of things have been said about Bank Negara. I don't think the guidelines will be loosened because I think Bank Negara is strict. Like the changes, I think it depends on the economy. There are figures produced by Bank Negara showing that we have over-borrowed in terms of the household. If you have a car, you have children to go to school, you have credit cards, and so on, the bank needs to take all these into consideration when it lends money to you. So these rules are there not to prevent people from borrowing. But these rules are there to make sure that bank lends wisely.

Some will argue that these figures are a bit hard for the rest of the industry since the developers are not selling their developments as hotcakes as they used to. What do you feel about this current trend and what are the effects?

First of all, the market at this moment is soft. It's a biased market. There is a risk or tendency of overbuilding especially in the office sector.

We are going to hit another ten mil sq ft in the next two to five years. But there is also overbuilding, and the pickup rates are less.

Gone are the days when you launch, and there are a number of people wanting to buy houses. Now people have a lot of choices when it comes to houses.

Speaking of the demands, what do you think is the demand of the market now? Because some argue that it is not oversupplied. It is just the mismatch between demand and supply. So, from your experience, what are the products that are in need right now?

Regarding residential demands, affordable housing is the demand right now. It includes the housing that will be built according to demand. In Kuala Lumpur for example, there will be high demand if the housing price is within the affordable range which is about RM400,000.

But if you talk about the smaller towns, the affordable housing price range changes. If we talk about the East Coast of Malaysia, the affordable units are probably around RM200,000.

Recently, there was a house in Kajang worth RM1mil-RM2mil. Do you think it is a case of overvaluing or are other factors influencing the market?

First of all, the problem in the housing industry is the construction cost, regardless of location. Cost of construction would always go up, and prices of land are expected to increase over time.

So if you buy a piece of land for RM200,000, next year it would value at RM250,000. This is the problem. Construction and land costs are high, but when there is overbuilding, the demand becomes less.

Therefore, there is a mismatch between the price the developers want and the price the market can take.

Does it mean that the developers have to slow down their construction?

I think there should be a call for prudence and there is a lot of talk in the market asking local authorities to step in to reduce the number of developments. But, this would not sit well with the developers.

We had done it before, and it worked. But look at the other side of the coin. The developers are asking why should they stop if they can build more houses. But, I think there must be a balance.

The local authorities should not stop development, but instead, they should regulate it according to the market needs.

How about the demand for office spaces?

Regarding office spaces, there is a limit on the building of the offices. But, it is not a prohibitive measure, instead a stabilising measure to stabilise the market.

Is it true that Dewan Bandaraya Kuala Lumpur (DBKL) is not allowing the building of office spaces in KL area anymore?

It is not a complete embargo. But I think they are playing a role in regulating or slowing down the development of office spaces.

In other words, there is a justification for slowing down. I think DBKL has thought about this seriously. But of course, in an open economy, some might object because they think that it halts the growth of the market. But I think everybody would agree that there should be prudence when it comes to development.

In Malaysia, land development is controlled by state government rather than the federal government.

Compared to Singapore where the approval is based on the central government, in Malaysia, different states have different guidelines and policies.

Do you think it will be better if we can centralise the land development under one authority?

First of all, the state land is under the jurisdiction of the state government. In other words, the federal government cannot interfere with the state government’s decision regarding the land.

However, every state should be prudent in making decisions regarding the land. It is highly unlikely that the land authority would be centralised since then there will be a need to change the constitution.

Let’s look at Iskandar Johor Forest City. The state government is more in control than the central government, and there has been a lot of news about it recently. When it comes to reclamation, who is in control? The state government or the central government?

The State government. It is in the power of state government to allow reclamation. Even though, aspects of the environment come under the central authority, the ultimate power lies with the state government.

Kuala Lumpur and the Greater KL has always been touted as the hotbed for investors. Do you see the trend to continue or do you see other new trends coming up or other hotspot areas that investors might be interested in?

When we talk about hotspots, I think KL is still the centre of developments. A lot of foreigners when they want to invest in our country, they think of the capital first. So I think most developments should be concentrated in Klang Valley and Johor because at the moment people are also talking about the Forest City.

From your experience of more than 40 years in the industry, do you see any significant changes regarding how people view the real estate industry? Do you feel that there is a shift concerning thinking patterns between the different generations?

They are a part of the thinking ‘generation’ when they start working. It is also the influence of parents that cause their children to own a house.

It is the general attitude of a lot of people. They always think that renting is temporary and that eventually, or as soon as possible they must purchase their own house.

I think this mentality needs to change. There is nothing wrong with renting a house provided you are saving up money. In other words, you must be able to save enough money before you buy a house.

But it is very difficult to change that mentality. The Prime Minister Datuk Seri Najib vision is that every Malaysian should be able to hold property. That is why the government has introduced Perumahan Rakyat 1Malaysia (PR1MA), Syarikat Perumahan Negara Bhd (SPNB) and other affordable housing schemes. The government wants to help Malaysians to own a house.

One of the reasons why people want to buy is they are always afraid that house price will go up and they cannot afford to buy a house.

It is quite true. If you wait for another five years, house price will go up, but you have to focus on affordability. This is why the issue of affordability is taken seriously by the government. DBKL has introduced ‘rent first and buy later’ scheme. You use your rent and turn it into a purchase. Rent for the first three to four years, and at the end of the four years when your income has increased, you would be able to buy the house.

How about not buying a house for your whole life? Do you think it is prudent to do that? To rent for your entire life?

That’s controversial. But I think eventually you have to have the ambition to own a house. But I haven’t said that it is the right thing. It depends on people. My staffs, after they have worked for five to ten years most of them would want to own a house.

It is a matter of balancing your income and so on. But the lifestyle has shifted nowadays because you have credit cards. When you’re married you want to own two cars, you have children, and you want to send them to school and so on. So you have to balance between taking care of your children, taking care of your comfort of life, and then own a house.

I think it is the same for Malay and Chinese. Like Malay, I know it is the ambition of every family that all sons and daughters should own a house as soon as possible. Or at least buy a piece of land first, then build a house on it.

Now, if you want to buy or sell a house, you will have to go in depth into property evaluation. But sometimes when it comes to the price in the market, there used to be a lot of differences. Some feel it is too expensive while some feel it is too cheap. And then we have the question whether property evaluation affects the asking price of the property?

First of all, valuers do not necessarily determine the market value. We value the property by the market value at the particular time. Some people say that it is the valuers who determine the prices but we do not. We give an opinion on the market value of the property.

Say a bank asks us to do an evaluation, we would carry out the evaluation; we would not undervalue or overvalue the property.

When can we know what the value analysed by property valuer is? Because the seller’s asking price may not necessarily be what you value the property to be. Maybe the value of the property is RM400,000, but the asking price is RM100,000 which has quite a gig gap.So, when can the value of the property as valued by the property valuer can be known?

When it comes to valuation, we follow a few methods. One is comparative. You know, value with comparable sales that determines the value of the property. Next, when you have a piece of land, and you build a house on it, the value of the property is the sum of the land value and the building value. So, we can only determine the value using professional methods.