BY THEAN LEE CHENG
Paring high growth: Referring to the Malaysian House Price Index which includes all types of residentials, Napic director Khuzaimah Abdullah says double-digit growth – seen in 2011 until 2013 – are not sustainable.
House prices continue to rise but at a slow pace as affordable housing becomes the mantra
DESPITE the various measures by the government to make housing more affordable, house prices continue to rise, although at a more gradual pace, participants at the “Post-Property Market Report 2016 dialogue” were told.
The introduction of tighter lending conditions to remove speculation, the offering of various affordable housing schemes at national and state levels and government subsidies have not resulted in making housing affordable for the masses. The introduction of the mass rail transit (MRT) and the development of high dense housing near these amenities, while convenient, has come with a price beyond the reach of most.
Public officials including surveyors and valuers attending the one-day dialogue on April 19 entitled Property Market Performance in Challenging Times were at their wits’ end.
Said an official: “I don’t know how this can be resolved. Prices (although at a more gradual increase than a few years ago) are getting higher.”
The interest in the sector by both public and private sector, the prolonged soft property market, long standing affordability issues and the short supply of affordable housing have spurred much interest.
It was against this backdrop that the event was organised for the first time by the Sports Club of Valuation Department (Kesupen) and the Malaysian Public Sector Valuers Association (Penilaisama). It was held a day after the Valuation and Property Services Department (JPPH) launched the Property Market Report 2016.
The dialogue allows participants to hear directly and to seek clarifications from the very people who make the report possible.
JPPH’s deputy director-general (operations) Zailan Mohd Isa gave a broad sweep of the overall market and touched on three main sectors – residential, office and retail sector.
Her key take-aways are:
> The property market is expected to remain soft for 2017;
> New properties have to compete with the secondary market, where buyers deal directly with house owners, in terms of the right pricing and right product;
> Prices to see gradual growth going forward;
> Incentives would continue to support the residential market; and
> The game changers are the MRT, the Kuala Lumpur-Singapore high speed rail and the East Coast Rail Line which connect the city to the east coast.
Although there was much focus on the residential segment as housing continues to be the main driver of the property market, there were also much concern regarding the office space and retail sector.
National Property Information Centre (Napic) deputy director Aina Edayu Ahmad says all states saw a downtrend in the commercial property market. She says while the residential sector is all about ownership, commercial properties are about business sentiment.
“Every state has average occupancy of about 70%, or a vacancy rate of about 30% in the office space sector. So it is worrisome,” Aina says.
The retail sector is faring slightly better with occupancy of above 80% in the (KL) Federal Territory and Selangor. In Johor and Penang, occupancy rate is slightly above 70%.
“We have to be careful that the retail sector does not become like the office oversupply situation,” she says.
About 30 complexes were completed last year. Starts and new planned supply both softened in the retail sector.
As for the residential sector, the Klang Valley has an overhang in condominiums priced from RM500,000 onwards and this figure is rising.
Referring to the Malaysian House Price Index which includes all types of residentials, Napic director Khuzaimah Abdullah says double-digit growth – seen in 2011 right until 2013 – are not sustainable. From 2013 onwards until the third quarter of 2016, annual growth rate was between 7% and 9.6%, which is still high. It was only in the last quarter of 2016 that saw growth at 5.5%.
Government’s role
Despite the high overhang rate, the government will be increasing the stamp duty rate from 3% to 4% for properties costing RM1mil and above effective Jan 1, 2018.
The rate rise may actually see more sales in this segment, Zailan says. Investors may say this is not the right time to raise stamp duty but this move may spur the well heeled to bring out their cheque book to order to avoid higher taxes next year, she says.
Although there were issues about the office, retail and residential sector, the day’s focus was the short supply of affordable housing and the difficulties getting on the house ownership ladder.
While the government is doing all it can by way of subsidies, there is another view that the government can resolve the issue by taking another trajectory.
Khazanah Research Institute research director Dr Suraya Ismail is of the view that if just one government-linked company (GLC) were to price units reasonably, prices will come down considering that both federal and state governments are large land owners.
“If one developer, hopefully a GLC, were to built units with built-up of between 1,200 and 1,500 sq ft in places like Shah Alam and price them at about RM250,000 each, prices will go down,” Suraya says.
“Most of the GLCs have gone into the property market. If one or two were to do this, prices will come down. The move has to begin with the GLCs,” she says.
Suraya says there has to be a strong resolve on the part of the government to do this. Healthy profit margins are still possible, she says. The public and private sectors must have the political will to modernise construction methods that cut labour and construction time.
“Have the property unit ready in six months, not two years,” she says.
On the government subsidising housing for the bottom 40% (B40) right up to the top 20% (T20), Suraya says while she appreciates efforts to provide for the B40 group, Malaysia does not have enough funding to support public affordable housing for such a large proportion of the population, not to mention the T20 as well.
B40 refers to the bottom 40% of households with monthly income of RM3,900 and below. T20 refers to households earning about RM10,000.
Suraya says the different programmes to help people get on the house ownership ladder cannot be premised on the increasing household debts and neither is it sustainable for the government to carry the financial burden.
On the pursuit of monetary wealth at individual and state levels, and using an Asia-Pacific country as an example, she asks: “Does it make sense to live in a country with high gross domestic product (GDP) and yet the people cannot afford anything?”
The second panelist Kenanga Investment Bank Bhd equity research head Sarah Lim Fern Chieh says private sector developers will not take the lead in resolving scarcity-affordability challenge because they are driven by profit margins, which begs the question, what is the role of the government and the GLCs.“It has to be a top down approach. How much return on investments do you want to forgo, or to get?”
Lim says if the government wants the private sector to play a bigger role, the government has to give something in return.
“The private sector can provide better quality housing, but the local authorities have to tweak the model. On this side of the road is better low-cost housing, but on the other side, give the private developer a higher plot ratio as compensation,” she says.
There has to be a lot more planning, cooperation and coordination between the public and private sector to overcome the present challenge. “Without government intervention, prices will not go down,” Lim says.
On the weaker ringgit and its affect on the Johor market, Lim says she was expecting to see some buying activity but that has yet to happen.
“Has our ringgit made us more attractive? Yes. Will it bring investors in? Not necessarily,” she says.
Follow us on Wechat or Facebook for the latest updates.
Download StarProperty.my e-Mag(bit.ly/StarProperty_Emag) for more articles.
Want to contribute articles to StarProperty.my? Email editor@starproperty.my. [slider id='81590' name='StarProperty' size='full']
