They have been adapting well in the current challenging market and they will find a way around it
By FARA AISYAH / Pic By MUHD AMIN NAHARUL
The government decision to stop approving certain development projects will do little to stop developers of luxury and commercial property units, according to property consultants.
Faced with an indefinite approval ban on four types of property developments announced over the weekend, developers that have invested heavily in their plans will adapt.
Property valuer Kit Au Yong of Laurelcap Sdn Bhd said he expected developers to adjust their proposals to get around the freeze “like they’ve been doing for years”.
“Developers have been adapting well in this challenging market, they will one way or another, find a way around it. If they cannot sell at RM1 million, they will probably try to sell it at a slightly reduced price,” Au Yong told The Malaysian Reserve (TMR).
He said the new ruling will bring down the number of units a little, but it would not affect the majority of the industry.
“There is an oversupply of properties in the market because no prior market and financial feasibility study were carried out to determine the effective demand and the take-up rate before embarking on a development.
“Therefore, the freeze is certainly a good move to help absorb the glut of luxury property over the next few years.”
Another consultant said the freeze would not affect the big boys such as SP Setia Bhd, IJM Land Bhd and Sime Darby Bhd because they already have projects approved for the foreseeable future.
“However, it will influence the smaller developers as well as foreign developers,” VPC Alliance (KL) Sdn Bhd director James Wong.
Wong agreed that a temporary stop to approvals for some projects is justified, but suggested that the decision should not be too sudden as to catch the industry unawares.
“It should not be a blanket freeze, instead there should be a one-year moratorium before enforcing the freeze order,” he said. “If the developer can prove that the property is viable and can achieve a certain percentage of sales then approvals should be given.”
Property consultants PPC International Sdn Bhd MD Datuk Siders Sittampalam said that the ruling from the government was not absolute, and developers will find ways to manage.
“This is only temporary. The government will monitor the supply and demand for such properties before they can announce their next step,” Siders said. He applauded the government’s decision because there is an oversupply of office space in Kuala Lumpur (KL) and it will take time for the demand to catch up with the supply.
Exastrata Solutions Sdn Bhd chief real estate consultant Adzman Shah Mohd Ariffin said one way for developers to get around the freeze on RM1 million units is to adjust prices.
“It is inevitable that when the freeze happens, this will allow the market to adjust accordingly,” Adzman Shah said.
He said that one of the reasons for this severe market imbalance is the obvious gap difference between unaffordable versus affordable properties.
The Real Estate and Housing Developers’ Association (Rehda) has requested the government to reconsider the freeze because land prices for certain areas in the country are higher, which makes building properties under RM1 million impractical.
It has also requested members to make feasibility studies on prices before embarking on projects. The government implemented the indefinite freeze on approvals for luxury commercial and residential projects after Bank Negara Malaysia (BNM) warned of a property crisis due to the real estate glut.
In a report, the central bank said a property overhang has developed that will be problematical for developers of high-rise condominiums, shopping malls and commercial units, including those worth more than RM1 million.
The government freeze will be lifted when all excess supply is cleared and is only affecting properties that fall under KL City Hall’s management and as new applications.
Projects that have been approved prior to the freeze order — which include changes made to building plans — must receive planning permission by January 2018.
Based on BNM’s quarterly bulletin published last week, the total unsold residential properties for the first quarter of 2017 (1Q17) stood at 130,690 units, the highest recorded in a decade.
The number includes over-hang, unsold properties under construction, SoHo (small office/home office), as well as serviced apartments as per the National Property Information Centre.
Eighty-three percent unsold units were in the above RM250,000 price range, 61% were high-rise properties, out of which 89% were priced above RM250,000.
BNM also stressed that severe property market imbalances can pose risks to the macroeconomic as well as the financial stability.
“There are imbalances for both residential and commercial property markets in Malaysia. This is a concern seeing that the property sector has linkages to more than 120 industries, collectively accounting for 10% of gross domestic product and the employment of 1.4 million Malaysians,” the BNM report said.