Exclusive Round Table Discussion at Majlis Profesor Negara (part 2)

BY GUNAPRASATH BUPALAN

In the 22 November issue of Real Reserve, we highlighted the framework that was discussed at the Round Table Discussion held on 10th November at Majlis Profesor Negara. This week, we shall get in-depth on the thoughts each panellist had.

The Round Table discussion was aligned with the focus of the Malaysian Property Press Zerin Property Awards in collaboration with the Chartered Institute of Logistics and Transportation Malaysia this year on the issue of inclusive home ownership.

The panel discussion addressed the issue of home ownership among Malaysians, including the question of affordability for the younger generation, what property developers can do to help young Malaysians get a foot into the property market and the importance of housing for improving productivity. Here’s an insight into the discussion:

Nordin Abdullah

Moderator: Nordin Abdullah, founding chairman of The Malaysian Global Business Forum

Nordin Abdullah CEO of The Malaysia n Global Business Forum, who moderated the discussion asked:

How are the next generation of Malaysians are going to be creating enough wealth to be able to afford that housing that they need? Looking at the ratio of 35 per cent of your income. Looking at that ratio, what is the end cost in Malaysia? What is the formula that we have to come up with?

Professor Datuk Dr. Raduan Che Rose

Panelist: Professor Datuk Dr. Raduan Che Rose, CEO of Majlis Profesor Negara.

Prof Datuk Dr Raduan Che Rose, CEO of MPN: This is as simple as looking at our income trend and the property cost trend. We have to compare between the two. Over the past three years, income has increased by 12.4 per cent, but property prices have increased by 17.6 per cent. This isn’t a tandem increment, and I believe that it will continue to grow this way.

There must be a more creative formula than this. Maybe, instead of purchasing property, we should opt to renting for time being? I would also suggest that improvements on public transport would play a crucial role here.

Nordin: We see there’s a 5 per cent in income to property increasing. We see also property prices around the logistics to have increased. So our logistics solution may or may not be working at the moment. What do you think?

Chang Kim Loong

Panelist: Chang Kim Loong AMN, Honorary Secretary- General of National House Buyers Association (HBA).

Chang Kim Loong AMN, Honorary Secretary-General of National House Buyers Association: There have been many aspects that caused this situation. DIBS was one of them, which we managed to outlaw. The Real Property Gain Tax (RPGT) has been reinstated which will be 30 per cent levy within 3 years. Banks are more stringent now over loan to value ratio. There have been good initiatives by the government as well as the banks, but these aren’t good enough.

Property prices are very high at the moment and have been escalating for the past four to five years. Utility companies should absorb their capital cost. We echoed this some five years ago. Those days, electricity was government owned and it was called Lembaga Letrik Malaysia (LLN). But today LLN has been corporatised to become Tenaga Nasional Berhad (TNB) with their last announcement stating a pro t of RM2 billion. My question is, why is it that the setting up of a sub-station or reservoirs has now become the burden of a developer? By doing this, developers have no choice but to factor these costs into the property sale price, hence becoming one of the reasons why property prices have increased.

Nordin: We have seen the MRT come up. We have seen areas such as Cheras and Kajang as well as some property explosion out there. What has that done to property prices and affordability? Are property developers just making profit or are those properties actually worth more now?

Dr Daniele Gambero

Panelist: Dr Daniele Gambero, CEO of REI Group of Companies

Dr Daniele Gambero, CEO of REI Group of Companies: Infrastructure is surely one of the most impactful property values risers. The 11th Malaysian Plan highlights the intention and direction of the government in promoting competitive cities and one of the components in competitive cities is mobility. For this reason, it clearly states that Transit Oriented Developments in prime locations is very difficult to maintain affordable pricing.

However, he fully agrees that infrastructure is fully needed for people to commute from areas where land is cheaper. Cheaper land equates to final cost of the development to be cheaper too.

Nordin: We see that 45 per cent of property price cost comes from non-construction related items, how would consultants and engineers view that statement in view of their social responsibility to build low cost houses and affordable houses as their guaranteed CSR requirement?

Dato’ Dr Alias Abdullah

Panelist: Professor Dato’ Dr Alias Abdullah, Head – Cluster of Engineering, Technology & Built Environment, Majlis Profesor Negara.

Prof Dato’ Dr Alias Abdullah, Head of Cluster of Engineering, Technology & Built Environment, MPN: Professional fees are not de ned as pleased. There is a fees scale gazetted for every profession. So this means that you cannot simply in ate the price based on an increase of professional fees.

In terms of property development, the cost of building is determined by looking at the current property in place. If a property in a particular location costs X amount of Ringgit, the new development (even though it may be cheaper to develop) would follow the price of the current development due to the location.

Our failure is that we allow developers to determine property prices every year. They can define what ever price they like. These prices should be examined by the public. He suggests that a new model to be developed, where if a developer declares his selling price, there should be a governing body (for the rakyat), maybe an association like HBA to scrutinize the pricing and determine if the proposed selling price is correct or not, and if not, let HBA determine the most appropriate price for the said development.

Nordin: So, actually, our success in getting mobility right in especially Klang Valley has created a paradox of more expensive housing in opposed to making things more accessible. What’s our next step?

Hj Abi Sofian Abdul Hamid

Panelist: Hj Abi Sofian Abdul Hamid, Executive Director of The Chartered Institute of Logistics & Transportation Malaysia (CILT) Venture.

Hj Abi Sofian Abdul Hamid; Executive Director of CILT Venture: Probably, we need to look at the new MRT lines and define any developer who would like to develop along this line with compliance within their development. The selected developers will need to fulfil certain criteria in their pricing to be awarded the chance to develop there. Those who are not interested to comply could choose to develop further away from the said line.

Nordin: What is the perception from a developer’s point of view? What are developers doing at the moment and what can they do to help people obtain homes?

Gunaprasath Bupalan

Panelist: Gunaprasath Bupalan, chairman of The Malaysian Property Press Awards / Executive Director of Terra Value Sdn Bhd and Emjay Communications.

Gunaprasath Bupalan, Executive Director of Terra Value & Chairman of MPPA: Having worked with developers for the past 13 years or so, I have seen all types of developments come about. We have seen a shift in

paradigm, from what it used to be before where buyers seek space and location to lifestyle needs such as facilities by today’s buyers. The new generation of buyers do not mind living in a smaller unit as long as they have ample modern facilities around them for entertainment and recreation. This has led many property developers to follow suit with their projects, creating more shoebox units with ample of lifestyle facilities.

What can property developers do to improve entry into the market? From my research and observation, I feel that aside from Affordable Housing that many developers are already looking at, they could also offer ‘Rent to own’ schemes, where you rent for a period of time and part of the rental goes towards the down payment for the home you are renting and after a certain number of years, the tenant is given the option to purchase the property with no additional down payment.

They could also offer ‘Developer loans’ to purchasers. This would mean that the interest charged is slightly higher than the banks, but easier to obtain.

Developers could also look at selling ‘shell houses’ — homes that come with no frills. These are units that are just a block of cement, where fittings, wiring, plumbing and decor are all borne by the buyer. This will definitely bring the property price down significantly, hence making the down payment much lower too.

Nordin: Do we have a perception problem where Malaysian are more in love with cars compared to property and they are just waking up to realize that they have made the wrong choice?

Shanthi Thiruchelvam

Panelist: Shanthi Thiruchelvam, Executive Director and Principal Consultant of Perception Management.

Shanthi Thiruchelvam, Executive Director and Principal Consultant of Perception Management: Certainly. She finds that purchasing cars have become lifestyle choices. If you look at an average household, the moment one starts working, the first thing required is a car. She feels that once an individual crosses the age of 26, they start to become more serious about home purchase and choices they make for their future.

We need to address perception gaps. All that was discussed here were fantastic. We have to be transparent. The government and property developers need to work together and use the barometer of communication, may it be social media or media or etc and tell the rakyat what is actually affordable homes.

Closing

To close the session, Profesor Raduan said that this 2018 budget, we have a bigger cake which is an increase by RM20 billion, from originally RM260 billion to now RM280 billion. That is a very good development indeed. In terms of de cit, we managed to curb to it to below three per cent.

The government is also very serious in preparing the right infrastructure for further development of the country, which includes transportation. He strongly believes that it would be good to have one agency to look into this (a one stop agency).

The government could provide more homes for rent to the rakyat and Bank Negara needs more policies to reduce speculators and third party players such as those conducting investor clubs.

I on the other hand concluded that based on my personal observation, I feel that the government isn’t doing enough marketing, advertising, promotions and education regarding these initiatives.

They should have more education on PR1MA, MyBeautifulHome and all other initiatives to let the public know how they could benefit from it. These educational promotions shouldn’t be con ned to rural areas but should be brought to the urban public too, because majority Malaysians are mid-income earners, and they are mostly renting homes at the moment with no clue on how to benefit from the government initiatives.

Chang Kim Loong said that there should be a way for people to take a loan from the Employee Provident Fund (EPF), where buyers would borrow from their own accounts, to purchase a home. If the home is sold in the future, the pro ts can be pumped back into their EPF account. This would be easier to obtain, for those who have trouble with bank loans.

Of course there are issues that need to be ironed out and many area that need to be looked at, but this is surely an idea for the near future.

With over two hours of discussion, the Roundtable ended on a positive note, with many ideas to improve home ownership and ideas for new policies with hopes that they will be implemented soon to help the rakyat with their home ownership.

The Malaysian Property Press Zerin Properties Awards 2016/2017 in collaboration with The Chartered Institute of Logistics and Transportation Malaysia will be held at the end of the year.

Amongst the winners this year are Hatten Group Sdn Bhd, Mah Sing Group Berhad, The Haven Sdn Bhd, Far Capital Sdn Bhd, M101 Sdn Bhd, UM Land Berhad, PKNS Real Estate Sdn Bhd (PREC), Andaman Group, Gila Hartanah, Datuk Ng Sieng Liong JP of MAPEX, Ninja Van, KSS Auto and NCT Sdn Bhd.