Luxury projects freeze could taper foreign interest

The temporary ban will discourage foreign players to bid or invest in the current and future mega developments

by IZZAT RATNA / pic by TMR filepic

FOREIGN investors are pulling the brakes on large-scale property and construction ventures after the authority imposes a temporary ban on high-end commercial and residential projects.

The authorities are trying to prevent a property bubble as unsold residential and commercial properties rose to about 130,000 units. But, the unexpected decision had surprised industry players including potential foreign developers.

Property industry experts said many investors, especially foreign developers, are growing wary of their business decisions and are seeking new strategies to mitigate the situation.

A property expert said the temporary stop order could discourage foreign players to bid or invest in the current and future mega developments, due to the uncertainties over the temporary freeze.

The industry insider said the multibillion projects like the 196-ha Bandar Malaysia development in Sungai Besi could also be strained to find interested foreign partners “Foreign players are sceptical to come to Malaysia as the development of that size still has no clear structure and transparency to move forward.

“The prospect of attracting foreign players is not expected to improve soon due to the extremely volatile market conditions,” the industry insider told The Malaysian Reserve (TMR).

Despite the temporary ban of new development, Bandar Malaysia has been given a go-ahead by the government to proceed as it was envisioned prior to the freeze. The market is waiting for the winning bidders for the master developer after the aborted deal between Iskandar Waterfront Holdings Sdn Bhd and China Railway Engineering Corp (M) Sdn Bhd.

The owner of the Bandar Malaysia project wants to woo global and Fortune 500 companies to craft the country’s leading commercial, residential and transportation hub on the former air force site, which is equivalent to the size of 486 football fields.

In the last few years, China developers and construction firms have been investing heavily in Malaysia, taking up shareholding with local companies and bidding for many development projects.

Abdul Rahim says the country is now witnessing an excess of over 1.4m sq m of high-end residential and commercial properties. (pic by HUSSEIN SHAHARUDDIN/TMR)

Meanwhile, Rahim & Co International Sdn Bhd chairman Tan Sri Abdul Rahim Abdul Rahman  said the government’s move is prudent and timely to stabilise the market.

He said investors are now more cautious and prudent with their investments.

“I don’t think any prudent investors would participate in a property venture when there is evidence of an oversupply.

“Every developer, either foreign or local, will have to consider the situation before they get involved in any development,” he told TMR.

Abdul Rahim said Malaysia is now witnessing an excess of over 1.4 million sq m of highend residential and commercial properties, while the average occupancy rate for retail and office spaces dropping below 80% is a matter of concern.

“As soon as the condition improves, the government can lift the freeze,” Abdul Rahim said.

The ban on new luxury projects had forced developers to adopt a wait-and-see attitude before the glut dissipates.

JLL Property Services (M) Sdn Bhd research and consultancy associate director Veena Loh said that some developers would have to formulate strategies to mitigate the situation.

She said the states were given some leeway for new luxury projects depending on the locations.

“Large-scale projects such as Bandar Malaysia will be given exemption. Some developers may lobby for more leeways on a particular development whether it is for luxury residence or retail components, depending on the demand,” she said.

Unsold residential properties for the first quarter of 2017 stood at 130,690 units.

The number includes overhang, unsold properties under construction, SoHo (small office/home office), as well as serviced apartments.