PEPS: We’re not blaming developers PEPS: We’re not blaming developers
Share this on WhatsAppOVERHANG ISSUE IS A COMPLEX PROBLEM THAT REQUIRES ATTENTION FROM NUMEROUS STAKEHOLDERS IN THE PROPERTY INDUSTRY BY Chris Prasad The Association... PEPS: We’re not blaming developers

OVERHANG ISSUE IS A COMPLEX PROBLEM THAT REQUIRES ATTENTION FROM NUMEROUS STAKEHOLDERS IN THE PROPERTY INDUSTRY

BY Chris Prasad

The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) has clarified that an earlier press statement by the body was not intended to expressly blame developers for the current property overhang (or oversupply) situation in the market.

The association said it regrets that its press release has been misconstrued as blaming the developers for the above problem, when in actual fact the overhang id a complex issue which involves many parties. This includes federal, state and local authorities, as well as the finance eco system from the governing bodies, banks, the developers and buyers/investors at large.

“As highlighted in our Press Statement, the major issue with the housing industry which led to current issue of overhang is information or rather lack of it,” it said in a new statement to the press.

For developers, PEPS said in an imperfect market where data is scarce, inaccurate and not timely, coupled with lack of proper market and feasibility studies, the situation has led to indiscriminate building – especially in the high-end segment.

For local authorities, poor coordination among separate institutions on development and approval date within certain districts has resulted in duplication similar developments within the same neighborhood.

Data is scarce, inaccurate and not timely, while lack of proper market and feasibility studies has led to indiscriminate building.

Buyers and investors too have contributed to the situation by disrupting the accuracy of demand and supply by buying blindly and making purchase decisions based on herd instinct.

Additionally, PEPS’ earlies press statement outlines that some of the major causes of overhang in the Malaysian property market include delays in gazetting of local and structure plan; mismatch of product and location; high building and compliance costs; and artificial demand created by members of the public for fear of losing out on choice properties.

The chart below on residential developments, purpose built offices and shopping centres illustrates the current situation, where RM35 billion worth of unsold and unutilised buildings are sunk in and a waste of financial resources.

Currently, there is 13 billion square feet of purpose-built offices (for 2018-2019) and 44 million square feet of incoming supply in Greater Kuala Lumpur alone (from 2017 onward).

PEPS believes that every effort must be made to absorb this incoming supply before the existing freeze on such developments is lifted.

PEPS supports the Government’s move to impose a freeze on new buildings, but clarifies that this should not be a “blanket” freeze.

“The freeze should take into consideration the sector, location and effective demand and supply. We recommend that there be a moratorium of 1 year for those developers who have submitted their planning applications to get the approval within 1 year. During the moratorium, an in-depth market and feasibility study should be conducted for all projects submitted for approval,” it said.

PEPS also concurs with Bank Negara Malaysia’s (BNM) statement that “severe property market imbalances can pose risk to macroeconomics and financial stability”.

The property industry is linked to more than 120 industries and collectively account for 10% of the GDP. Therefore, any severe property market imbalances and overbuilding will affect the stability of the financial system.

On affordable housing, apart from having a single entity, PEPS said the authority should also carry out market and feasibility study to ensure effective demand and supply and most importantly, the right location with proper supporting infrastructure. It also agrees with BNM’s call to introduce a central authority to manage this effort.

“The best model to adopt is the Housing Development Board (HDB Singapore) whereby HDB as a single authority act as the contractor, developer, marketing agency and also financier of all public housing in Singapore. HDB is responsible for housing 80% of Singaporeans,” it said.

Ultimately, the association believes that the building of low cost housing should be governed and undertaken by the government and not by the private sector.

Property 360 Online

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