Are gatekeepers of property sector sleeping on the job?

 

Too much supply and lack of demand have led to some housing projects being abandoned. (Facebook pic)

PETALING JAYA: At a virtual property seminar in mid-October, a National Property Information Centre official asked: “Why do we continue to build when we cannot sell?

“We have excess malls, offices and residences,” a frustrated Ari Adam, Napic’s deputy director (inventory division), said.

“What are we to do with the overhang in the residential and commercial segments? Do we let the prices fall? We have to think out of the box to resolve this.”

Ari was a guest at the “Property Outlook for 2021: Eye on 2022″ organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia on Oct 13.

The same week, some Bangsar residents protested against the proposed construction of a 34-storey serviced apartment on Jalan Abdullah, which will comprise 180 units.

Anyone who has driven there will know how narrow the roads are. Drivers need to slow down when there is an approaching car ahead, even on a straight road, what more when the road curves.

During the same week of the Bangsar protests, it was reported that Johor Baru has some 70,000 houses, landed and high-rise units, which are unsold, unoccupied or abandoned.

Johor menteri besar Hasni Mohammad said the state government would seek the views of real estate professionals to resolve the matter. The state government would like to make Johor Baru a dynamic city, and such wasted resources do not go well in a dynamic city.

Hasni said the revised Malaysia My Second Home requirements contributed to the problem.

The three events, although more than 300km apart, all pointed to the same problem – too much supply and lack of demand.

It is simple economics – when there is too much supply and not enough effective demand, prices will fall.

It is ironic, therefore, that despite the weak property market, and the billions of ringgit worth of unsold completed housing in the country, Bangsar residents had to brave a pandemic to come together to protest against the proposed commercial project.

They have been protesting together with the Save KL Coalition (SKL), which is made up of Kuala Lumpur residents advocating for sustainable growth and development.

SKL chairman M Ali said three bungalows on Jalan Abdullah have been demolished. Ali has been taking the media to view the site and to voice their unhappiness for years.

Meanwhile, the problem of unsold completed projects, or overhang, has been with us for about a decade now and growing.

Yeah Kim Leng, economics professor at Sunway University, said it is a “well-known coordination problem”.

He said the stakeholders, from developers to state authorities, valuers and property consultants and financiers, are “all acting in their own interest but not looking at the bigger picture”.

“They are optimising their own resources. So, they continue to build to sustain their business,” he said at a panel discussion.

Investment analyst and managing director of Datametrics Research & Information Centre Pankaj Kumar said making it mandatory for developers to do independent market and feasibility studies before a project commences, as suggested by some valuers, is not enough.

“Local authorities will need to play a role to ensure that all applications that come to them are well thought out in terms of what is being offered to the market, and if they can really sell,” said Pankaj, who was part of the panel discussion..

The strange thing is, despite the high levels of unsold units, development orders continue to be given to develop public parks, and even protected forest reserves have come under threat.

“It does not make sense,” he said.

He said it is up to the state governments – one of two gatekeepers, the other being the banks and lending institutions – to address the issue which has “gone on for far too long”.

“The market needs a reset button and the authorities and developers have to address the state of the property market.”

RHB Investment Bank analyst Loong Kok Wen, who was also a panellist, concurred that the lack of coordination and leadership has gone on for far too long.

She said the local authorities should be “the gatekeepers” to control the supply. They are the ones who have the information as to what the available units are and how many units are coming up in a particular location.

“Nobody, absolutely, no one other than the government has that information,” she said.

In short, the local authorities, together with the banking sector which finances the projects, can end the overhang problem. An economics professor and two analysts have provided the answer.

Yet, the government is scratching its head over what to do about the unsold, abandoned and unoccupied units.

Land is a state matter. The states seem to have long abdicated their duties and their role as planners. - FMT