Putrajaya’s constant u-turns over its announced luxury property ban are yet another example of the government’s absurd tendency to ignore expert policy advice in favour of ill thought out knee-jerk reactions.
Bank Negara (BNM) had reported last month on the substantial supply and demand imbalance within the country’s property market. The report found that new property launches were skewed towards the high-end sector of the market priced above RM250,000.
The government then immediately issued a poorly thought out directive halting approvals for all new high-end property developments priced above RM1 million per unit.
When the blanket freeze was first announced on November 17, I had already warned that the ban was not going to resolve any of the issues highlighted by Bank Negara. Sure enough, the government has now made a near-complete U-turn its ban in less than a month.
Based on the latest announcements by the Housing and Local Government Minister, Dato’ Seri Noh Omar and the Second Finance Minister, Dato' Seri Johari Abdul Ghani, earlier this week, property developers can now appeal to Ministers for high-end project approvals on a case-by-case basis. Basically, the Ministers have now granted themselves full discretionary powers to approve projects for developers who can sweet talk way to win the hearts of the Ministers.
The arbitrary nature of this new policy with have serious consequences to short and longer term investments by both foreign and domestic investors in Malaysia.
The thing is, BNM’s report had outlined six different policy recommendations to dealing with specific issues in the property market. Hence, why doesn’t the government just adopt the advice already given to them by BNM?
To address the high level of unsold residential properties, the report suggested increasing encouragement for the rental market. On affordable housing, it was recommended that the government increase its efficiency in providing and allocating affordable homes. These policies are targeted and are designed to address the specific issues in the residential market.
The government’s halting of new approvals for high-rise residential developments over RM1 million does nothing to address these issues. According to the Edge Weekly’s in-depth report published last weekend, units at that price point and high-rise residences only make up 12.06% and 11.48% of unsold properties respectively.
BNM also suggested better management to address the large incoming supply of commercial properties. This includes ensuring the commercial viability of the project is thoroughly assessed and for developers to be cognisant of demand conditions. However, the government’s blanket ban lacked any mechanism that would allow an objective assessment of each development.
In addition, to alleviate the problem of high office vacancy rates and low rental rates in existing buildings, the report recommended the repurposing of vacant commercial buildings as well as increasing demand for existing space through either rental rebates or greater efforts to attract foreign business.
Unlike these policies, the government’s knee-jerk ban would only halt the approvals for future high-end developments without managing the already severe level of oversupply. It is difficult to understand why the government has chosen to ignore Bank Negara’s relatively sound advice to address these problems.
We call upon the government to take heed of Bank Negara’s recommendations immediately. It should also conduct a thorough study with all stakeholders and think-tanks to design and implement consistent, constructive and incentivised policies to ensure continued growth and sustainability for the property sector and correspondingly, our economy.
Showing posts with label Housing. Show all posts
Showing posts with label Housing. Show all posts
Friday, December 08, 2017
Thursday, November 23, 2017
Why are 1MDB-related projects given special exemptions despite Cabinet blanket ban on luxury property projects above RM1 million in unit values?
Last week, Dato’ Seri Johari Abdul Ghani announced the Cabinet decision on a “temporary ban” approvals for shopping complexes, offices, serviced apartments and luxury condominiums priced over RM1 million effective November 1.
The freeze came after Bank Negara’s report on the substantial supply and demand imbalance within the country’s property market. The report found that new property launches were skewed towards the high-end sector of the market.
Particularly in the Klang Valley, the report found that office vacancy rates had increased from 20.9% in Q1 2015 to 23.6% in Q1 2017. The situation is only set to get worse as there is an incoming supply of 38 million square feet of office space.
It has also been confirmed in various news reports that the Kuala Lumpur City Hall (DBKL) has received the above directive.
However, we are not sure if we should be shocked that the Mayor, Tan Sri Mohd Amin Nordin Abd Aziz announced yesterday that the prospective single largest high-end property development project ever in Malaysia – Bandar Malaysia is exempted from the ban.
Malaysiakini reported that although the Kuala Lumpur City Hall (DBKL) had yet to receive any application regarding the project, Mohd Amin said the freeze on approvals for condominiums, serviced apartments, offices and shopping complexes priced at RM1 million and above is not a blanket ban.
“We haven’t received any application from Bandar Malaysia. No, because it is not a blanket (ban). On certain developments, it can be approved,” he told Malaysiakini.
At the same time, it was announced yesterday that IJM would be building a new RM500 million office tower at Tun Razak Exchange after acquiring TRX City subsidiary Fairview Valley Sdn Bhd. Will this new tower, which will have a gross floor area of 560,000 square feet also be exempted from the ban?
Due to the size of these 1MDB-related projects, they will certainly exacerbate the property over-supply situation in the Klang Valley and effectively blunt the effectiveness of the Cabinet decision to ban high-end development projects.
More critically, if the 486 acres Bandar Malaysia and the 70 acres Tun Razak Exchange projects receive automatic exemptions from the ban – how is that fair to the rest of the property development industry in the country?
Clearly the “temporary ban” is a hare-brained which will fail to actually solve the “supply-demand imbalances” in our property sector. Worse, the investment and business community will only see the inconsistency and unfair policies imposed by the Government. Can they be blamed if both the domestic and foreign investors take their money and invest in other countries?
The freeze came after Bank Negara’s report on the substantial supply and demand imbalance within the country’s property market. The report found that new property launches were skewed towards the high-end sector of the market.
Particularly in the Klang Valley, the report found that office vacancy rates had increased from 20.9% in Q1 2015 to 23.6% in Q1 2017. The situation is only set to get worse as there is an incoming supply of 38 million square feet of office space.
It has also been confirmed in various news reports that the Kuala Lumpur City Hall (DBKL) has received the above directive.
However, we are not sure if we should be shocked that the Mayor, Tan Sri Mohd Amin Nordin Abd Aziz announced yesterday that the prospective single largest high-end property development project ever in Malaysia – Bandar Malaysia is exempted from the ban.
Malaysiakini reported that although the Kuala Lumpur City Hall (DBKL) had yet to receive any application regarding the project, Mohd Amin said the freeze on approvals for condominiums, serviced apartments, offices and shopping complexes priced at RM1 million and above is not a blanket ban.
“We haven’t received any application from Bandar Malaysia. No, because it is not a blanket (ban). On certain developments, it can be approved,” he told Malaysiakini.
At the same time, it was announced yesterday that IJM would be building a new RM500 million office tower at Tun Razak Exchange after acquiring TRX City subsidiary Fairview Valley Sdn Bhd. Will this new tower, which will have a gross floor area of 560,000 square feet also be exempted from the ban?
Due to the size of these 1MDB-related projects, they will certainly exacerbate the property over-supply situation in the Klang Valley and effectively blunt the effectiveness of the Cabinet decision to ban high-end development projects.
More critically, if the 486 acres Bandar Malaysia and the 70 acres Tun Razak Exchange projects receive automatic exemptions from the ban – how is that fair to the rest of the property development industry in the country?
Clearly the “temporary ban” is a hare-brained which will fail to actually solve the “supply-demand imbalances” in our property sector. Worse, the investment and business community will only see the inconsistency and unfair policies imposed by the Government. Can they be blamed if both the domestic and foreign investors take their money and invest in other countries?
Wednesday, November 22, 2017
Is the high-end property ‘freeze’ a case of a hare-brained attempt to hose down a fire which has already burnt to ashes, or worse, cause a flood and further add to the woes?
On 17 November, Bank Negara Malaysia (BNM) produced a report highlighting the mismatch in supply and demand of property developments in Malaysia.
The BNM Governor, Tan Sri Muhammad Ibrahim pointed out that the supply-demand imbalances in the property market has increased since 2015, pointing to the decade-high of unsold residential properties. There were 130,690 unsold units at the end of March this year, with 83% priced at above RM250,000.
The knee-jerk reaction to the alarming report was the announcement two days later by Second Finance Minister, Datuk Johari Abdul Ghani that the government had issued a directive temporarily stopping developments of shopping malls, commercial complexes and condominiums valued about RM1 million from November 1.
One can tell that it was a hare-brained policy attempt because the day after, the Works Minister, Datuk Fadillah Yusof said that the directive was not a blanket freeze and that approvals would be evaluated on a case by case basis.
Datuk Johari then added, on November 21, that the freeze would only affect projects that had not been approved and the length of the freeze would depend on a continued assessment of the situation.
The question is, how did the Government allow the situation to develop to such a state of gross mismatch in the first place?
Actually, the issue of imbalances in the property market was already highlighted by BNM in its 2015 annual report. And the oversupply in the housing market has since then almost doubled between 2015 and 2017. In fact, Bank Negara’s figures for the property supply and demand come from the National Property Information Centre (NAPIC) located under the Ministry of Finance (MoF).
As the BNM Governor opined, “we have raised these issues for more than a year. Exposure of financial sector within this area is within a comfortable level. But if we're not careful, the oversupply could have a negative impact on the economy.”
Hence the question now is, given the fact that the milk is already spilled, will the seemingly drastic knee-jerk ban on luxury condominiums, shopping malls and commercial complexes solve the problem or trigger even more problems?
Investors, both domestic and foreign, will tell you that what they fear and hate more than bad policies are inconsistent, uncertain and ad-hoc policy-making. The latter results in constant unanticipated changes and frequent policy U-turns which makes it impossible for business to plan their investments and measure their expected returns.
In this case, there are so many unanswered questions based on the Cabinet's hasty policy decision.
Has MoF asked the real estate sector – why is it that despite the excess supply of “luxury condominium”, developers continue to build them at that price? Are Malaysian developers really that stupid to invest in projects which cannot sell?
Has MoF conducted a study to determine if a ban on the “luxury” sector will reallocate investments into the “affordable” property sector? If it doesn’t, will the ban merely stop property and construction activities and consequently trigger an economic slowdown and lower employment opportunities?
One of the biggest questions that needs to be asked is, what is considered a “luxury” project? The Bank Negara report used RM250,000 as the benchmark. However, the Government’s own affordable housing agency PR1MA have properties priced between RM100,000 and RM400,000, although prices tend to be skewed more to the higher-end. On the other hand, the latest MoF ban appears to apply to only properties priced above RM1 million. Hence, are we prescribing medication to the wrong patient?
Worst, the blanket ban does not take into account of regional factors and imbalances. The BNM Governor clearly stated that Johor is poised to have the highest number of unsold residential properties and potentially the largest excess supply of retail space. Hence is a nationwide ban of any kind the right prescription or will it instead cause economic distortions in other states and regions?
We call upon the Minister of Finance to provide not only clarity to the hare-brained “temporary ban” decision but also to justify how such a ban will actually solve the “supply-demand imbalances” in our property sector. He should also take in cognizance of the fact that BNM’s 6-policy prescription to resolving the problem did not involve an outright ban on types of development. Otherwise, the unintended consequences of such a crude policy prescription would worsen the effects on our already fragile economy.
The BNM Governor, Tan Sri Muhammad Ibrahim pointed out that the supply-demand imbalances in the property market has increased since 2015, pointing to the decade-high of unsold residential properties. There were 130,690 unsold units at the end of March this year, with 83% priced at above RM250,000.
The knee-jerk reaction to the alarming report was the announcement two days later by Second Finance Minister, Datuk Johari Abdul Ghani that the government had issued a directive temporarily stopping developments of shopping malls, commercial complexes and condominiums valued about RM1 million from November 1.
One can tell that it was a hare-brained policy attempt because the day after, the Works Minister, Datuk Fadillah Yusof said that the directive was not a blanket freeze and that approvals would be evaluated on a case by case basis.
Datuk Johari then added, on November 21, that the freeze would only affect projects that had not been approved and the length of the freeze would depend on a continued assessment of the situation.
The question is, how did the Government allow the situation to develop to such a state of gross mismatch in the first place?
Actually, the issue of imbalances in the property market was already highlighted by BNM in its 2015 annual report. And the oversupply in the housing market has since then almost doubled between 2015 and 2017. In fact, Bank Negara’s figures for the property supply and demand come from the National Property Information Centre (NAPIC) located under the Ministry of Finance (MoF).
As the BNM Governor opined, “we have raised these issues for more than a year. Exposure of financial sector within this area is within a comfortable level. But if we're not careful, the oversupply could have a negative impact on the economy.”
Hence the question now is, given the fact that the milk is already spilled, will the seemingly drastic knee-jerk ban on luxury condominiums, shopping malls and commercial complexes solve the problem or trigger even more problems?
Investors, both domestic and foreign, will tell you that what they fear and hate more than bad policies are inconsistent, uncertain and ad-hoc policy-making. The latter results in constant unanticipated changes and frequent policy U-turns which makes it impossible for business to plan their investments and measure their expected returns.
In this case, there are so many unanswered questions based on the Cabinet's hasty policy decision.
Has MoF asked the real estate sector – why is it that despite the excess supply of “luxury condominium”, developers continue to build them at that price? Are Malaysian developers really that stupid to invest in projects which cannot sell?
Has MoF conducted a study to determine if a ban on the “luxury” sector will reallocate investments into the “affordable” property sector? If it doesn’t, will the ban merely stop property and construction activities and consequently trigger an economic slowdown and lower employment opportunities?
One of the biggest questions that needs to be asked is, what is considered a “luxury” project? The Bank Negara report used RM250,000 as the benchmark. However, the Government’s own affordable housing agency PR1MA have properties priced between RM100,000 and RM400,000, although prices tend to be skewed more to the higher-end. On the other hand, the latest MoF ban appears to apply to only properties priced above RM1 million. Hence, are we prescribing medication to the wrong patient?
Worst, the blanket ban does not take into account of regional factors and imbalances. The BNM Governor clearly stated that Johor is poised to have the highest number of unsold residential properties and potentially the largest excess supply of retail space. Hence is a nationwide ban of any kind the right prescription or will it instead cause economic distortions in other states and regions?
We call upon the Minister of Finance to provide not only clarity to the hare-brained “temporary ban” decision but also to justify how such a ban will actually solve the “supply-demand imbalances” in our property sector. He should also take in cognizance of the fact that BNM’s 6-policy prescription to resolving the problem did not involve an outright ban on types of development. Otherwise, the unintended consequences of such a crude policy prescription would worsen the effects on our already fragile economy.
Friday, March 03, 2017
Dato’ Seri Abdul Rahman Dahlan failed to convince anyone that he has not abused his powers to benefit developers while he was the Housing Minister
Dato’ Seri Abdul Rahman Dahlan has been embroiled in the controversy of granting an extension of time (EOT) for the construction of condominium projects by BHL Group of Companies. The former Urban Well-Being, Housing and Local Government (KPKT) Minister’s move has resulted in the house-buyers failing to secure Liquidated and Ascertained Damages (LAD) from the developer as stipulated in the Sale and Purchase Agreements (SPAs).
The aggrieved house-buyers have filed a judicial review against the Housing Controller and the Minister for the above decision last year.
Last Tuesday, the High Court ruled that the Housing Controller has no power to grant an extension of time to developers who delay the completion of housing projects. Justice Hanipah Farikullah, who allowed the judicial review application by 71 house buyers, said the minister’s decision to rely on a regulation to allow the extension was against the Housing Development (Control & Licensing) Act.
We have called upon Dato’ Seri Rahman Dahlan to explain why he abused his powers to benefit the developers who have failed to deliver their projects on a timely basis for the house-buyers.
Worse, it has been discovered that the appeal by BHL approved by the Minister was supported by a letter from the wife of the Attorney-General, Tan Sri Apandi Ali, masquerading as a Director of the company. The existence of the letter raises valid suspicions of bias, cronyism and impropriety.
Yesterday, the former Minister, Dato’ Seri Abdul Rahman Dahlan denied that he has abused his power in the process.
"The decision I took was based on the powers clearly given to KPKT minister as stated in Act 118 (Housing Development (Control and Licensing) Act 1966)," he said. He added that the decision in granting EOT was based on merit and was not influenced by support letters.
However, the Court ruling has stated clearly that the Minister has no power under Section 24 of the Housing and Development (Control and Licensing) Act, to empower housing controllers to waive or change any of the terms and conditions of the prescribed statutory agreement. What “power” is the Minister harping about?
What is however most important, is the fact that Dato’ Seri Rahman Dahlan had insisted that his decision was based on the “merits” of the case. However, in his statement, the Minister failed to specify even a single instance of such a “merit” to justify his decision which had rubbed salt onto the wounds of the house-buyers.
What could be so convincing and justifiable in the appeal by the developer, other than the fact that it was put forth by the wife of the Attorney-General, which moved the Minister to arbitrarily extend the completion date of the housing project by 12 months resulting in millions of ringgit of losses by the house-buyers?
Among the primary roles of the Minister is to safeguard the interest of Malaysian home-buyers against incompetent and unscrupulous developers. Barring perhaps acts of God, the Minister should never interfere in a transaction, especially if it were to clearly result in substantial losses to the house-buyers.
Instead of granting approvals for extensions to Developers and penalising house-buyers, the Minister should have instead given warnings to the Developers that the Government will not hesitate to assist home-buyers in asserting their rights should the former fail to deliver their promises.
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