Following a meeting with DBKL Mayor Tan Sri Mohamad Amin Nordin, my colleagues from Parliament revealed yesterday that DBKL would not be enacting the announced freeze on high-rise property developments above RM1 million. According to Segambut MP Lim Lip Eng, DBKL Mayor said that the ban would not be implemented in the Golden Triangle as it would infeasible.
City Hall’s response confirms two glaring flaws in the government’s ‘hare-brained’ solution to the oversupply of luxury properties in the country. Firstly, as I’ve stated before, it shows how ill-thought out and impractical the ban actually is.
Secondly and more importantly, DBKL’s defiance of a Cabinet directive demonstrates just how toothless Putrajaya’s is. Ironically the BNM report specifically highlighted that in Kuala Lumpur and the Klang Valley alone, 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 with an incoming supply of additional 38 million square feet of office space.
The property freeze was first announced on November 17 by Second Finance Minister Datuk Johari Abdul Ghani following the release of Bank Negara’s (BNM) report on the severe supply and demand imbalance in the country’s property market. The freeze was supposedly a nationwide blanket ban which would freeze approvals on condominium, office and shopping mall developments valued above RM1 million per unit.
The announcement quickly became a farce when the Works Minister Datuk Fadillah Yusof contradicted his cabinet colleague by saying the ‘blanket ban’ would actually be applied on a case by case basis. The Federal Territories Minister Dato’ Seri Tengku Adnan Tengku Mansor then added that 1MDB-linked projects - Tun Razak Exchange and Bandar Malaysia would be exempted from the ban because they were ‘pre-approved’.
Finally, cabinet made a full u-turn last week when it said that developers could appeal the ban to a Ministerial committee comprising the Second Finance Minister, the Works Minister, Urban Wellbeing and Local Government Minister Tan Sri Noh Omar, and Minister in the Prime Minister’s Department Datuk Abdul Rahman Dahlan.
However, yesterday’s revelation by the DBKL Mayor proved that all these acrobatics are unnecessary since any decision by the Cabinet is utterly futile. If DBKL can do it, then there’s no reason why all other local councils in the country would comply with the directive.
The above further showed why we have reached such a state of severe “demand and supply imbalance” in the first place despite warnings from BNM since 2015. It is precisely because of the Cabinet’s impotence, that whatever policy that has been decided upon – good or bad, are completely diulted, if not ignored altogether like the above, by the its implementation agencies.
Beyond the major policy decisions Putrajaya needs to make to remedy the increasingly severe property sector problems which will have far-reaching consequences for our economy, there is a clear need to overhaul the Government bureaucracy to ensure policies made are carried out to the letter. Otherwise, you may have the world’s best policy-makers and the highest paid consultants, but all would be wasted with a Government effectively run by politically entrenched warlords and little Napoleons.
Showing posts with label Real Estate. Show all posts
Showing posts with label Real Estate. Show all posts
Wednesday, December 13, 2017
Friday, December 08, 2017
Why is the Cabinet adamant in ignoring Bank Negara's policy prescriptions on the property market imbalance?
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.
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.
Thursday, December 07, 2017
Our Cabinet has some of the best back-flip acrobats in the world with the unbelievable twists and turns over high-end property development freeze
Second Finance Minister Datuk Seri Johari Abdul Ghani announced on November 17 that the government had sent a directive to halt all approvals for high-end residences, shopping complexes and office buildings priced over RM1 million.
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.
The Second Finance Minister subsequently reaffirmed the blanket ban after his fellow Cabinet colleague, Works Minister Datuk Fadillah Yusof said that developments would be reviewed on a case by case basis.
The ‘blanket ban’ had smacked of being a ‘hare-brained’ policy prescription as the Government started granting exemptions to projects which the Government had a vested interested. In particular, the Minister of Federal Territories, Dato’ Seri Tengku Adnan Tengku Mansor said the 1MDB-linked projects – Tun Razak Exchange and Bandar Malaysia were “pre-approved”, and are hence exempted.
The fact that Bandar Malaysia has not even found a developer with a plan appears immaterial to the ban exemption.
The biased exemption of such projects by Government-linked companies (GLCs) created an uproar among the private sector, who then lobbied hard to ease the ban.
Yesterday, the Government did another double-twist somersault on its ‘blanket ban’. Two statements by Urban Wellbeing and Local Government Minister Tan Sri Noh Omar and Datuk Seri Johari, suggested that the Government will now allow developers to appeal the ban on a case by case basis.
For luxury residential properties, Tan Sri Noh Omar announced that a four-minister committee to review the project applications comprising of Datuk Seri Johari, Datuk Fadillah, Minister in the Prime Minister’s Department Datuk Abdul Rahman Dahlan and himself. The committee would apparently subject its approvals to criteria including the existing housing condition, the number of houses in that location and those priced above RM1 million, as well as the number of unsold houses.
Separately, Datuk Johari said that developers of office spaces and shopping malls could appeal to the relevant ministers if they find locations that lack those properties and can justify their developments. He even went on to say that “anyone can build an office provided you know how to market it”.
Does the Minister actually think that developers are going to build an office block or a mall that they are not confident in selling?
I was among the first who had criticised that the blanket ban would not do much to remedy the property market imbalance. However, now the Ministers have granted themselves full discretionary powers to grant approval to any developers who can sweet talk way to win the hearts of the Ministers.
Have we now become a communist regime where the Government dictates how many left shoes to manufacture? Two big mistakes here certainly don’t make a right.
The multiple twists and turns worthy of a world-class acrobatic act only goes to prove that the Najib administration is completely clueless in policy-making. How does the above, for example, even address the main issue of the lack of affordable housing in the country and the largest oversupply of residential properties were reported at the RM500 000 to RM1 million segment?
The worst type of Government for any investor, foreign or domestic, is the absolutely lack of predictability and consistency in its policies. The current fiasco will certainly have major short to long term negative implications for Malaysia’s economy. The Cabinet must remedy its knee-jerk policy-making mechanism and instead, conduct a thorough study with all stakeholders, Bank Negara and think-tanks to design a consistent, constructive and incentivised policies to ensure continued growth and sustainability for the property sector and our economy.
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.
The Second Finance Minister subsequently reaffirmed the blanket ban after his fellow Cabinet colleague, Works Minister Datuk Fadillah Yusof said that developments would be reviewed on a case by case basis.
The ‘blanket ban’ had smacked of being a ‘hare-brained’ policy prescription as the Government started granting exemptions to projects which the Government had a vested interested. In particular, the Minister of Federal Territories, Dato’ Seri Tengku Adnan Tengku Mansor said the 1MDB-linked projects – Tun Razak Exchange and Bandar Malaysia were “pre-approved”, and are hence exempted.
The fact that Bandar Malaysia has not even found a developer with a plan appears immaterial to the ban exemption.
The biased exemption of such projects by Government-linked companies (GLCs) created an uproar among the private sector, who then lobbied hard to ease the ban.
Yesterday, the Government did another double-twist somersault on its ‘blanket ban’. Two statements by Urban Wellbeing and Local Government Minister Tan Sri Noh Omar and Datuk Seri Johari, suggested that the Government will now allow developers to appeal the ban on a case by case basis.
For luxury residential properties, Tan Sri Noh Omar announced that a four-minister committee to review the project applications comprising of Datuk Seri Johari, Datuk Fadillah, Minister in the Prime Minister’s Department Datuk Abdul Rahman Dahlan and himself. The committee would apparently subject its approvals to criteria including the existing housing condition, the number of houses in that location and those priced above RM1 million, as well as the number of unsold houses.
Separately, Datuk Johari said that developers of office spaces and shopping malls could appeal to the relevant ministers if they find locations that lack those properties and can justify their developments. He even went on to say that “anyone can build an office provided you know how to market it”.
Does the Minister actually think that developers are going to build an office block or a mall that they are not confident in selling?
I was among the first who had criticised that the blanket ban would not do much to remedy the property market imbalance. However, now the Ministers have granted themselves full discretionary powers to grant approval to any developers who can sweet talk way to win the hearts of the Ministers.
Have we now become a communist regime where the Government dictates how many left shoes to manufacture? Two big mistakes here certainly don’t make a right.
The multiple twists and turns worthy of a world-class acrobatic act only goes to prove that the Najib administration is completely clueless in policy-making. How does the above, for example, even address the main issue of the lack of affordable housing in the country and the largest oversupply of residential properties were reported at the RM500 000 to RM1 million segment?
The worst type of Government for any investor, foreign or domestic, is the absolutely lack of predictability and consistency in its policies. The current fiasco will certainly have major short to long term negative implications for Malaysia’s economy. The Cabinet must remedy its knee-jerk policy-making mechanism and instead, conduct a thorough study with all stakeholders, Bank Negara and think-tanks to design a consistent, constructive and incentivised policies to ensure continued growth and sustainability for the property sector and our economy.
Saturday, December 02, 2017
Datin Paduka Chew Mei Fun should look into the mirror before false making accusations of “unrestrained land sale” in Penang
In a statement on Thursday, the MCA Vice-President, Datin Paduka Chew Mei Fun accused Penang of being “unrestrained in its sale of land”. She referred to the 2016 Auditor-General’s (AG) report to show that a substantial portion of the state’s income came from the sale of land and land transfer fees.
Chew could not be more wrong in her baseless accusations. In fact, exactly the reverse is true.
Despite the current Pakatan government’s ‘restrained’ sale of land, we have managed to receive income which far exceeds that received under the previous BN government’s policy of ‘unrestrained land sale’. The statistics could not be more blatantly clear.
BN’s rule over Penang saw the sale of 3,661 acres of state land in the 15 years before 2008. Under Pakatan leadership, only 106.1 acres of state land was sold over the past 10 years. If Chew didn’t fail her mathematics, she should have figured that Pakatan has barely sold 3% of what BN sold!
More pertinently, Penang lead by Pakatan received RM1.11 billion for its sale of 106.1 acres whereas the BN state government only raised RM1.06 billion from 3,661 acres of land. In other words, the Penang state government today collected more money despite selling only a tiny fraction of the land sold by BN. This was achieved simply because the Pakatan government carried out open tenders for its sale.
By the very fact that we have successfully sold these land for very substantially higher prices than the BN government, of course it would naturally result in a higher contribution from land revenue to the state coffers, as reported by the AG.
In addition, figures from the BN’s era from 2002 to 2007 AG’s report also showed the sale and transfer of state land was a key contributor to state. Hence, the only difference was Pakatan received much more despite selling much less.
What amazes me however, is the cheek Chew Mei Fun has to actually criticise Penang on the alleged ‘unrestrained land sale’.
As exposed earlier, even when Chew was the Member of Parliament for my current constituency, her party MCA acquired an acre of prime land from the then BN state government for a measly RM1 per square feet (psf) in 2007. Today, the land is worth as much as RM400psf. Despite her refusal to take responsibility for the transaction, she admitted to being fully aware of it. And this is just one of the hundreds and perhaps thousands of land which MCA has benefited from BN state governments across the country.
So the question for Chew is, what moral standing does she have to chide the Penang state government over land sale conducted via open tenders, when her own party has effectively abused its position in power to profit themselves and betray the trust the voters had placed in them?
Chew could not be more wrong in her baseless accusations. In fact, exactly the reverse is true.
Despite the current Pakatan government’s ‘restrained’ sale of land, we have managed to receive income which far exceeds that received under the previous BN government’s policy of ‘unrestrained land sale’. The statistics could not be more blatantly clear.
BN’s rule over Penang saw the sale of 3,661 acres of state land in the 15 years before 2008. Under Pakatan leadership, only 106.1 acres of state land was sold over the past 10 years. If Chew didn’t fail her mathematics, she should have figured that Pakatan has barely sold 3% of what BN sold!
More pertinently, Penang lead by Pakatan received RM1.11 billion for its sale of 106.1 acres whereas the BN state government only raised RM1.06 billion from 3,661 acres of land. In other words, the Penang state government today collected more money despite selling only a tiny fraction of the land sold by BN. This was achieved simply because the Pakatan government carried out open tenders for its sale.
By the very fact that we have successfully sold these land for very substantially higher prices than the BN government, of course it would naturally result in a higher contribution from land revenue to the state coffers, as reported by the AG.
In addition, figures from the BN’s era from 2002 to 2007 AG’s report also showed the sale and transfer of state land was a key contributor to state. Hence, the only difference was Pakatan received much more despite selling much less.
What amazes me however, is the cheek Chew Mei Fun has to actually criticise Penang on the alleged ‘unrestrained land sale’.
As exposed earlier, even when Chew was the Member of Parliament for my current constituency, her party MCA acquired an acre of prime land from the then BN state government for a measly RM1 per square feet (psf) in 2007. Today, the land is worth as much as RM400psf. Despite her refusal to take responsibility for the transaction, she admitted to being fully aware of it. And this is just one of the hundreds and perhaps thousands of land which MCA has benefited from BN state governments across the country.
So the question for Chew is, what moral standing does she have to chide the Penang state government over land sale conducted via open tenders, when her own party has effectively abused its position in power to profit themselves and betray the trust the voters had placed in them?
Tuesday, November 28, 2017
The biggest culprits to the supply-demand imbalances in the property market in Malaysia are none other than Government-linked Companies
The Cabinet has imposed 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. Bank Negara stated that the oversupply of properties in the country has been persistent over the past few years. Bank Negara themselves had raised the issue in their 2015 annual report.
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.
However, what Bank Negara and the Cabinet did not say was that among the biggest culprits causing the supply-demand imbalances in the property market are the Government-linked Companies (GLCs) and Government-linked Investment Companies (GLICs).
A report by The Star on April 6 this year highlighted the increasing involvement of GLICs in the property both directly and indirectly. EPF has been directly involved developing the new Kwasa Damansara township, which has a massive size of 2,300 acres and RM50 billion in gross development value (GDV).
Pemodalan Nasional Bhd (PNB) on the other hand, is developing the 118-storey Menara Warisan project next to the historic Stadium Merdeka. It will offer 4.3 million square feet of residential, hotel and commercial space.
PNB is also the single biggest shareholder of S P Setia, one of the largest, if not the largest property developer in Malaysia. S P Setia is renown for some of the biggest luxury developments in the Klang Valley, including a 25-acres KL Eco-City, Setia Sky Seputeh and many others.
In addition, EPF and PNB jointly owns 63% of Sime Darby Bhd, whose property arm is another one of the largest property developers in the country. The company has only recently launched its RM8 billion GDV AYLA Kuala Lumpur project which covers an area of 360 acres.
There is also the Bukit Bintang City Centre (BBCC) which sprawls over 19.4 acres with a GDV of RM8.7 billion. The project is spearheaded by UDA, a wholly-owned subsidiary of the Ministry of Finance.
No listing of high-end property projects in Kuala Lumpur will be complete without also mentioning the 76-acres RM20 billion GDV KL Metropolis project. While on paper, it is developed by a private company, Naza TTDI, the project is in effect a controversial land-for-building deal with the Ministry of International Trade and Industry (MITI).
Elsewhere, Khazanah-owned UEM Sunrise also specialises in the high-end residential market in prestige locations such as Mont Kiara. In Johor, which was highlighted as having the largest share or 27% of all unsold properties in the country, UEM Land is developing 14 new projects which are all listed as high-end developments.
All of the above do not yet include the two mega-property developments linked to the scandalised 1Malaysia Development Bhd (1MDB) – the 70-acre Tun Razak Exchange (TRX) and the 486-acre Bandar Malaysia.
The issue here is two-fold. First, it is clear that GLCs contribute overwhelmingly to the glut which is threatening our property space in the country today. No policy prescription without recognising and reviewing the role of the government, GLCs and GLICs has played in our “imbalanced” property development sector will be effective or successful.
The second more important economic question is, will the Government also be granting ‘ban’ exemptions to all these GLCs’ projects as it has done for TRX and Bandar Malaysia? What then, will be the implication for the private sector in Malaysia? Should they all just pack they bags and take their money to other countries to invest?
The freeze came after Bank Negara’s report on the substantial supply and demand imbalance within the country’s property market. Bank Negara stated that the oversupply of properties in the country has been persistent over the past few years. Bank Negara themselves had raised the issue in their 2015 annual report.
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.
However, what Bank Negara and the Cabinet did not say was that among the biggest culprits causing the supply-demand imbalances in the property market are the Government-linked Companies (GLCs) and Government-linked Investment Companies (GLICs).
A report by The Star on April 6 this year highlighted the increasing involvement of GLICs in the property both directly and indirectly. EPF has been directly involved developing the new Kwasa Damansara township, which has a massive size of 2,300 acres and RM50 billion in gross development value (GDV).
Pemodalan Nasional Bhd (PNB) on the other hand, is developing the 118-storey Menara Warisan project next to the historic Stadium Merdeka. It will offer 4.3 million square feet of residential, hotel and commercial space.
PNB is also the single biggest shareholder of S P Setia, one of the largest, if not the largest property developer in Malaysia. S P Setia is renown for some of the biggest luxury developments in the Klang Valley, including a 25-acres KL Eco-City, Setia Sky Seputeh and many others.
In addition, EPF and PNB jointly owns 63% of Sime Darby Bhd, whose property arm is another one of the largest property developers in the country. The company has only recently launched its RM8 billion GDV AYLA Kuala Lumpur project which covers an area of 360 acres.
There is also the Bukit Bintang City Centre (BBCC) which sprawls over 19.4 acres with a GDV of RM8.7 billion. The project is spearheaded by UDA, a wholly-owned subsidiary of the Ministry of Finance.
No listing of high-end property projects in Kuala Lumpur will be complete without also mentioning the 76-acres RM20 billion GDV KL Metropolis project. While on paper, it is developed by a private company, Naza TTDI, the project is in effect a controversial land-for-building deal with the Ministry of International Trade and Industry (MITI).
Elsewhere, Khazanah-owned UEM Sunrise also specialises in the high-end residential market in prestige locations such as Mont Kiara. In Johor, which was highlighted as having the largest share or 27% of all unsold properties in the country, UEM Land is developing 14 new projects which are all listed as high-end developments.
All of the above do not yet include the two mega-property developments linked to the scandalised 1Malaysia Development Bhd (1MDB) – the 70-acre Tun Razak Exchange (TRX) and the 486-acre Bandar Malaysia.
The issue here is two-fold. First, it is clear that GLCs contribute overwhelmingly to the glut which is threatening our property space in the country today. No policy prescription without recognising and reviewing the role of the government, GLCs and GLICs has played in our “imbalanced” property development sector will be effective or successful.
The second more important economic question is, will the Government also be granting ‘ban’ exemptions to all these GLCs’ projects as it has done for TRX and Bandar Malaysia? What then, will be the implication for the private sector in Malaysia? Should they all just pack they bags and take their money to other countries to invest?
Friday, November 24, 2017
Ku Nan demonstrates “Malaysia Boleh” spirit by declaring Bandar Malaysia plans ‘approved’ even before master developer selection, to circumvent Cabinet luxury development ban.
Federal Territories Minister Datuk Seri Tengku Adnan Mansor has confirmed yesterday that the 1MDB-linked Bandar Malaysia and TRX would not be affected by the freeze on property approvals for condominiums, serviced apartments, offices and shopping complexes price above RM1 million.
He was responding to a question by PJ Selatan MP, Hee Loy Sian, when he said that the two projects had already received approval ‘in principle’ and could not be stopped from developing.
It is quite clear here that the government’s only principle here is to protect the interests of 1MDB. TRX and Bandar Malaysia are two of 1MDB’s largest assets that need to be developed if the fund wants any chance of staying afloat. They are also two of the biggest slated development projects in KL.
The amazing thing is, the Ministry of Finance has not even declared a winner to the tender for the master developer of Bandar Malaysia. The latest response from the Ministry of Finance last week is that there are 8 companies which have “expressed interest” in developing the massive 486-acres project. DBKL Mayor Tan Sri Mohd Amin had himself told Malaysiakini that they had yet to receive an application from Bandar Malaysia.
If exemptions from the freeze can be given just because of approvals had been given ‘in principle’, what worth is the freeze at all? Does this mean that other ‘planned’ high-end developments, which have yet to submit their planning applications, will also get exemptions?
These exemptions raise two worrying questions about the government’s planned freeze on high-end developments.
Firstly, it would mean that the effectiveness of the supposed ban on high-end project would be severely diluted. Bank Negara’s report showed just how grave the supply and demand imbalance was, projecting 1-in-3 office spaces being vacant in the Klang Valley by 2021, if measures aren’t taken to control it. If this freeze on high-end developments is to be taken seriously at all, the government has to make sure it is fairly enforced across the board.
And secondly, 1MDB gets the special treatment which discriminates against all private businesses.
As per my previous statements on this issue, I reiterate that the purported ‘blanket ban’ against high-end projects with unit values above RM1 million is a hare-brained knee-jerk reaction which is faulty due to the unfair and substantial exemptions granted above. In addition, the policy itself will not only fail to achieve its objectives because it is not properly targeted, it will create greater distortions in the market as well as turn away both domestic and foreign investors.
He was responding to a question by PJ Selatan MP, Hee Loy Sian, when he said that the two projects had already received approval ‘in principle’ and could not be stopped from developing.
It is quite clear here that the government’s only principle here is to protect the interests of 1MDB. TRX and Bandar Malaysia are two of 1MDB’s largest assets that need to be developed if the fund wants any chance of staying afloat. They are also two of the biggest slated development projects in KL.
The amazing thing is, the Ministry of Finance has not even declared a winner to the tender for the master developer of Bandar Malaysia. The latest response from the Ministry of Finance last week is that there are 8 companies which have “expressed interest” in developing the massive 486-acres project. DBKL Mayor Tan Sri Mohd Amin had himself told Malaysiakini that they had yet to receive an application from Bandar Malaysia.
If exemptions from the freeze can be given just because of approvals had been given ‘in principle’, what worth is the freeze at all? Does this mean that other ‘planned’ high-end developments, which have yet to submit their planning applications, will also get exemptions?
These exemptions raise two worrying questions about the government’s planned freeze on high-end developments.
Firstly, it would mean that the effectiveness of the supposed ban on high-end project would be severely diluted. Bank Negara’s report showed just how grave the supply and demand imbalance was, projecting 1-in-3 office spaces being vacant in the Klang Valley by 2021, if measures aren’t taken to control it. If this freeze on high-end developments is to be taken seriously at all, the government has to make sure it is fairly enforced across the board.
And secondly, 1MDB gets the special treatment which discriminates against all private businesses.
As per my previous statements on this issue, I reiterate that the purported ‘blanket ban’ against high-end projects with unit values above RM1 million is a hare-brained knee-jerk reaction which is faulty due to the unfair and substantial exemptions granted above. In addition, the policy itself will not only fail to achieve its objectives because it is not properly targeted, it will create greater distortions in the market as well as turn away both domestic and foreign investors.
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.
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