Developers are responsible for the market overhang, says PEPS

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KUALA LUMPUR (Nov 23): The property developers are responsible for the causes of property market overhang in the country, says the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS).

In a statement today, the association blames the developers’ indiscriminate building of properties, a lack of market studies and financial feasibility studies being carried out prior to building and no coordination on planning among local authorities and indiscriminate approvals for the market overhang.

"Other causes include the delay in gazetting of local plans that leads to uncontrolled development and higher cost as well as artificial demand created by members of the public for fear of losing out on choice properties," it added.

According to PEPS, there are now RM35 billion worth of unsold and unutilised buildings comprising residential development, purpose built offices and shopping centres, which it said is a waste of financial resources.

"There are 13 billion sq ft of purpose built offices for 2018 and 2019 and 44 million sq ft of incoming supply in Greater Kuala Lumpur alone from 2017. Every effort must be made to absorb this incoming supply before the freeze is to be lifted," it said.

"The property industry has linkages to more than 120 industries and collectively account for 10% of gross domestic product. Therefore, any severe property market imbalances and overbuilding will affect the stability of the financial system," said PEPS, adding that it concurs with Bank Negara Malaysia's view that "severe property market imbalances can pose risk to macro economics and financial stability".

PEPS is supportive of the government's decision to freeze approvals for luxury property projects from Nov 1, saying it serves as a wake-up call to  developers not to overbuild and buyers to be more discerning and selective in their choice of purchase.

However, it is of the view that the freeze should not be a blanket ban, that is, it should not be country wide.

"The freeze should take into consideration the sector, location and effective demand and supply. PEPS recommends that there should be a moratorium of one year for those developers who have submitted their planning applications to get the approval within one year.

"During the moratorium, an in-depth market and feasibility study should be conducted for all projects submitted for approval," it said.

On affordable housing, apart from having a single entity, PEP 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.

"Currently, affordable housing are carried out by too many Government agencies," it noted, citing Singapore's Housing and Development Board (HDB) as having the best model where it acts as a single authority — contractor, developer, marketing agency and financier — for all public housing in Singapore.

"Hence, PEPS supports the idea of the Government setting up a National Housing Authority to plan, implement and coordinate all affordable housing projects in Malaysia. This entity can be entrusted
to Perbadanan Pr1ma Malaysia and all the other government agencies involved in affordable housing to be merged with Pr1ma.

PEPS also calls on the government to free residential developers from developing affordable housing.

"As the key component of affordable housing is the high land cost and with the high land cost, residential developers are unable to fulfil their obligations to build affordable housing. So it is best to get the government to set up a single authority to concentrate on affordable housing and to work with the state governments to fulfil the target of 500,000 units of affordable housing," it said.