This article first appeared in The Edge Financial Daily on November 22, 2017

KUALA LUMPUR: The government is not making any U-turn concerning the freeze on approvals to develop properties above RM1 million, said Second Finance Minister Datuk Seri Johari Abdul Ghani.

“I would like to categorically state there is no such thing as [a] U-turn, or turning back or reconsidering [the decision for now]. The freeze order that we have issued remains,” Johari told reporters on the sidelines of the National Economic Outlook Conference yesterday.

On Monday, Works Minister Datuk Fadillah Yusof said the government will give the green light for the development of shopping complexes, offices, serviced apartments and condominium units above RM1 million “on a case-by-case basis”, prompting some to speculate that it is a U-turn on an earlier decision.

“The headline as if the government is making a U-turn is incorrect,” said Johari. “I personally called Fadilah last night (Monday night) and clarified to him that this [freeze] is a directive and decision by the cabinet.

“No one can make a U-turn on the cabinet’s decision. Not myself and not even Fadilah,” he added.

On whether the freeze is indefinite, Johari said: “The government is looking into it (the timeline) and study the number of unsold units.”

He said the freeze on luxury property developments will not be retrospective and affect developers granted approvals to develop luxury property projects prior to Nov 1.

“Those who are building houses worth less than RM1 million, by all means, please proceed as the government recognises the need for affordable houses.”

As for the industry’s feedback, including those from the Real Estate and Housing Developers’ Association (Rehda), Johari said: “So far, I have yet to hear their views. But let’s listen to what they have to say first. The government will allow all developers to proceed with housing developments worth RM1 million and below.”

In a prompt response, Rehda yesterday urged the government to reconsider the new ruling, saying it will be impractical to build property below RM1 million, particularly in certain areas of the country where land prices are high.

“Further, in certain locations across the city, there is still demand for high-end property and [the] free market should prevail,” the association said, adding that it wants further clarification from the authorities on the new ruling.

Since the implementation of various property cooling measures in 2014, Rehda said not many developers had undertaken developments of properties above RM1 million.

The main reason for an oversupply of such properties is the mismatch between supply and demand.

“As the voice for private developers in Malaysia, Rehda has always advocated the need for comprehensive data to establish demand and supply of property in the right location. The availability of data will help give a more accurate picture of where the most demand is located, and which areas require less, thus preventing [an] oversupply,” it said.

Rehda said it is calling for the government, particularly Bank Negara Malaysia, National Property Information Centre and the urban wellbeing, housing and local government ministry, to work together in utilising and streamlining the data available.

“These timely data will tremendously assist developers and relevant industry players in making proper and informed decisions concerning their development projects.”

Rehda also pointed out that despite the income per capita of Malaysians in general improving by about 46% since 2010, this has not been reflected in the average Malaysian’s disposable income and purchasing power due to the rising cost of living.

“This is the fundamental reason why many Malaysians cannot afford to purchase property as their household debt is high,” it said.

Rehda is also calling for more incentives to attract more private developers to build affordable housing, reduce unnecessary compliance cost to help lower developers’ cost of doing business, and remove restrictions on various types of unsold completed properties.

“Stamp duty waivers, especially in the affordable housing category, would also go a long way in assisting buyers. In addition, Rehda supports the proposal to repurpose completed office spaces and retail lots as it may help to mitigate the high number of the said property segments,” it said.