This article first appeared in The Edge Financial Daily on November 1, 2018

KUALA LUMPUR: Property prices will definitely have to adjust in the near term to cater to the softening demand, said Sime Darby Property Bhd chairman Tan Sri Dr Zeti Akhtar Aziz.

Zeti said the current soft property market situation presents a window of opportunity for developers to work on strengthening the sector and look at revising prices to prevent a potential collapse.

“As you know economics, it’s based on supply and demand. When there’s excess supply and demand softens, what has to adjust? Prices. Prices have to adjust. Therefore that is something we look forward to as this is for the benefit of the consumers and households.

“We need to manage it well and effectively so we have the time to do it as [the sector] hasn’t collapsed, it’s just softened. So we have a window of opportunity to manage the property sector so we can come out of it well,” she told reporters after chairing Sime Darby Property’s first annual general meeting since being appointed to the group’s board three months ago.

She was responding to a statement by Finance Minister Lim Guan Eng on Monday that the prices of new houses were expected to fall by up to 10% as the exemption of the sales and services tax (SST) on construction services and building material costs kicked in.

Guan Eng said for new houses that were not subject to the SST, the ministry expected to see a drop in prices. Otherwise, it would consider reimposing the 6% SST on developers.

Moving forward, Zeti said the outlook for the property sector remains very challenging at the moment but she is positive of a turnaround.

“We believe that we have the capabilities and resources to manage ourselves so that we ride out this challenging period and move into strategic areas in property development where there is demand and areas which would support the economy and the public at large,” she said.

Sime Darby Property, which has changed its financial year end to Dec 31 from June 30, said it aims to launch about 1,500 units of properties with a combined gross development value of RM1.1 billion in the six months to Dec 31. Its sales target for the six-month period is RM1 billion.

On the upcoming Budget 2019, Zeti said she is not able to say much, but looks forward to it.

“I can’t comment. I was part of the Council of Eminent Persons and we made many recommendations [to the government] but of course we don’t know which of the recommendations will be taken up in the budget.

“[Nevertheless,] we are looking forward to it. It’s an opportunity for Malaysia to demonstrate that it’s going to take the country through this period of transition to stabilise conditions and provide a platform for us to regain our growth momentum,” she said.

At Bursa Malaysia, Sime Darby Property closed up 5.5 sen or 5.98% at 97.5 sen, with a market capitalisation of RM6.63 billion.