PUTRAJAYA’S case-by-case freeze on high-end developments is a wake-up call to developers not to overbuild and buyers to be more discerning, an association of private sector property valuers and agents said today.

The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (Peps) took developers to task for their “indiscriminate” building of properties and buyers for creating “artificial demand” as among the causes of the property market overhang.

Other reasons, Peps said, included a lack of market and feasibility studies prior to construction, lack of coordination among local authorities and “indiscriminate” approvals.

Delays in gazetting local plans had also led to uncontrolled development and higher costs.

Peps said buyers had worsened the problem by creating artificial demand “for fear of losing out on choice properties”.

It welcomed the government’s move but said it should not be a blanket measure nationwide.

“The freeze should take into consideration the sector, location and effective demand and supply,” it said in a statement.

It suggested a one-year moratorium for planning applications that had already been submitted, during which an in-depth market and feasibility study should be conducted for projects submitted for approval.

Referring to Bank Negara Malaysia (BNM)‘s recent statements on property oversupply in the residential market, Peps said that there were still RM14 billion worth of residential properties planned but not yet constructed as of the first half of this year.

Another RM68 billion worth of residential units were currently under construction.

Beyond 2017, there would also be RM15.5 billion worth of vacant office space (13 million sq ft) and shopping centres (44 million sq ft) in incoming supply.

“Every effort must be made to absorb this incoming supply before the freeze is to be lifted,” Peps said.

It also noted that of the 83% of unsold residential units which were in the RM250,000 category and above, 22,000 units could be classified as affordable housing.

“We concur with Bank Negara Malaysia’s statement that ‘severe property market imbalances can pose risk to macroeconomics and financial stability.’

“The property industry have links to more than 120 industries and collectively account for 10% of GDP.

“Therefore, any severe property market imbalances and overbuilding will affect the stability of the financial system,” Peps said, commending BNM’s stringent lending guidelines, which it said had helped to cushion the impact of speculative buying.

Peps also repeated calls for the government to be fully responsible for providing low-cost housing and not make the private sector share the burden.

“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,” it said.

Putrajaya should have a single entity to plan and coordinate for low-cost and affordable housing, and work in tandem with state governments, PEPS added.

“The best model to adopt is Singapore’s Housing Development Board (HDB), whereby HDB as a single authority acts as the contractor, developer, marketing agency and also financier of all public housing in Singapore. HDB is responsible for housing 80% of Singaporeans.” – November 23, 2017.