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Thursday, September 9, 2010

Diffuse the property bubble before it is too late

The subject of property prices and financing has gathered momentum ever since news broke that Bank Negara is assessing the situation to determine if new measures should be instituted to cool down fast escalating property prices.

Lobby groups for the industry have been busy making their case heard, saying that any move to impose higher downpayments for houses would hurt the property market.

Their concerns come at a time as a growing number of people have complained that prices of houses, especially in the hotspots in the country such as the Klang Valley and Penang, are spiralling beyond affordability.

The last thing everybody needs is such speculation spreading to other areas where for the moment, speculative activity appears to be contained for the moment in the hotspots as 94% of houses sold in the country are priced below half a million ringgit and 85% of houses launched in the past nine months cost below RM500,000.

Dealing with speculation is tough and the last thing anyone should do is to make genuine buyers suffer, especially first time buyers.

Suggestions that houses costing below RM500,000 should not be subject to the new higher downpayment requirement makes sense.

Also first-time house buyers or owner occupied houses should be given the most ease of financing to allow them to fulfil the dream of owning a home.

It’s also hard to clamp down on speculative activity as the wealth creation process is an allure that developers, banks and policy makers might find hard to turn away.

After all, the money generated from flipping houses adds to the bottomlines of companies and the money in the hands of people could well filter down to other consumption activity that would go a long way to help spur economic activity.

But the profit from speculating activity, this time driven largely by cheap and ready financing, is unsustainable and history is full of examples of the dire consequences of a property bubble gone burst.

It’s then not surprising that the authorities in other countries in the region, where a property bubble has formed, are working hard to manage and diffuse the situation. Rules introduced in China, Hong Kong and Singapore are far more drastic that what the authorities here are reported to be contemplating.

In fact the new rules that are talked about are tame compared with what has been done in the past. In 1995, reports said that Bank Negara imposed a maximum 60% loan for residential properties priced above RM150,000 to put the brakes on the then fast rising house prices.

Furthermore, a real property gains tax of 30% was imposed on foreigners selling their properties irrespective of the holding period of the property.

Those measures were met with a huge hue and cry from the lobby groups, and developers who claimed that such draconian measures would maim the market. A couple of years later Malaysia entered its worst-ever recession, and as they say the rest is history.

The point is, just as the saying goes, those that fail to learn from history are doomed to repeat it, and for Malaysia, failing to deal with any property speculative bubble would spell trouble for the banks that have grown to rely more and more on households to drive their lending activity.

In the interest of financial stability and common sense, the move to act should be made soon.

Deputy news editor Jagdev Singh Sidhu is amazed just how much his house is “worth” in the secondary market.

By The Star (by Jagdev Singh Sidhu)

Positive outlook for Johor property market

JOHOR BARU: The property market in Johor is expected to remain positive in 2010 and 2011, given the improvements seen since the second half of 2009 and the first half of this year.

Johor Real Estate and Housing Developers Association (Rehda) branch chairman Simon Heng said demand for residential property has improved and that developers could expect a better year ahead.

He said the property market had regained momentum after experiencing a slowdown almost two years ago, due to the global economic downturn, which was caused by the US subprime crisis and European financial woes.

“Consumers’ confidence is returning and developers here are cashing in,” Heng told StarBiz. He said this could be seen from the many new property launches over the last 12 months. Heng said developers that took part in the Malaysia Property Expo in April this year had recorded RM200mil sales a month after the event ended.

He also said banks were offering attractive interest rates to buyers and consumers were spoilt for choice with the numerous loan packages available in the market. “Feedback from our members show that many first time property buyers are taking advantage of the good offers to buy houses,” he said.

SP Setia Bhd executive vice-president (property division, northern and southern regions) Datuk Chang Khim Wah said buyers started coming back into the market from mid-2009 onwards.

He said unlike 20 years ago, where the Johor Baru property market attracted a large number of speculators buying residential properties, owners-occupiers had now taken their place.

Chang viewed the presence of more developers in the Johor Baru property market as a positive sign as it would help raise the standard of products and services in the market.

He said the company’s four ongoing projects in Johor – Bukit Indah I & II, Setia Indah, Setia Tropika and Setia Eco Gardens – would keep the company busy for eight years.

Berinda Properties Group sales manager Lim Sung Heng said the Government’s move to improve road connectivity and public infrastructure within Iskandar in the last three years had led to the opening of new suburban developments in Johor Baru.

He said Singaporean investors were buying high-end houses as prices of private residential properties in the republic had skyrocketed and was beyond the reach of the average Singaporean.

Some of Berinda’s projects in Johor Baru include Taman Molek, Molek Pine, Impian Molek, Molek Square and Molek Groove.

By The Star

Astral unit buys land in Kuantan

PETALING JAYA: Astral Asia Bhd’s 65%-owned subsidiary, Syarikat Ladang LKPP Sdn Bhd, is acquiring 599.4ha in Kuantan from the Pahang State Agricultural Development Corp for a cash consideration of RM4.25mil.

Astral told Bursa Malaysia yesterday that the two parties had decided to revoke their original conditional agreement signed in December 2008 whereby Syarikat Ladang LKPP was to acquire 758.1ha in Kuantan for RM5.37mil.

It said its board felt the proposed acquisition of 599.4ha would be adequate for the initial phases of the development of the proposed Kuantan Hi-Tech Park.

Mah Sing gets green light

PETALING JAYA: Mah Sing Group Bhd has received notification that the Economic Planning Unit had approved its proposed acquisition of 44,313 sq m in Bukit Jelutong, Shah Alam, from Azeera Properties (M) Sdn Bhd for RM31.86mil, it says in a filing with Bursa Malaysia.

With the said approval, the sale and purchase agreement dated July 9 in respect of the proposed acquisition has now become unconditional.

PETALING JAYA: IOI Corp Bhd has completed the transfer of its 55% stake in Projects IOI (Mauritius) Ltd to Jewel Trade DMCC for US$2.75mil, it announced to Bursa Malaysia.

Accordingly, Project IOI (Mauritius) Ltd and its subsidiaries, IOI (India) Projects Private Ltd and A.P. Gems & Jewellery Park Private Ltd have ceased to be its subsidiaries.

The principal activity of Project IOI (Mauritius) Ltd and IOI (India) Projects Private Ltd is investment holding while that of A.P. Gems & Jewellery Park Private Limited is property investment.

By The Star

Astral Asia to buy smaller plot

PLANTATION, construction and property developer, Astral Asia Bhd, has reduced the size of land it plans to buy in Kuala Kuantan, Pahang, saying it is a much better fit for its mixed property development.

Astral had entered into a sale and purchase agreement with Lembaga Kemajuan Perusahaan Pertanian Negeri Pahang , to pay close to RM5.4 million for a 749.2ha plot of land.

Astral Asia is now paying RM4.24 million for a 599.4ha plot of land.

The land is a mature oil palm estate, known as Ladang Bukit Kuin, which has been proposed for a mixed property development incorporating, the proposed development of Kuantan Hi-Tech Park.

By Business Times