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Tuesday, September 2, 2008

Damper for property

PENANG: The property market in the country may not be sustainable for long due to the possibility of an increase in the base lending interest rates.

KPMG partner Ooi Kok Seng said the low interest rates had been maintained for the past five years for housing loans, which were very attractive as they were 0% to 2% below the base lending rate, which was about 6%.

Ooi Kok Seng

“Since the capital market has been sluggish and bank interest low, many people have invested in properties instead.

“Thus, any adjustment in the interest rates by Bank Negara to curb inflation may negatively impact the property market as there would be forced selling of properties,” he told StarBiz.

Ooi was giving his views at The Star Property and Home Fair Penang 2008 roundtable discussion in Penang recently. The three-day exhibition from Sept 5 will be held at the Penang International Sports Arena.

Another participant at the roundtable discussion, Dr Lim Mah Hui, said the factors preceding a banking and financial crisis usually involved too much money flowing into the system either from foreign investors or due to the central bank’s policy of being too loose.

“This invariably leads to two types of bubble. The first is the property bubble while the other concerns the stock. It has happened in the past and it’s happening today. The cost of cleaning up a banking crisis is enormous. Developers should not just build and build to make more money.

“Thus, it’s okay to take into account that we should not overdevelop. The current loan margin of 70% is fine. If one does not have money, then one shouldn’t be buying property,” he said.

Lim is a senior fellow attached to the Asian Public Intellectuals fellowship.

Meanwhile, Joint Business Council Malaysia chairman Datuk Faudzi Naim was more optimistic.

“I believe property prices in Penang will hit RM750 to RM1,000 per sq ft by 2010. This is because there are foreign investors who are interested in Penang due to its positioning as a hub for education and medical services.

“Last year I helped out in promoting Penang properties in Medan. Within a year, investors from northern Sumatra came over and bought properties worth RM30mil to RM40mil.

“These investors always compare Penang with Singapore as a choice destination for second homes,” he said.

However, Faudzi said developers must now also provide high quality professional management services for high-rise properties.

“Foreign house buyers want professional management services to look after their investments when they are away. The Government must also, of course, beef up the local security situation, and improve on the hygiene and traffic conditions,” he said.

Faudzi also said the state government should stop making developers build affordable housing.

“When developers fulfill their affordable housing obligation, they have to cross-subsidise from their other projects. This inevitably leads to the high selling prices of the properties in the non-affordable category.”

He sad the state government should look into redeveloping certain districts on the mainland as growth centres and as an area for affordable housing.

Another participant Tropical Resort Lifestyle Sdn Bhd managing director Ishihara Shotaro said Penang had to stop advertising and promoting itself as an island resort with nice beaches.

“The waters are dirty. This has started to have an impact on tourist arrivals from Japan and Korea.

“Singapore and Hong Kong don’t promote themselves as island with nice beaches, so tourists also do not have such expectation when they visit Singapore or Hong Kong,” he said.

“But Penang does and this leaves the tourists going home disappointed.”

By The Star (by David Tan)

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