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Saturday, August 1, 2009

Keeping to a time-tested adage

Although potential property buyers are taking a longer time to make up their mind on whether to proceed with a purchase, the time-tested adage of the property business still holds true. Good quality property products in the right locations that are priced competitively will not face difficulty in finding buyers.

However, the impending removal of most of the housing packages offered by developers to attract buyers will mean that any sales realised will be dependent on the intrinsic values of these property products and how attractive they are.

Buyers have to accept the fact that developers are not about to continue with their housing packages indefinitely as these facilities incur higher cost.

As buyers only need to fork out 5% or 10% of the purchase price depending on the facilities signed for, developers have to service the interest charges to the financiers for between two to three years during the project construction period.

They are also bearing all the legal fees and stamp duty on the sale and purchase agreement, loan agreement and memorandum of transfer.

The consolation is that these facilities have translated into low entry cost for buyers and have contributed to the higher sales of the past few quarters.

Post-housing packages, whether the sales numbers will continue to flow in will largely depend on whether there is a major turnaround in the people’s sentiment.

Generally the prevailing sentiment is still one of caution. This has resulted in more developers resorting to redesigning and repositioning their projects into more affordable range which have lower profit margins.

A number of projects that have been launched lately have smaller built up space to ensure they are priced lower.

It is a fact that competition will continue to heat up and developers will be faced with more challenges on the horizon.

How well they hold up to the competition and overcome these challenges will have a great impact on their performance and market’s sustainability going forward.

The lull in the market of the past few quarters should have given industry players sufficient time to undertake some serious business restrategising plans and product research and development initiatives.

It looks like industry players still have some way to go before regaining their previous confidence (before the global financial crisis sets in last September) where they have no qualms about having multiple project launches.

These days, developers have to really tune in to buyers’ needs and the realities of the current times when planning their projects.

They have to conduct their business differently and come out with more “out of the box” project designs and plans.

The projects are likely to be of smaller scale and with less units.

One of the projects that should be able to hold out quite well will be well designed and moderately sized apartments and small office home office units in Kuala Lumpur’s inner city or the peripherals areas just outside the city’s central business district.

There are many young executives and professionals who are looking to move into these residences to enjoy the conveniences of city life, yet cannot afford or are not ready to commit to buy one of the high-end KLCC residences.

To ensure a more “smooth landing” for industry players, it will certainly help if the Government adopts more market liberalisation measures to create a level playing field for property players.

Industry players, through Real Estate and Housing Developers Association (Rehda), want the Government to urgently look into the bumiputra quota release mechanism to ensure a standardised, structured and transparent system is in place so that developers will not be unneccesarily burdened by the high holding cost of these unsold bumiputra units.

There is a need for an automatic release of the quota units after six months of a project’s launch or when a project has reached 50% in its construction, whichever is earlier.

Meanwhile, to help the lower income group, it will be fair to cap discounts for bumiputra buyers at 5% of a property price and such discounts should only be applicable for houses priced at RM250,000 and below.

Purchasers for a higher priced property are better off financially and will not need a discount. Currently, the different states impose different discounts ranging from 5% to 15% for bumiputra buyers.

Deputy news editor Angie Ng believes it is timely for more proactive collaboration between developers, the Government and common folks to promote strong bonding, good neighbourliness and mutual respect.

By The Star (by Angie Ng)

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