It has been a dizzying past two years and many lessons that can be learned from the challenges that have unfolded – the latest being Dubai.
The tiny Gulf emirate, hailed as a major economic phenomenon, plunged into severe debt woes causing its real estate market to collapse after a six-year boom.
Thousands of jobs were slashed and projects worth billions of dollars were cancelled or delayed.
The local property sector should take cue from Dubai’s debacle to ensure that our market’s sustainability and stability is based on industry fundamentals.
Only when property markets are driven by real demand from buyers can its growth be sustainable in the long term. Speculative activities should be curbed as it will artificially boost property prices.
The collapse of Dubai’s property market also shows the danger of an over-dependence on foreign buyers.
Many corporations with projects in Dubai, such as Malaysia’s LCL Corp Bhd, are still struggling to recoup their outstanding bills from their Middle Eastern customers and are in serious cash flow problems.
The bubble burst because the phenomenal rise in Dubai’s property prices and building frenzy of mammoth skycrapers were not supported by real demand but speculative buying.
The speed of Dubai’s collapse after it went into debt problems drives home the point that it is important to balance the market between owner occupiers and investment buying activities.
So far, Malaysia has been lucky as its market is driven by fundamentals and sustained by strong local demand. Foreign buying only accounts for 10% of transactions.
Property prices have also been pretty stable in the last two years.
The country’s relatively young population, with close to 50% aged below 21 years, bodes well for a stable and balanced property market driven by first time buyers.
Reinstating the real property gains tax on gains made from property sales within the first five years of purchase is a move in the right direction to curb over speculation in the market.
Property buyers seeking fast gains should rightly be taxed.
More proactive measures should be initiated to promote property demand as it will create spillover effects in other economic sectors.
It is not an exaggeration to say that property is one of the best investment assets right now and the onus is on developers to strut their best stuff to attract buyers.
·Deputy news editor Angie Ng wishes to see more Malaysians benefiting from the high income economy initiatives and living in wholesome neighbourhoods.
By The Star (by Angie Ng)
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