Property market cools amid debate over affordable housing

http://www.themalaysianinsider.com/malaysia/article/property-market-cools-amid-debate-over-affordable-housing/

By Lee Wei Lian

September 04, 2012

KUALA LUMPUR, Sept 4 — The property market is showing signs of cooling even as developers and homebuyers take sides over the critical issue of housing affordability and the government mulls further steps to make it easier for Malaysians to own a home ahead of a crucial general election.

The home loan approval rate has dipped nearly seven percentage points in the first half of the year to 46.8 per cent from 50.1 per cent during the same period last year.

The trend is indicative of the residential market cooling following tightening measures by Bank Negara, Malaysia Property Inc, a government agency in charge of marketing Malaysian property abroad, said today.

Despite official statistics pointing to flattish growth in property prices since last year, many Malaysians are feeling fed-up over what they feel are continued unreasonable surges in house prices driven by market greed and warn of social consequences and even a potential backlash at the polls.

While property prices have not been used as an election issue in the past, they became a lightning rod of discontent across the Causeway where the opposition used it to garner popular support in last year’s Singapore general election.

It was also the number one issue identified by the prime minister’s Budget 2013 online feedback gathering platform, which ran from July 16-29, receiving almost 3,000 separate forms of feedback on the topic.

There are indications that the government is poised to take more fiscal measures to tackle affordability following previous tightening measures, such as a slight increase in real property gains tax, a cap on the loan-to-value ratio and efforts to curb household debt such as basing loans on net income rather than gross income.

Housing and Local Government Minister Datuk Seri Chor Chee Heung said in a property forum late last month that the public perception was that the government had not done enough to control property speculation and that he would be recommending that fiscal policies affecting property be reviewed in Budget 2013 that will be presented on the 28th of this month.

The issue of affordability was also the main topic at several property conferences and forums organised in the past month at which developers acknowledged the public concern but warned that any move to increase affordability by dampening property market sentiment could have adverse effects on economic growth and potentially disrupt future supply.

House price growth nationally does not appear high but in key urban markets, such as Kuala Lumpur and Penang, prices have spiked dramatically giving rise to much discontent, especially among the younger generation, who say they have been priced out of the market as incomes have not kept pace.

Many industry observers say the problem lies with excessive speculation as word of attractive profits by buying and selling houses, or “flipping” spreads, entices speculative investors looking for high returns to pile into the market, crowding out prospective homeowners and genuine investors.

One developer based in Kajang acknowledged in a property forum last month that high returns in some of his projects — which roughly doubled in value over the space of the last two to three years — were causing a lot of speculative interest among investors.

Rehda president Datuk Seri Michael Yam said in a press conference today that while putting the brakes on speculation was alright, developers were wary of measures being taken too far.

“Nipping the bud of excessive speculation is ok but if tightening is too tough, it will have ramifications,” he said.

Yam also said that he was against any hike in the RPGT — which many potential homeowners say should be increased to cut down speculation — as it would make things more uncertain for investors and further the government’s flip-flop image.

Developers, meanwhile, say that affordability can be increased by releasing more government land for medium-cost homes; implementing an auto-release mechanism for unsold Bumiputera quota units, which currently represent a high holding cost; making utilities pay for their own infrastructure; and introducing steeper discounts on stamp duty for first-time homeowners.

While medium-cost properties have continued to rise in cost, figures provided by MPI show that the high-end of the market has seen prices actually fall following the imposition of the cap in loan-to-value ratios and increase in RPGT from five to 10 per cent.

For homes costing above RM500,000, they had depreciated by 3.16 per cent in 2011 as compared to 2004.