Market forces will decide property prices

Have developers become too greedy?” Ask this question to Real Estate and Housing Development Association (Rehda) president Datuk Seri Michael Yam and there is a momentary pause on the other side of the line.

Then just as quickly, Yam springs to the defence of developers, insisting that this is just perception and not at all true.

“It is because property affects every facet of people’s lives that it becomes so sensitive and almost a political issue.”

He points out that developers have over the years delivered more than four million housing units including a huge number of subsidised units.

“Ninety-five per cent do a proper job, so it’s not fair to call us greedy,” he says.

Yam says property prices are based on supply and demand, and that prices will be kept at an equilibrium when the supply in the market meets the demand.

“When there is an oversupply, people will stop buying and the less efficient developers will be forced out of business.”

He stresses that developers have had a lot of conditions and requirements imposed on them in the past, like building low-cost housing, offering bumiputra subsidy for housing, building community centres and other approvals, which all adds to the cost.

“If people claim developers make a lot of profit, don’t forget a number of developers are SMEs. Those who develop Kelantan, Terengganu and Johor – ask them if it is very profitable,” he says.

Even for the public-listed property companies, he points out that their profit margins are usually less than 20%.

“If they make more than 20% to 25%, then it’s usually from the sale of parcel of land and they realise the profit from that year,” he says.

Yam says the property sector is no more different than those in manufacturing or trading but points out that the top public-listed companies that made billions are in fact not property companies but those in banking, plantation, trading and services.

He admits that the stringent measures announced in Budget 2014 to curb property speculation took the industry by shock because the quantum of the real property gains tax (RPGT) was even higher than the rates imposed before April 1, 2007, which were already deemed to be high at that time.

“We expected a revision of RPGT upwards but not by this quantum.”

On the RM1mil minimum for foreigners to buy property in Malaysia, Yam says Malaysia has never been a spot for property speculation by foreigners in the past because the appreciation had been too slow compared to its neighbouring countries.

“But property prices in Hong Kong and Singapore have gone to dizzying heights to the detriment of their citizens, and so these countries are doing some serious curbing. So what Malaysia has done (with regard to purchases by foreigners) is a pre-emptive move because knowing that all the other doors are closed, you don’t want the horse to bolt.”

Still, he notes that foreign property ownership in Malaysia is only 5.5% of the whole housing stock which is really not a significant percentage.

“If Malaysia was such a fertile ground, foreigners would have bought it up.

“You must remember that investors do not just buy because land or property is cheap. it’s about the whole packaging. It’s about crime, security, lifestyle, quality of living etc. The most expensive places are Hong Kong, Singapore and London and people are still rushing to buy there. So let’s not look at things in isolation,” he adds.

With the stringent measures in place in January, he says, developers will now need to be creative and find “various marketing mechanisms” to survive.

He concedes too that consumers should also be enlighted and educated with regards to purchasing property.

“But people are not idiots. They know what they are buying.” - By The Star

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