The National House Buyers Association (HBA) was invited to attend the annual Budget Consultation last Monday at PutraJaya International Convention Centre (PICC). This year’s theme was “Strengthening Growth, Enhancing Inclusiveness, Ensuring Fiscal Sustainability”.
Although HBA has submitted our proposals to the secretary-general of the Federal Treasury for next year’s budget to enable our Government to consider them from the house buyers’ perspective, we thought it necessary to bring this up at the public forum.
Having accorded the usual salutation to our Prime Minister who is also the Finance Minister, we begin to describe Budget 2014 and 2015 vis-à-vis housing as an ‘excellent mathematical formula’ to curb the unbridled escalation of house prices, which has in the last five years skyrocketed.
The Government has in fact taken steps in the right direction in the current round of cooling measures. These being banning the developers’ interest bearing scheme (DIBS), tightening of the loan-to-value ratio (LTV) and increasing the real property gain tax (RPGT). The housing market is now more stable to a certain extend.
We have submitted our memorandum and offered nine recommendations (visit www.hba.org.my for our written text) for the betterment of the housing industry but because of time constraint, we took the opportunity to summarise three pertinent points. We implored our Prime Minister to re-examine the misguided concept proposals of our current Minister of Urban Wellbeing, Housing and Local Government. This was in line with our Prime Minister’s opening address of “an open and frank” dialogue. Below are the three points:
> Housing Guarantee Corporation (HGC)
In an effort to curb abandonment of housing projects, the minister suggested the setting up of HGC purportedly to protect house buyers and developers in the event of abandonment by developers. What is more worrying is that the loss caused by abandonment is to be incurred by the Government. He suggested, as reported in the media, that the Government held 70% equity in HGC while the balance is held by private funds as well as the EPF and Tabung Haji.
This clearly is a case where the Government is misled by business groups with vested interest on how to tackle the problems of abandoned housing projects. Enforcement of the laws is the key. The Government should not toy with another ill-concocted HGC.
It is akin to guaranteeing developers’ profit with house buyers having to pay an insurance premium to guarantee against developers’ business possible loss. It is a clear case of “Profit Privatised Losses Nationalised”.
> Developers’ Interest Bearing Scheme (DIBS)
Developers love DIBS because they are cunning marketing tools and gimmicks which can be used to entice potential, naïve and unwary house buyers into believing that they have a good financial deal.
“Pay nothing to own a house” for first-time house buyers. Does the Housing Minister not know that the interest during construction is factored into the developer’s sales price? DIBS properties are priced much higher than non-DIBS property because the interest absorbed by the developer (during construction period) is factored into the pricing, e.g. Bukit Jalil condominium priced at RM550,000 with DIBS are sold at RM645,000. This has a domino effect as developers in the vicinity will price their products higher.
At the dialogue, we praised the efficiency and wise decision made by Bank Negara and the Finance Ministry to thwart the minister’s effort to revive DIBS. Bank Negara has since outlawed DIBS or any other permutations that entail elements of “interest capitalisation scheme”.
We sincerely hope DIBS will not be re-hatched to entice the naïve, especially first-time house buyers in the coming budget and subsequent to it. Our clarion cry was not to drown our children to “slave” for the banks and suffer lifetime indebtedness.
> Built-Then-Sell 10:90 concept
The Government, via the then Housing Minister Tan Sri Chor Chee Hueng, had in February 2012 reiterated that the BTS 10:90 concept would be made mandatory by 2015. That was also recorded in the 2013 Parliament Hansard in the Dewan Rakyat.
Even our housing regulations were equipped with the BTS 10:90 statutory sales and purchase agreements. Recently, the current HousingMinister, Datuk Abdul Rahman Dahlan, has made a “U-Turn” to shun the mandatory imposition of the BTS 10:90 system and that he will propose to the Government to allow BTS 10:90 system to co-exist with the “sell-then-build” concept and that the developers were allowed to choose. This is akin to allowing housing developers free rein again.
This has drawn the flak and adverse criticism of the house buying public, consumer associations, victims of abandoned projects and victims of unlicensed developers and whether the Government will hold true to their slogan Janji DiTepati (Promises Fulfilled).
The Government saw it fit and just had in February 2012 announced the mandatory imposition of BTS 10:90 concept come 2015. Is the Government taking a retrogressive step by reneging on its promise?
We posted three questions to our Prime Minister:
> Discussions after discussions and LAB after LAB for the last 10 years we have deliberated on the BTS 10:90 concept. Why was it rendered “good for the housing industry” in 2012 and not good now?
> In bad times, the launch of the BTS 10:90 concept was not appropriate; in good times it was wrong timing. Then, when is the correct time to launch the BTS 10:90 concept?
> What is becoming of the Housing Minister and those under his charge?
We have in fact proposed a gradual “phase-in” period to make BTS 10:90 a reality.
Conclusion
Every market will have its ups and downs. With the current cooling measures, it is now more stable and normal. Growth is at a realistic pace and that actually benefits the market because if prices were to rise too fast, the developers would suffer more when the bubble unexpectedly bursts.
This softening was on the back of government measures. Basically, the screw has been tightened. With the warning that interest rates may be inching up sooner or later, there’s the general expectation that prices will ease.
The once red-hot property market has begun to slow in the wake of a succession of new rules but prices probably need to fall further before policy-makers wind back these cooling measures.
Property cooling measures of recent years are helping, to a certain extent, to rein in housing prices and household debt, but it is too soon to ease restrictions. Property cooling measures have helped strengthen overall household balance sheets. The overall property market is consolidating.
The pace and degree of increases in prices is certainly not as high as before. We can conclude that house prices have moderated but not enough – it’s still beyond the affordability of the majority population.
We sincerely hope our Government will take heed of the points that we have raised. For the benefit of the readers, the summarised points of the nine recommendations and their respective links can be read from our website: www.hba.org.my
Chang Kim Loong is the honorary secretary-general of the National House Buyers Association (HBA): www.hba.org.my , a non-profit, non-governmental organisation manned purely by volunteers. - By The Star
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