I think not. It's actually under-regulated.
Property sales and launches has slowed down quite a bit this year. I've highlighted it in a previous post last month HERE. Since then, every other day, there'll be industry players giving their opinions in the media on the latest market sentiments and government cooling measures.
I'm always wary of the opinions or views coming from people who are vested.
Below is an article highlighting the views from the property agents group. Obviously, similar to developers, they are not in favour of strict regulations. Members from the group which I would loosely term as the "unholy trinity" of the property market:- Developers, Agents & Banks, are responsible for the current unhealthy property speculations.
Homes are a basic need. People need homes. The commercial properties, on the other hand, can be unregulated, by all means. Residential properties on the other hand should be regulated. Those who are exploiting the market are very irresponsible.
Property market should not be over-regulated
KUALA LUMPUR: The Malaysian property market, which saw cooling measures instituted in Budget 2014 to arrest steep property price increases, should not be over-regulated by the government, but be allowed to grow at a normal pace.
Making the call, Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector president, Lim Lian Hong, said a price increase of between 5% and 7% annually, is justified.
“I think, the central bank is also very careful that they don’t kill the market … We want to practice free market, so that foreign investors will feel more at ease to come into the system, to buy and sell.
“If you have a very restrictive market, foreign investors will feel that this market is artificial, on the whole,” he said at a press conference in conjunction with the Seventh Malaysian Property Summit 2014, on Feb 25.
Lim said that if the local property market is highly regulated, it may pose a problem to foreigners, if they want to resell their units. “We have to balance the laissez-faire, which is the free market,” he added.
Laissez-faire should be applied in the appropriate context. In a country where there are even ownership regulations between citizens of different races, I think foreign ownerships should be the least of our concerns for now. It's not a totally free market. Foreigners can always invest in commercial properties. Or residential properties above a certain price, over RM5mil maybe?
The problem now is that property prices are not rising at a normal pace. While I agree that price increases of 5%-10% is reasonably healthy, but the price increases for the past 3-4 years have reached levels that would normally take 10 years to reach.
Rahim & Co managing director, Choy Yue Kwong, said that Bank Negara Malaysia (BNM) regulations on housing loans are most effective in regulating the Malaysian property market, as the regulations are targeted at speculators. “Speculators are people who make use of the banking system, take out very little money, [use] 95% loan to buy and speculate. These are the people, the system should target at.
“The main reason why there was so much speculation in the past, was because loans were so easily available. Some developers would price it at a certain level, give discount and then sign the agreement at the gross level effectively.” Choy said, new BNM guidelines that stipulate that loans will be based on the net price, rather than the gross price, will take out a large segment of customers, who depend on loans to speculate.
Yes. BNM regulations are effective. It protects people from over extending themselves & speculating beyond their means. But what he is actually saying is that we should take out speculators who need loans, while those who have the cash can continue to speculate.
Home buyers should be allowed to borrow with higher margin of financing, especially for their first home. What the government should do is to ensure the prices are affordable and not allow developers to rake in excessive profits with high prices.
Property developments should be categorised according to owner-occupied or investment segments. Singapore's model should be emulated.
However, he is doubtful that the imposition of real property gains tax (RPGT) will have any significant impact on sales of houses.
“I think, house prices have gone up so much in the the last few years. No doubt, RPGT has its effect, but the effect is not much anymore. If you had RPGT three or four years ago, then it would have had more effect, because at that time, the prices hadn’t gone up so much.”
RPGT is the most effective way to control speculation. In fact, the rates & duration should be increased to prevent prices from rising further. RPGT keeps prices of new launches at reasonable levels. It is not meant to dampen sales but to control prices & speculation.
Choy is also sceptical about the effectiveness of the government’s intention to stop bulk-buying of properties by investors, by imposing restrictions on the number of properties bought by an individual.
“You can’t stop people from buying, if they have the money,” he noted. Choy said, there are methods other than government regulations, that can be utilised to control the property market. He argued that housing planners have a role to play, in ensuring that developers are not “carpet building” or overbuilding to feed the speculative market.
Yes. The government can, and should stop these bulk buying practises. It is the most damaging form of speculation. If these investors are so rich to buy in bulk, they should build their own instead. Again, residential properties are not vegetables to be made available in bulk. Those with money can always buy up commercial properties. You can even buy the whole building if you want.
Government planners should control the number of units, not because of over supply, but most importantly to control population density which if left unchecked could lead to traffic and pollution problems. They should also regulate the prices and types of property as well.
“Government planners [should] become more proactive. Let’s say, if the developer wants to build 9,000 units in a certain place, the planners should step in, even though the guidelines allow it. If they know that 9,000 are too many, they may say, tone it down to 5 phases [or] 10 phases,” Choy explained. He said that property developments now have an excess of investors, but not enough occupiers, leaving many units empty, years after the development has been completed. The scenario could also apply to the Iskandar Malaysia development.
The empty units are the result of excessive speculation which led to over supply. Which means that there's excessive speculation in the market. The culprits are the speculators and developers. Regulators should control the quantity of units allowed to be built.
This article first appeared in The Edge Financial Daily, on February 26, 2014. - SOURCE
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