Thursday, November 02, 2006
[RealEdge] BT : M'sian developers staring at tough times
| Published November 2, 2006  | |||
| M'sian developers staring at tough times Housing oversupply threatens to push landed assets into quagmire
By PAULINE NG
MALAYSIA'S housing market faces challenging times if demand does not pick up, developers have warned. A survey by the Real Estate Housing & Developers' Association (Rehda) shows weakening demand - a situation borne out by figures from the National Property Information Centre (Napic).
Developers have become less gung-ho about launching new projects - but this may not be enough. In the first quarter of last year, 26,103 new housing units were launched. The number dropped to 16,557 in Q2, 9,789 in Q3 and 4,841 in Q4. At the end of last year, 61,129 units were unsold after more than nine months. Napic data shows 3.69 million unsold units at the end of Q1 last year. There was also incoming supply of 618,274 units, 579,431 of which were under construction. A property researcher said that the figures are subjective. 'You have to see where they are located. There is oversupply in some places but not in other places.' But some players fear that the overhang foreshadows problems if not tackled quickly. In the first half of last year, the market for new units showed signs of easing. Some 30,623 were launched but only 10,009 - or 32.7 per cent - were sold. This was a sharp decline from the first six months of 2004, when 36,574 units were launched and the take-up rate was 41.8 per cent. Transaction volume in the first half of 2005 was down 1.3 per cent from first-half 2004, and 16.8 per cent from second-half 2004. In a submission to the National Economic Action Council in January on the housing and property market, Rehda said that supply remained undiminished, amid signs of weakening demand. Lower consumer and business confidence is compounding the problem. 'There are fewer people attending launches and customers are taking a longer time to get back to us,' the sales manager of a property company told BT. 'Previously, if they liked what they saw at a launch, they would sign on the same day. Now they are taking a week to revert.' Interest rate and petrol hikes are often trotted out as reasons for reduced confidence. And fewer purchasers are biting despite attractive finance packages on offer. Location is everything, the sales manager said. The more 'prestigious' areas in the Klang Valley such as Bangsar, Sri Hartamas, Mont Kiara and Damansara Heights are still doing okay, particularly in the luxury segment. This has spurred developers to jump on the luxury bandwagon and to concentrate launches in those areas, leading to a danger of overdevelopment. Rehda president Ng Seing Liong said that developers need to do their homework. 'Demand in Kuantan and Alor Setar is still quite strong because there has not been overdevelopment. Market players agree that there is a considerable oversupply of mid-range residential housing. Williams Talhar Wong (WTW) chairman Mohd Talhar Abdul Rahman believes that developers are in danger of 'flogging the proverbial horse dead'. In a foreword in the company's 2006 market direction report, he said: 'Throughout the past decade, the mass affordable housing has been described as the mainstay of the industry. For all we know, the horse may have been dead for some time. The flurry of building activity is likely to be a manifestation of the poor animal in its death throes.' Although the number of property launches is declining, a sharper deceleration is required. But developers continue to build, citing high holding costs and the need to generate sales and profits for shareholders. Such reflex action, backed up by gimmicky marketing and promotions, is making matters worse. 'The value of a property depends on the yield, and if there is an oversupply then the yield is lowered,' said Rehda's Mr Ng. Rightly or wrongly, some blame state governments for approving so many housing projects, forgetting that they operate in a free economy. Rehda has warned developers that they will have to deal with any headaches themselves should they get stuck with unsold units. But Rehda is hopeful that the federal government will cut capital gains tax to attract investors, or stamp duty to encourage potential first-home buyers to take the plunge. Last week, the government announced that foreigners can now buy homes costing RM250,000 (S$107,000) or more without needing approval from the Foreign Investment Committee, which comes under the Prime Minister's Department. However, such property has to be for own use and not for rent, lease or investment purposes. And while FIC approval is not needed, state authorities must still give their consent. Mr Talhar believes that the industry as a whole has fallen victim to its own success, and that general statistics on housing stock and sales can be misleading. 'The industry needs more refined measures,' he said. 'Our land-use policy and management of land-use need an up-close and concentrated look to prevent our landed assets from literally sinking into a quagmire.' | |||
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