By Khairie Hisyam
The four-unit cap on bulk property purchases, which took effect last week on May 15, would be difficult to enforce and unlikely to have much impact, real estate agents say, adding that it might even be too late.
See Kok Loong
“It is an okay measure, but in practice it would be difficult to enforce,” said See Kok Loong, director of real estate and property agency Metro Homes. “It is unlikely to have much impact.”
To recap, the four-unit limit requires any sale of four units or more by developers to a single buyer — whether individuals or group — to obtain prior approval from the Controller of Housing by registering the buyer with the housing ministry.
In Parliament earlier this month the Urban Well-being, Housing and Local Government Minister Abdul Rahman Dahlan said the measure is targeted at curbing the proliferation of so-called property investors clubs and this measure is in addition to previous initiatives including the loan-to-value (LTV) ratio cap to 70% for third residential property purchases onwards that took effect in January 2011.
Chang Kim Loong, honorary secretary-general of the National House Buyers Association (HBA) said the move is good to add transparency in curbing spiralling house prices due to speculation.
Chang Kim Loong
That said the measure also needs more clarity, opined Chang of HBA, saying that it is unclear how the four-unit cap is calculated.
“Is it a four-unit cap for a specific project or does it apply across all projects by any given developer?” asked Chang. “And is it a lifetime cap unless given approval?”
‘Difficult to enforce’
In addition the difficulty lies in regards to enforcement as investors clubs are not normally a registered entity like a company, said See, adding that most are simply a collection of investors acting in tandem.
Estate agency PPC International CEO Siva Shanker shares the sentiment, saying to KiniBiz that from what he can tell a majority of buyers who are involved with investors clubs are “young, impressionable people who do not have the capacity to buy more than one unit (at a time)”.
Adding to the difficulty is that some investors clubs are able to quickly flip properties — quick-resales of property for quick gains — without even having to sign sales and purchase agreements (SPA), said See, clarifying that this has happened when “the developer allows them to”.
This casts doubt on whether the four-unit limit will have any impact at all on investors clubs’ activities. A property market observer said to KiniBiz that this limit is easily sidestepped by investors who can use proxy buyers via deeds of trusts — essentially using another person’s name on the SPA.
“At most they’ll probably have more paperwork to do,” said the observer who declined to be named.
Too late to curb investors clubs?
One issue raised by estate agents is the timeliness of the four-unit cap. Is it too late to curb investors clubs?
Siva Shanker
“The ministry means well but (the implementation) is too slow,” said Siva, who is also president of the Malaysian Institute of Estate Agents (MIEA). “This should have been done three years ago.”
Siva added that investors clubs have done a lot of damage over the past two to three years, primarily by creating false demand. “But now some developers are finding it difficult to purposely go to investors clubs and get them to buy in bulk,” he added.
However, while agreeing with Siva that the measure was too slow, See of Metro Homes opined that the statement of intent by the housing ministry was welcome. “It is still better than nothing.”
‘More action needed’
Going forward more needs to be done for curbs to be effective against investors clubs, said both See and Siva.
“If the country is serious about affordable housing, serious about allowing every person to have a roof over their heads, serious about encouraging young couples to buy (homes) as a hedge against inflation, then it must act (faster) to stop such rampant speculation,” said Siva via telephone to KiniBiz. “The government must engage all industry stakeholders (to do this).”
It must be noted however that the housing ministry held a workshop with housing industry players in August 2013 to address the issue of affordable housing ahead of the Budget 2014 tabling in October.
Abdul Rahman Dahlan
“The purpose of this workshop is to allow industry players to give us their opinions on short-term measures to control and reduce house prices,” housing minister Abdul Rahman Dahlan was quoted as saying last year.
However estate agents were not included, said Siva, arguing that the housing minister is missing out on a vital demographic’s input. “My industry represents those who talk to property buyers and sellers every day and we have intimate knowledge of these people’s thought processes,” said Siva to KiniBiz.
At the moment MIEA represents an estimated 20,000 estate agents nationwide, according to Siva.
In addition the implementation of 1Malaysia People’s Housing Programme should be accelerated, said See of Metro Homes, as this would increase the supply of affordable housing. He retraces the rise of investors clubs to property flipping opportunities that arose as genuine buyers were spooked by the prospect of prices rising too fast if they wait too long to make their purchase.
“The government also needs to be more transparent with the data of housing supply,” said See. “At the moment no one has a real picture of the supply situation in any particular area.”
‘Don’t stop investment’
While calling for more action, See cautions that any future measures should not hurt genuine investment activities.
“You can’t stop people from investing (in a free market),” said See of Metro Homes.
Chang of HBA agrees. Coming back to the four-unit cap as an example, he suggested that it be refined to only apply to a specific price threshold that represents the affordable housing segment. This would allow affluent investors to keep investing, said Chang.
“For instance in the Klang Valley maybe the cap should only apply to properties priced at RM1 million and below,” said Chang.
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