By Khairie Hisyam
Fateh Iskandar Mohamed Mansor
Property developers are calling for Bank Negara Malaysia to relax measures aimed at curbing rising household indebtedness as well as arrest surging residential property prices.
Speaking to the media today, the Real Estate and Housing Developers Association (Rehda) said its members reported declining sales performance last year, based on the findings of its twice-yearly Property Industry Survey.
This decline is partially due to difficulties in obtaining end-financing for buyers, said Rehda president Fateh Iskandar Mohamed Mansor or FD Iskandar as he is more commonly referred to.
Polling 132 of its members across Peninsular Malaysia, Rehda reported that only 42% of its respondents unveiled new property launches in the second half of 2014, totalling some 6,569 new residential and commercial property units in that six-month period.
This figure is 35.5% lower than 10,189 new property units launched in the first six months of 2014.
In terms of sales performance, Rehda members polled reported 49% sales rate of new property launches in the first half of 2014 – selling some 4,989 units — and just 45% or 2,951 units in the second half.
Among others the declining sales rate was attributed to rising loan rejection among buyers. “Take-up rates are good but upon signing the SPA (sale and purchase agreement), applying for bank loan, then the rate goes dismal,” said FD Iskandar today.
On average the loan rejection rate had risen in 2014 at 23% compared to 16% in 2013, reported Rehda today.
Overall, the number of new property launches in 2014 was 17% lower than that seen in 2013, which saw 20,349 new property units launched. In comparison, 2012 saw 22,274 new property units launched.
‘Segmentalise curbs’
While government concern over rising household indebtedness is understandable, Rehda urged more precise curbs to target debts that do not create value, arguing that property mortgages are more productive.
“We understand the central bank is very worried over our household debt levels,” said Rehda president FD Iskandar. “But we hope they can segmentalise household debt and control something else.”
FD Iskandar was referring to macroprudential measures previously introduced by Bank Negara to arrest surging residential property prices as well as growing household debt levels.
Among others, these include the implementation of loan-to-value (LTV) ratio capping property financing to 70% of purchase price for third residential property buys onwards; an upward revision of real property gains tax (RPGT) as well as the prohibition of controversial developer interest-bearing scheme (DIBS).
In Bank Negara’s Financial Stability and Payment Systems Report 2014 released last week, the central bank stated that these measures are achieving their intended effect with aggregate house price growth slowing for three consecutive quarters since the last quarter of 2013.
The central bank expects the fourth quarter of 2014 to retain the same moderating trend based on preliminary data.
“Wide-ranging measures to address property market issues are moderating growth in aggregate house prices,” said Bank Negara. “The intended effects…have become more apparent.”
However, property purchases are a good investment, said FD Iskandar today, arguing that the central bank should instead look to curb less productive debts such as car purchase loans.
“Property enhances value — it creates value,” said FD Iskandar. “This has been proven.”
Shrinking supply
Rehda also raised alarm on declining numbers of residential units launched last year, which paints a bleak picture for would-be homebuyers.
According to Rehda’s survey, 5,894 of the 6,569 new property units launched in the second half of 2014 were residential properties. In comparison, the first half of 2014 saw 9,362 residential properties from a total roll-out of 10,189 new properties launched.
This poses a worry for developers, said FD Iskandar, as supply and demand dynamics mean fewer launches would translate into a smaller supply, in turn pushing prices up.
“The only way to counter upward price movement is to produce a lot more houses,” said FD Iskandar to assembled media, “because high demand coupled with shortage of supply will definitely push prices up.”
“We are trying to help the government avoid this (rising house prices) but policies, especially by Bank Negara Malaysia, are not helping,” added the Rehda president.
“We understand the government’s aspirations and we want to work with them but certain guidelines by financial institutions has to change so that the dreams of Malaysians to own houses can be achieved,” he said.
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