By Khairul Khalid
Siva Shanker
The Malaysian property market needs to offer more asset classes as investment opportunities to prevent shortage of residential units, according to property consultant Siva Shanker of PPC International Sdn Bhd.
“One of the main reasons that prices of residential properties go up exponentially is that investors buy more than one unit. More often than not, these purchases are beyond their actual needs,” said Siva to KINIBIZ.
The property consultant explained that people will usually buy the first unit for their own occupation, and the rest for investment purposes. This exacerbates the shortage of residential units and leads to irrational spikes in prices.
“We often look at property as investment vehicles to hedge our funds. Often, we only need one house to stay in. But people buy three, four or sometimes even more residential units as investments. This is either for rental or to flip for a profit. We can’t really blame them because they need to park their money somewhere. But are we giving them enough options?” said Siva, who is also former president of Malaysian Institute of Estate Agents.
He said that this situation is depriving first-time buyers from owning a unit.
“Demand is always greater than supply. What we need are other asset classes as investment options to take the pressure off residential units,” said Siva. He proposed a few asset classes that can be offered as investments with good returns to buyers.
He urges Malaysians to look at foreign property markets with multiple offerings, such as the market in the United Kingdom, where one can invest in assets such as student housings and hotel rooms.
“For example, developers can offer proper serviced apartments that can be bought and leased out for decent returns. What we have in the market right now are mostly not proper serviced apartments. They are normal apartments classified as commercial properties.
“I am just mooting the idea, but why stop at serviced apartments? The local market has to diversify its offerings. There are other types of properties that developers could offer as investment vehicles. For example, golf clubs, hotel rooms, student colleges and accommodation. You cannot kill speculative buying but we need other asset classes so that residential units are not the prime mover of property investment,” said Siva.
Siva also felt that Malaysia’s secondary market has been underserved by the policy makers in the last few years.
“Between 2010 and 2014, 80% of volume of properties transacted in the local market have been secondary units and 20% primary units (or new launches). But 80% of demand and policies were geared toward chasing 20% of supply. Is it any wonder that prices soared?” said Siva.
He said that a more balanced approach towards the primary and secondary residential units is needed to counter speculative buying. The market has been shifting from primary to secondary units but Siva expects this to normalise soon.
“The developers have been having a bit of a hard time lately with the market slowing down. Buyers have slowly come back into the secondary market. Of course the goods are a bit older but the speculative elements are not so bad,” said Siva.
The property consultant felt that despite the sluggish property market, which has seen sales down by 20%-30%, the market will find its footing in the first and second quarter of next year.
According to Siva, the second half of 2016 should see the market beginning to level out. 2017 and 2018 will see the market rising again and start its upward trend. The next property high is expected in 2019.
Siva also advised buyers to be realistic in their expectations, especially in terms of locations for their homes.
“There are relatively cheaper properties in satellite suburbs. The city is expanding really fast. Buyers have no choice but to consider locations outside of KL if they want more affordable homes,” said Siva.
Bank Negara Malaysia should also relax lending policies to help first-time homebuyers, added Siva.
“We should give first-time homebuyers a bit of advantage, especially with the property market slowing down. Banks should make loans easier for them, don’t be so harsh,” said Siva. He adds that other than providing them with easier access to loans, there are several other ways that the banks could assist first-time homebuyers.
“For example, they can give preferred interest rates or have easier payment plans for them. Maybe even a 100% loan on the purchase. I’m all for it, as long as they are genuine homeowners,” said Siva.
Bank Negara governor Zeti Akhtar Aziz has said that current policies are flexible enough for first-time homebuyers and the responsibility is on them to ensure they meet loan requirements and criteria.
There has been a clamour by for Bank Negara to boost a sluggish property market by easing lending policies to first-time homebuyers. Financing for first time homebuyers is currently on a case-to-case basis.
Siva expects the market to be flattish, in terms of volume sold, until the end of the year. He explained that other than the goods and services tax, the falling ringgit and fall of oil prices causing the property market to slump, it is also suffering from negative perceptions about the country.
“There is a big perception problem. The political uncertainties, over issues like 1Malaysia Development Bhd, has to be settled before the market can recover,” said Siva.
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