THERE are many
ways to stabilise the residential property market and the latest measure by the
Government to curb bulk buying is a step in the right direction to ensure a
more equitable market that is led by real demand.
On Monday,
Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman
Dahlan said developers selling more than four residential units to a single
buyer or group must now obtain prior approval from the Controller of Housing.
The new enforcement would be made compulsory in all real-estate advertising and
sale permit materials.
Property
consultants gave their thumbs up to the move aimed at reigning in property
speculation and flipping activities for fast gains.
Property
consultancy Khong & Jaafar managing director Elvin Fernandez says the curb
will in the medium to long term help to stabilise the housing market. “It is
very good that these measures have come out. Bulk buying has been misused and
the current intended curtailment to limit such buying to four units is good.
Bulk buying by speculators with the intent of flipping and crowding out genuine
buyers is not healthy,” Fernandez says.
He says bulk
buying can distort the market when speculative groups of buyers signal to
developers demand which in fact is not real demand in the market. However,
Fernandez believes bulk buying is a good thing if it is done for genuine
reasons such as parents buying houses for each of their children when there are
favourable interest rates.
Property clubs
“Bulk buying
by a group of property buyers under property clubs can be disruptive only when
they feed on rising prices. If such clubs are more investment orientated and
are highly transparent about their operations, I see no harm in them,”
Fernandez observes.
VPC Alliance
Malaysia Sdn Bhd managing director James Wong discloses that bulk buying are
mostly done via property investors club and by foreign buyers from China,
Singapore, Japan and South Korea.
“They are
mostly financially strong and are interested to buy in strategic locations with
public amenities such as projects nearby to MRT stations and LRT extension
lines, which usually have higher opportunities for capital appreciation. Bulk
property buyers normally have the financial muscle to buy in bulk to get good
pricing and discounts, and they usually go for properties of RM500,000 or
more.”
Wong contends
that bulk buyers of properties are indirectly providing shadow banking
financing for projects and assisting developers to fast-track the required sales
target for bridging loan drawdown.
As such, bulk
purchase of properties tend to distort the market as they are sometimes
“intermediary” buyers and after buying, wait for opportunity to flip and
dispose the properties.
Concurring, CB
Richard Ellis Malaysia executive director Paul Khong says bulk buying creates
artificial demand in the early stages of a project’s launch.
It usually
involves high-rise residential strata properties where supply is high, but
rarely for properties with genuinely strong demand especially landed segment in
prime locations.
According to
Khong, bulk buying has been successful in hot areas and allow developers to
report 100% sales on the first day of a project’s launch.
“Due to the
artificial demand of a big take up at attractive prices in the early stages,
the stock available to the market quickly dries up and it creates a rush and a
buzz for the balance units which sends the unit prices rocketing further. This
also sets the tone for prices in the next launch,” Khong explains.
Cooling the market
Due to the
high number of units booked, developers would be willing to offer more
discounts to push sales and pare down their risks.
The property
clubs are used to bring in quick sales by offering good discounts prior to the
actual launch. Developers can get their sales numbers high from the start and
prices will rise even higher.
Khong says the
curb on property bulk buying to reduce unhealthy and excessive speculation in
the market needs to be closely monitored and has to be enforced effectively to
ensure a fine balance prevails in the market.
While
excessive speculation and false demand will create problems affecting the
capital values of properties, he says too much legislative intervention in the
property market will affect its “free market” status.
Besides bulk
buying, there are other contributory causes for the spike in property prices:
developer interest bearing schemes; attractive funding/financing rates; low
fixed-deposit rates and the weak foreign exchange that attracted more foreign
buyers to the local market in recent years.
“On the whole,
the curb gives a fairer chance to more genuine Malaysians to own properties at
reasonable prices or even at the developer’s original list prices.
“The public
will continue to invest and make profits from property purchases. With
inflation all around, property investments will do well as it is a hedge
against inflation and will always be a favourite investment choice for all,”
Khong concludes.
Fernandez
foresees more measures and tweaking of the measures to be introduced moving
forward.
He singled out
the DIBS and not property bulk buying as one of the main factors that has
caused the sharp price hikes in the local housing market in the last few years.
“The sharp
price hike in selected areas of Kuala Lumpur, Penang, Johor Baru and Kota
Kinabalu has more to do with the DIBS. Largely, as a result of the DIBS in
2009, transactions in the primary market climbed from about 25,000 housing
units a year or about 12% of the residential market in 2009, to about 60,000
units in 2012, or 22% of the residential market nationwide last year,” he says.
He says after
the DIBS was banned under the Budget 2014 announcement, short-term property
investors or “flippers” are finding it hard to operate in the current market,
which is an objective of the Government’s cooling measures.
When the
flippers have been subdued, it will give more room to first-time house buyers,
upgraders and investors to participate in the market; the phenomena has been
observed in other markets including Hong Kong.
“Bulk buying
came on more recently in the last year or so when buyers with purely
speculative intent came forward to take advantage of the rising market. Until
the end of 2012, house prices have been rising in line with household income,
increasing at 5% per annum. It is only selected hotspots that prices have
spiked to more than 10 times the annual average household income,” he says.
As to the
practice of pre-launch sales and its impact on other genuine buyers, Fernandez
observes: “Pre-launch sales are acceptable market practices for developers
because it enables them to gauge demand and is, in fact, a risk mitigation
measure. It is only when it is used incorrectly that it becomes questionable
such as when genuine first-time buyers, upgraders and investors are excluded.
Many pre-launch sales have, for example, been open to only the developers
staff, or friends.”
He says
pre-launch sales should be allowed but some controls must be put in place to
ensure all Malaysians who want to buy on the first day are given a chance.
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