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Friday, March 20, 2015

Pessimistic outlook for property sector in 2015

KUALA LUMPUR: Developers’ are pessimistic on the outlook for the property market in the first half of 2015 (1H15) and the gloom is expected to deepen by 2H15, the Real Estate and Housing Developers’ Association (Rehda) told a media briefing yesterday on its Property Industry Survey 2H14 report.

The survey, presented by Rehda president Datuk Seri FD Iskandar, was sent out to 1,000 Rehda members in12 states.

“Feedback from respondents generally indicated that the property market is still cooling down, not only due to the rising cost of doing business and the impending GST (goods and services tax) implementation, but mainly resulting from buyers’ inaccessibility to end-financing,” he said.

“Affected respondents reported that the percentage of loan rejection over sales has increased from 16% in 2013 to 23% in 2014, with the main problems of end-financing being ineligibility of buyers’ income, lower margin of financing, credit history ... banks requesting for more documentation and limited quota for low-cost or affordable housing.”

The survey also highlighted fewer property launches in 2H14 compared with previous years.

“Residential units launched shrank from 9,362 units in 1H14 to 5,984 units in 2H14. Properties priced between RM200,001 and RM500,000 continue to lead the market, especially in Perak and Johor, while commercial units have been reduced by 18%,” said F D Iskandar.

He added that for commercial property, the majority of launches were in the price range between of RM500,000 and RM1 million.

Respondents also reported a higher number of unsold units, mainly from Johor, Perak and Kedah. FD Iskandar added that the statistics in the number of unsold units increased by 64% in 2H14 compared with 57% in 1H14.

The main reasons for unsold units were unreleased bumiputera lots, low demand or interest, odd or special lots, and bad locations such as next to a sewage treatment plant.

FD Iskandar highlighted that Rehda supports the bumiputera quota but would like to see an automatic release mechanism for such lots.

Other issues include the challenges of dealing with utility service providers, especially in getting approval from the water authorities. Nearly half of respondents stated they faced problems with local authorities.

Issues faced include slow approval for building plans, inconsistent policies and guidelines, high development charges and slow or no bumiputera quota lot release.

FD Iskandar also said the impact of cooling measures like the GST, high real property gains tax and maximum loan tenure makes it hard for buyers, especially first-timers, to purchase property.

“Currently, the maximum loan tenure for first-time home buyers has been shortened instead of increased,” he said, adding that the government should relook at the developers’ interest bearing scheme that should only be given to first-time homebuyers.

Property prices ranging from RM250,001 to RM500,000, and from RM500,001 to RM 700,000 currently face the highest loan rejection with both categories standing at 22% and 24% respectively.

He called on the government to re-evaluate and assess the current household debt, which stands at 40% and buyers’ power of securing end-financing to reinforce demand as property remains a commodity that enhances over time.

He said 1H15 property launches will be low, with 75% of respondents anticipating less than 50% of sales performance.
This article first appeared in The Edge Financial Daily, on March 20, 2015.

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