Monday, May 4, 2009

How about property liberalisation? 什么时候要开放购置房地产条例?

Adapted from
MAY 4 – Recently, the Government announced a few major decisions that have been positive and I hope that there are more to come.

On the economic front, the decision to scrap the 30 per cent bumiputra equity requirement for the 27 services subs-sectors and also to allow a higher foreign equity participation for insurers and investment banks would augur well to attract more investment.

Even though some may argue that these are only ‘baby steps’, they are steps in the right direction to raise Malaysia competitiveness in the global business front.

We should not believe, however, that liberalising through removal of the equity component requirement would open the floodgates of investment. More still needs to be done to remove the bureaucracy of doing business, improving the efficiency of the civil service and etc.

In view of the gloomy economic climate, the Government should also consider liberalising or relaxing the property sector. Given its link to the other 160 industry sub-sectors, the property industry plays a pivotal role to breathe more life and activities in the local economy with its multiplier effect.

This is evident from the Government’s allocation of funds in the first stimulus package to build more low-cost houses through Syarikat Perumahan Negara Berhad.

With lower property sales, construction slowdown and deferment of new launches and huge inventory built up, some developers are facing difficulties and bracing for more hard times.

The few major areas relating to the national housing policy that may require some amendments or improvement are the applicability of the bumiputra discount, varying range of quota needed to be reserved and the mechanism for automatic release from bumiputra to non-bumiputra.

In parliament, I have raised the need to review and abolish the discount for the purchase of luxury properties by bumiputra.

Typically the bumiputra discount for property ranges from 5 to 15 per cent. The discount is intended to make property affordable to bumiputras. However, discounts provided for luxury property is not equitable to the rest of the buyers as it may result in non-bumiputra buyers having to purchase property at inflated price.

Example, for a RM1million condominium in Klang Valley, a 5 per cent discount would cost the developer RM50,000, equivalent to a low cost house. If there are 1,000 units being launched and 30 per cent are reserved for the bumiputra quota, thus the discounts on 300 units cost the developer RM15mil! The cost would be higher if it is a massive township development or if the discount is 15 per cent!

Providing discounts to some buyers would decrease the margin of the developer and hence developer would think of other ways to compensate for the margin loss or pass the cost to the other customers. This results in inflated purchase price.

On Nov 25, 2008, the Minister of the Housing and Local Government announced that they are in discussion on a proposal to scrap discounts for bumiputra who buy luxury property valued at RM500,000 and above. Hopefully the discussion is still in process and any amendments would be announced in due course.

Giving discounts to ensure that the people can have access to affordable housing is commendable and efforts to bridge the gap of property ownership between races promotes racial harmony but it should not be extended to luxury property. It creates feeling of unfairness and also potential conflict as a non-bumiputra buying a property worth RM250,000 is not entitled to any discount but a bumiputra buying a property worth RM1million is given a discount of at least RM50,000, which is 20 per cent value of the property costing RM250,000.

Furthermore, it is a fact that bumiputra lots usually fetch lower prices due to the restrictions on who it can be sold to, which makes the discount counter-productive. It does not allow the bumiputra to enjoy the maximum investment growth of a property when they buy a bumiputra lot.

The Ministry has also announced that they are discussing with the state governments to expedite the process of releasing unsold bumiputra quota units to the open market. Sometimes, bumiputra lots are not attractive as the buyer market is limited, resulting in unsold units.

Developers can apply to the state governments for permission to release unsold bumiputra quota units after six months or upon reaching 50 per cent construction stage, but the units are released gradually. The process can be so slow that the units might have completed but the release has not been obtained.

Worse still, some states even impose penalties for releasing unsold quota units, resulting in even higher cost to the developer. It would not be inconceivable that developers would have factored all these costs, again inflating the selling price of the property.

For example, it is possible that some of the developer lots sold after project completion are sometimes bumiputra reserve lot that have been released, and their price is usually higher to take into account the penalty paid and the holding cost.

Certain states impose a condition that the released units can subsequently be resold only to a bumiputra.

All these conditions can lead to unsold units and having too many empty houses in a project would diminish the growth value of the homeowners in the area.

There is also a range of quotas varying from state to state, from 30 per cent to 70 per cent in certain areas. While having a high quota may seem to be justifiable depending on the state demographics, it would invariably lead to the developer raising the base price to take into account both the impact of quota and discount that needs to be given, leading to inflated prices, especially for the non-bumiputra buyers.

There are also contradictions between the Federal Government’s initiatives to attract foreign investors and state rules.

The abolition of Foreign Investment committee approval for foreigners purchasing properties priced at more RM250,000 and the exemption of property gain tax would create foreigner interest in the local property market.

However, state governments still impose their own rules on foreign property sales and purchase, resulting in conflicting signals to investors.

Even though opening the property market to foreigners would enable to raise the profile and also spur the growth of the Malaysian property market, the minimum price for eligibility should be raised to at least RM1million, depending on state.

This is to ensure that we attract quality investors and avoid forcing Malaysians to compete with foreigners to buy a house for themselves as the amount of RM250,000 is too low for certain areas like the Klang Valley.

In summary, a bumiputra discount for property at a certain value should be maintained to ensure affordability of home ownership but a better policy is to not confine the discount to one race or religion.

We have already come so far since independence and I am sure anyone would agree that the Government should help the needy regardless of race or religion.

Consistent with this, discount should be given to every first home buyer limited to a certain value, maybe properties below RM500,000 depending on state, but not limited to race.

As bumiputras form the majority in Malaysia, they will still form the majority that would be entitled. That way the policy would be more equitable and fair, ensuring all Malaysians enjoy the benefits of development.

At the same time providing affordable property can help to fulfil one of the basic human needs and ensure that those starting out to work or middle income group are able to own homes.

The quota system and timeline to release the units should also be streamlined so that developers won’t have to price their properties higher just to offset the cost incurred for discounts, the quota system and potential holding costs.

Meanwhile, even though encouraging foreign buyers is essential to make the property market more vibrant, the needs of the citizen should not be neglected.

































  1. Do you really want to quit MCA with your father ?

  2. 马来西亚的名人何其多,有影响力的名人也不在少数,你觉得谁的发迹过程最不可思议呢?