Lower ceiling price of houses for foreigners

THE housing glut and freeze on development above RM1 million refers.

I believe the problem is self-created and could have been avoided with foresight and proper planning from the development planners. It takes time for a glut to appear in the housing market, it cannot happen overnight as planning, approval and construction takes time.

In 2008, the price for foreigners to buy property was at above RM350,000, then this was revised to RM500,000 in 2011 and subsequently to RM1 million in 2014. While the intention may have been good to allow Malaysian to buy lower-cost house however it gives the wrong impression that Malaysians are able to afford the house below RM1 million. Looking at the current figure this is no where correct as most of the housing glut is in the above RM500,000 pricing. Not sure who came up with the price ceiling of RM1 million but looks like that department or person did not do his research well.

This also sends the wrong signal to developers to focus on house below RM1 million and in order to target lucrative foreigners develop houses costing more than RM1 million but even for the foreign clients its very limited market as this would be ultra-high net worth foreigners.

As a result, there are no buyers (including foreigner) for property costing more than RM500,000 resulting in the current mess. Its also a wrong assumption that property costing more than RM1 million is affordable for foreigners, its expensive even for them.

In any developed market, foreign buyers always contribute to healthy property development and I believe the government does not want to price this segment out of the market by setting purchasing limits too high.

I suggest lowering the ceiling prices for foreigners (albeit temporarily) to more than RM500,000 (and keep below RM500,000 for Malaysians). This would allow foreigners to buy such properties and let the inventory clear. Unless the inventories clear developers would also be reluctant to invest on new development and this can create a vicious downward cycle. Once the inventories are back to healthy levels then the limit can be increased however I would suggest to use caution. Instead of just doubling up set a reasonable limit.

Sudhir
Kuala Lumpur