Luxury property projects freeze impedes readjustment phase: Ideas senior fellow

KUALA LUMPUR: The government’s move to freeze approvals for luxury property projects is a direct interference in the market as it impedes the readjustment phase that is necessary for the property sector to adjust to the present economic system, according to the Institute for Democracy and Economic Affairs (Ideas) senior fellow Dr Carmelo Ferlito.

He said even if the bursting of the Malaysian property bubble seems unavoidable, the proposed solution does not go in the right direction.

“The emerging of unsold properties is just the final symptom of a process. Government intervention at this stage would only impede the readjustment phase that is necessary for the property market to discover how to be consistent with the present economic system,” Ferlito opined in a statement released today.

Freezing approvals for luxury property development is not the right policy because of the unique nature of luxury products, which makes them less sensitive to cyclical fluctuations, he explained.

“Such a measure might generate panic among small investors, accelerating and aggravating the pace of the crisis.”

The move also lacks the consideration of ramifications of adopting such a policy, which is an excessive demonstration of government powers to suppress the free market, Ferlito said.

“What it seems advisable, on the other side, is an information campaign, oriented to create awareness about the present property market conditions, in particular among those people that got involved in the bubble without proper finance knowledge,” he said.

Bank Negara Malaysia reported that as of the first quarter of 2017, total unsold residential properties stood at 130,690 units, the highest in a decade, and about 83% of the total unsold units were in the above RM250,000 price category.

There is no doubt that there is a risk of property market imbalance and therefore policy measures need to kick in, Ferlito’s statement said.

The government decided to freeze approvals for luxury property developments indefinitely from Nov 1, 2017 to control the oversupply in the property market. The directive temporarily stops the development of shopping malls, commercial complexes and condominiums valued above RM1 million a unit until the excess supply is cleared.