Recently, the Penang Island Municipal Council (MPPP) classified the two 26-storey condominium blocks of One World and One Sky in Bayan Baru as commercial property. This meant that electricity, water and assessment rates for these two condos are under commercial, in other words, higher. The owners are complaining that the rates are way too high and they cited that the assessment rate of a commercial centre in Bukit Jambul was just RM3,100 for 730sf while they are being charged RM22,800 – RM28,000 for units measuring 1,160sf to 1,450 sf. They know that the units are SOHO as it was stated very clearly in their Sales and Purchase agreement but they are not happy because the amount is way too high!
Due to this, MPPP has frozen every other SOHO developments. For developers who has just SOHO development, I think this will affect them greatly unless the matter is solved soon. Deputy Chief Minister I Datuk Rashid Hasnon said this decision to freeze all SOHO projects was for whole of Penang and is in effect for more than three years. This is because of the two major concerns; whether the buyers should be charged residential or commercial rates for electricity, water and asessment. Secondly how much parking space should be supplied since residential and commercial requirements are different from each other.
I think MPPP may want to study the reasons why SOHO developments in Klang Valley faced no such issues thus far. The decision should also be made fast because without a final decision, the current buyers of One World and One Sky may not want to pay the assessment and is actually committing an offense. the developers with SOHO projects would also suffer and the overall compliance costs would build up. In the end, prices would only increase and again, affects the buyers of such units when it is launched in future.
With land price continue to increase and buyers becoming younger, SOHO may be a solution to those who needs a roof over their head but could not afford the typical 1,000 sf units. With population growth due to the economic growth, smaller units may be key to maintaining affordability. Think about it, the real reason why SOHO came about was because of location popularity and affordability. Everyone wanted to stay at a certain place but needs something affordable, that’s why SOHO became so popular few years ago. There are certainly no SOHO units for locations which are not hot or where prices of 1,000sf condos are just RM300,000.
written on 19 April 2014
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