Bank Negara’s 6 policy options. I like them all.

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I think everyone has read that article about RM500,000 property dropping to RM300,000 in the near future. I did not write a response but I did write an article about a few potential trigger points when the news about the 40 percent rise in unsold units first popped up. Here’s that article: Strategy with the 40 percent up in unsold units  Hopefully you have read an article where our Bank Negara Malaysia (BNM) outlined 6 policy options to everyone. I would think they are trying to influence everyone to think about it really seriously. Here’s that article in TheStar if you have missed it. It gave a warning that there is a supply-demand imbalance and that the oversupply of office space and shopping complexes in major states may worsen with incoming supply. This is their actual statement, “Supply-demand imbalances in the property market have increased since 2015. Unsold residential properties are at a decade high, with the majority of unsold units being in the above RM250,000 price category.”  (Please note that this is indeed a worrying statement.)

Property investments are now 25 percent of total investments versus 18 percent in 2005. (Please borrow responsibly yeah)  Johor is poised to have the largest property market imbalances (highest number of unsold residential properties and potentially the largest excess supply of retail space). BNM’s 6 policy options are as follows: (From TheStar article with my personalcomments in bracket and italic)  

First, there is a need to resolve the high level of residential properties for all price ranges. BNM said all parties should encourage the rental market. There is a need to develop a strong rental market by enacting the Residential Tenancy Act and establishing a Tenancy Tribunal to safeguard the rights of both tenants and landlords. (I think if it is true that if we really did not find the right property, renting is a good option.Keep viewing and negotiating. Who knows, we may just strike a good deal.) 

 as for affordable housing, there should be an increase in efficiency in  the provision of affordable homes. BNM suggested the setting up of a single entity for affordable housing to accelerate the rebalancing of supply towards the affordable range “Ensure that the development of new projects are in decent locations with good transport connectivity,” it said.  (This is the best policy to be considered. I always wonder why can’t we have just ONE main database with all the registered demand versus all the incoming supply. The programmes can be different lah. Since federal and state have their own programmes. However, all of the demand and supply for these affordable homes housed in the same system / database) 

Third, BNM said there should be greater efficiency in the allocation of affordable homes. It suggested that it should be ensured that applicant registries are regularly updated, verified and filtered to prioritise creditworthy households. Ineligible applicants should be directed to rental housing. For the offices and shopping complexes segment, BNM said there was a large incoming supply of commercial properties and a high vacancy rate and low rental rates in existing buildings.  (Directed to rental housing is good but supply of these need to be set-up properly as well) 

Fourth, there is a need to manage new incoming supply. Hence, the commercial viability of any new project must be thoroughly assessed before it is commissioned.  Developers should be  to be cognisant of current and future demand conditions:  Cannibalising effects on tenants and customers (from new malls and offices; high costs of living and rising e-commerce market.

Fifth, BNM said the parties should look into the repurposing of vacant commercial buildings. Vacant commercial spaces in prime locations could be repurposed into economically meaningful assets – such as corporate housing, en-bloc rental accommodation, art centres and indoor parks.

Sixth, increase demand for existing space. This could be done by intensifying efforts to attract foreign companies to set up businesses and expand their footprint in Malaysia. Encourage  start-up occupancy by giving rental rebates.

Other details: 83 percent of all unsold units are above RM250,000. Johor has the largest share of unsold residential units (27% of total unsold properties in Malaysia), followed by Selangor (21%), Kuala Lumpur (14%) and Penang (8%). From 2016 to 1Q 2017, only 21% of new launches were for houses priced below RM250,000. Here’s the full article again. 

Perhaps now we should wait for all the concerned parties to outline their own policies on how best to implement these for their side? Perhaps even their side of the story like usual but frankly, it is best that all parties think along the lines of these 6 policy suggestions. They are really based on numbers and allow me to quote my ex-Professor for Decision Science. He said, ‘Policies MUST be based on decision science and not on political science.’ How true then, how true today. Happy following.

written on 20 Nov 2017

Next suggested article: Difficulties in getting a loan will continue…. 2019

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