There must be political will to reduce property prices

• House prices are still rising, albeit at a slow pace. Finger-pointing over who is to blame for this will not get us anywhere. What is needed is will and commitment to bring down property prices and the buck does not stop with the developers. The government must do its part.

Let’s face it, property prices are not about to drop just because the market clamours for it. While we do hear of the isolated fire sales on the secondary market, truth be told, I have yet to know of anyone who has managed to seal a hot deal.

Calls to bring down home prices are not new. Neither are the developers’ responses — they cite the escalating cost of building materials, labour, land and doing business in general.

Be that as it may, home ownership is not about to go out of style. Buyers will emerge no matter which cycle of the market is dominant.

Consider this: Last year, more than 389,000 property transactions worth RM179.07 billion were recorded, up 29.5% in volume and 23.6% in value from 2021. Expectedly, the residential property subsector led the overall market activity, accounting for 62.5% of the year’s sales volume with 243,190 transactions worth RM94.28 billion. This grew by 22.3% in volume and 22.6% in value year on year.

On the supply side, 2022 saw the launch of more than 54,000 units — higher than the 43,860 units unveiled in 2021 but lower than in pre-pandemic years. Sales performance growth was only 36%.

In short, the Malaysian housing property market is alive and well, though not vigorously active.

Stop the blame game

House prices are still rising, albeit at a slow pace. Finger-pointing over who is to blame for this will not get us anywhere. What is needed is will and commitment to bring down property prices and the buck does not stop with the developers. The government must do its part.

To navigate higher costs, including land cost, developers engage in reengineering practices. They are also building smaller homes in locations farther and farther away from urban centres, where land is costly.

Margins, they contend, are also down. I can’t say for sure how and to what degree that is true but to be fair, tax-paying private enterprises are answerable to their stakeholders.

It is also true that property development tends to be a risky investment given the long gestation period. The development process spans years, the duration resting on the approval process, project type and size.

During this period, market sentiment can literally change overnight, sparked by unexpected incidents or circumstances domestically or overseas. The Covid-19 pandemic, for instance, caused an unprecedented market disruption, which translated into the dreaded holding costs for developers.

Property development is a key contributor to the economy, providing employment in more than 160 subsectors. It is also a complex industry that warrants working with a multitude of authorities and agencies at the state and federal levels for the countless documentation submissions, inspections and approvals required. Any unnecessary delay is translated into an unnecessary cost of doing business.

The one-stop-centre that is not

New buildings, both housing and commercial, must be issued with the Certificate of Completion and Compliance (CCC) before they can be occupied.

A little background on the CCC. In April 2007, the government enhanced the building delivery system in the construction industry to move towards self-certification and self-regulation.

The CCC is to be issued by principal submitting persons (PSP) and these are professional architects and professional engineers or building draughtsmen registered with the Board of Architects Malaysia (LAM), depending on the building type. In short, the CCC replaced the Certificate of Fitness for Occupation (CFO) issued by local authorities.

It is clear that the CCC is only issued when the authorities are satisfied that the building construction has been supervised and completed in full compliance with provisions of the law and technical conditions as imposed by the local authority approving the planning permission and building plan.

To tighten the CCC system and safeguard the well-being of occupants, amendments were made to the relevant Acts. Local authorities, meanwhile, are authorised to inspect the sites at any time and issue a notice if there is a breach or divergence from the approved building plan.

For housing property (including serviced apartments), vacant possession (VP) by the developer must be supported with the CCC. This is to protect the buyer’s interest and the requirement is embedded in the standardised sales and purchase agreement (SPA) prescribed by the Housing Development Act. What this means is that any delay in CCC issuance will affect VP and ultimately result in the developer paying liquidated damages to the purchaser.

For commercial property, however, there is no standardised SPA. The parties concerned are at liberty to draw up their own terms for VP.

The intention of the CCC is noble and clear. The onus is placed primarily on the relevant professionals tasked with the process of self-regulation.

To streamline and expedite the delivery process, one-stop centres (OSC) were established. Now there is OSC 3.0+, which mandates fixed timelines for the completion of processes. The idea is to ensure that approvals are granted expeditiously, thus improving the ease of doing business.

On paper, this sounds good. But in reality, OSC 3.0+, an initiative by the federal government, is far from satisfactory.

There are altogether 105 local councils in Peninsular Malaysia and not all of them are toeing the line. The problem lies in the fact that local councils report to their state government, which has the final say on all land matters.

Some local authorities, industry players say, are creating their own submission processes in addition to those specified in OSC 3.0+.

Interestingly, I have been told that some local authorities have taken to “commenting” on architectural designs that have complied with the Uniform Building By-laws!

Is there political will?

If the government is serious about reducing property prices, the building process must be made simple. Straightforward.

Operating in an environment that lacks clarity and transparency only courts unnecessary delay and, ultimately, costs that will be passed on to property buyers.

It is paramount to have the aspirations of the federal and state governments aligned, a task that is by no means simple or popular.

The time to do it is now. Does the government have the political will to crack the whip? That would be the real deal!

Au Foong Yee ([email protected]) is an editor emeritus at The Edge Malaysia

​This article first appeared in Forum, The Edge Malaysia, on April 10, 2023 - April 16, 2023.