YB Minister, over to you

DATUK Abdul Rahman Dahlan is taking charge during a time of rising property prices, dipping yields and high household debt. Add to this the pleas of hopeful, exasperated prospective first-time home buyers, squeezed by a serious mismatch between property prices and wages.

The new urban well-being, housing and local government minister is being courted by industry players who argue they are unable to bring down or cap prices as margins come under increasing pressure.

Indeed, it would be simplistic to think that cracking the whip on developers to drop prices is the way forward to providing affordably priced homes. Neither is it realistic to expect wages to rise substantially in the near future, to facilitate house purchases.

So long as the cross-subsidy environment in the property sector continues, the added costs will be passed on to consumers in the form of higher selling prices.

In one sense, Abdul Rahman is tasked with a balancing act of sorts. As the minister eases into his portfolio, he would agree that a quick fix that could frustrate the healthy expansion of the local property market won't be a wise move. On the other hand, the market can't be allowed to operate unrestrained and risk a hard landing.

It is against this backdrop that we have identified some of the key issues below that the minister must address. In reality, these issues cannot be unfamiliar to the authorities, but the execution demands political will, compared with taking a populist approach that would probably be counter-productive and even detrimental for the nation in the long term.

Since land is a state matter, solutions will require the minister to work with the National Land Council.

The way forward is to ensure a level playing field, guided by fair practices and transparency. This would in turn promote efficiency and genuine competition which, collectively, would help keep price increases in check instead of via some artificial mechanism.

Going by the new title of the ministry, a sense of urban well-being must underpin the government's roadmap for our housing and local government needs.

So, YB Minister, over to you.

Urban safety and security

There is an urgent need for local authorities to work hand-in-hand with the police to bring back the times when snatch thefts, burglaries and robberies were a rarity. Initiatives to combat crime by residents must not only be lauded but encouraged through incentives in every way possible.

Abandoned/illegal projects

About 200 unlicensed projects have been identified as abandoned. These include serviced apartments, terraced and semi-detached houses and bungalows — some of which are said to have come up on land not even zoned for housing. Act without fear or favour and throw the book at all the offenders — "developers" and professionals — involved.

Build-then-sell (BTS) concept

The implementation of this widely-discussed proposal would drastically shrink new housing supply. There are differing views on BTS, including allowing the current sell-then-build scheme to run concurrently and introducing insurance and/or home completion guarantee schemes to alleviate fears of projects being abandoned. According to the latest government statistics, the value of properties transacted in 2012 totalled RM142.84 billion (from 427,520 transactions), up from RM137.83 billion (430,403) in 2011.

Putting the brakes on housing supply will not only send prices higher, but create a negative economic impact on the 140 or so industries that depend on the property development sector. Are we ready for that?

Affordable/low-cost housing

Agencies tasked to provide housing for the poor and middle income group must steer clear of competing with the private sector. Build where the real demand is, and not just to meet key performance indicators. Of the 15,091 housing units classified as overhang property in 2012, almost a third (32% or 4,828 units) were in the price range of RM50,000 to RM100,000. Of these, about 71% (3,413 units) comprised flats and 1-storey terraced homes.

Relook and fine-tune low-cost home ownership policies to ensure only the deserving benefit. Review the policy of requiring developers to build low-cost homes — not only is the cost ultimately passed on to buyers as a cross-subsidy, but high construction cost warrants that low-cost homes be priced at a more realistic level to make them "liveable".

Utilities/infrastructure/public amenities

Compliance costs can account for as much as 30% of the gross development value of a project. Utility companies are privatised entities so why are property buyers — to whom developers will pass on the cost — paying for these facilities?

Bumiputera quota and discount

Standardise regulations across all states to ensure transparency and leave no room for the imposition of arbitrary limits.

The release mechanism for unsold units under the quota must be structured and automatic once the required and published criteria for release are fulfilled. This will bring down the cost of doing business and, ultimately, help rein in property prices.

Should we continue with discounts for million-ringgit real estate?

Delivery system

Make it transparent and streamlined. Differing sets of interpretations manifest as added costs for developers who, again, will pass these on to buyers. To build highly-ranked cities, use Kuala Lumpur as a benchmark, then get other states to fall in line with the best practices.

Redevelopment and urban slums

Review en-bloc regulations to enable redevelopment opportunities to bring about more liveable towns and cities. Land in the cities is fast diminishing, and urban slums are eyesores that must be avoided.


Au Foong Yee is managing director of The Edge Communications Sdn Bhd

This story first appeared in The Edge weekly edition of July 22-28, 2013.