Alarming approvals 
NST 09/07/2001 By Nicholas Mun and Zoe Phoon

Local authorities need to be more selective when granting approvals for new housing projects in the light of the RM6.61 billion overhang of residential properties that currently exists throughout the country.

The Ministry of Finance’s Valuation and Property Services Department (VPSD) deputy director-general Mani Usilappan said local authorities need to study applications for approvals carefully, keeping in mind the number of approvals that have already been given out and the demand for such properties. “They should be selective in granting approvals and also study the information that is now available in the form of the quarterly property market reports released by the National Property Information Centre (Napic) as an aid to making their decisions,” he added.

The increase in the planned supply of residential units in the country is a cause for concern, considering the excess unsold stock of 51,348 units that already exists. The Residential Property Stock Report (RPSR) for the first quarter of 2001(Q1 2001) released early this week by the VPSD revealed that the planned supply of residential units in the nation had increased by 26,295 units or 9.4 per cent to 305,104 units from 278,809 units in the fourth quarter of last year (Q4 2000).

This seems to point to the fact that local authorities may still be giving approvals too liberally despite the overhang. The other concern is that the industry may not be using the data that is now made available with the setting up of Napic. 
The planned supply appears to be most alarming in Kuala Lumpur and Penang.
According to the RPSR, planned supply for KL in Q1 2001 was 8,526 units, which represents a whopping 57 per cent increase over the supply of 15,081 units planned in the previous quarter. This brings the total number of approved units in KL to 23,670, of which condominiums appear to comprise a large chunk of the planned units at 43 per cent of the total. 

The RPSR revealed a poor take-up rate for newly launched low-cost units in KL during Q1 2001. Only 381 units or 26 per cent of the total 1,448 units launched were sold. The poor sales performance of properties in this segment of the market has been attributed to their poor location.

Penang is the other state where the volume of the planned supply for Q1 2001 has increased - in this case by over 95 per cent compared with the previous quarter. A total of 10,138 units was approved in Q1 2001, which, when added to the 10,509 units approved for Q4 2000, would bring the total to 20,647 units. The majority of the approved units for Q1 2001 comprise terrace houses, condominiums, apartments and low-cost flats located in the districts of Timur Laut on the island and in Seberang Perai Tengah on the peninsula.

Whether the KL and Penang property markets can absorb the planned supply will depend on when work on the approved projects commences and when the units are launched for sale. As a matter of interest, the sales performance of 598 units of condos and apartments released during Q1 2001 in Penang reached a mediocre 60 per cent.

Commenting on the high number of approvals given for residential properties,
International Real Estate Federation (Fiabci) Malaysian chapter secretary-general Dr Iskandar Ismail said local authorities should not be made to take all the blame. He added that property developers would have to accept their share of it as well.

“Property developers get upset when there is government interference. In any case, it is not a problem if approvals are granted as developers have the final say in determining when to commence work,” he added.

Iskandar also said that since property developers reap the profits of their
developments, they should also bear the risks that come with releasing properties into the market despite the overhang. However, he added that the authorities should take cognisance that data on the market is available and use it when giving approval to build.

The RPSR revealed that for Q1 2001, median prices for both KL and Penang remained unchanged compared with the previous quarter indicating that the respective markets have come to terms with the existing supply. However, median prices may slip in the near future if the rate of supply of completed stock increases when the approved units are released into the market. 

In Selangor, however, median prices fell in Q1 this year, indicating that the state’s property market has yet to bottom out. According to the RSPR, the median price of two- and three-storey terraces in the state fell almost 25 per cent to RM159,800 from RM210,000 in Q4 last year

The Petaling district led the decline, with the median price for two- and three- storey terraces falling 13.2 per cent to RM247,500 in Q1 2001 from RM285,000 in Q4 2000. This was followed by the Hulu Langat district where the median price for such terraces fell 7.2 per cent to RM173,500 from RM187,000.

Median prices for one- and one and a half storey terraces in the state also dipped, falling 8.4 per cent to RM109,900 in Q1 this year from RM120,000 in Q4 2000. Petaling again led the decline with the median price for such houses here falling 3.5 per cent from RM195,000 to RM188,000.

Notwithstanding that planned supply in the state fell three per cent from 39,358 units in Q4 2000 to 38,203 units in Q1 2001, the high existing stock totalling 586,381 residential units may have slowed down the buying process and take-up of the units which consequently forced median prices to drop.

According to the RPSR, the nation on the whole saw a 0.8 per cent increase in the supply of existing residential properties to 2,547,093 units in Q1 2001. The existing stock is dominated by low-cost houses and single-storey terraces, which at 447,529 units and 545,999 units respectively, make up almost 40 per cent of the total.