Property developers failure to make market survey results in over supply

The Star 01/08/2002 By Lee Kar Yean

A FAILURE by property developers to carry out detailed market surveys has resulted in a serious overhang in residential property supply, according to Jurunilai Bersekutu principal Sultan Mydin Ibrahim. 

He said most of the unsold properties were located in Rawang and Kundang in Selangor and Nilai in Negri Sembilan. 

“There are many residential properties in these townships but they are located in places where no one wants to stay and in most cases the designs of the houses are not suitable. In addition, there is the issue of poor accessibility and dubious track record on the part of the developers,” he said at the launch of the company’s publication Malaysian residential property outlook for 2002 in Kuala Lumpur yesterday. 

According to Mydin, the developers are selling the houses at astronomically high prices that are “unacceptable” to the market.  

The oversupply problem could have been avoided if the developers as well as the local authorities had conducted proper surveys and feasibility assessments instead of relying on hearsay when embarking on their projects, he said. 

“For example, property developers got into difficulties because they built too many houses in Rawang on the belief that Proton City would be developed there but now they realised that the Proton City project is not there. 

“The same is true with property developers who were caught in a bind because they heard that Nilai would be a new airport city, which didn’t happen,” he added. 

It is learnt that in Selangor alone there are RM342mil worth of unsold residential units comprising mostly apartments and condominium units. 

Mydin said there was a general recovery in the residential sector this year because housing was a basic necessity for a growing population.  

Nonetheless, “property developers should keep in mind that the affordable price range for young Malaysians who have just started working is RM80,000 to RM150,000, and after they have started a family they would want to upgrade to a bigger house costing between RM150,000 and RM200,000,” he said. 

In a general overview of the market, Jurunilai Bersekutu said real estate transactions had declined compared with the boom years of the past. 

“Also, given the present market conditions, the potential of interest rates going down further is very limited since financing rates are already at an all-time low. Such a situation appears to indicate that the market has reached rock-bottom,” it said. 

Property valuer Ishak Ismail said Puchong was set be the new growth corridor in the Klang Valley in view of its close proximity to the new government administrative centre of Putrajaya. 

“Putrajaya is being promoted internationally and visiting dignitaries are bound to come to this new administrative centre. There is still 80% land area to be developed in Puchong, which is set for huge capital appreciation,” he added.