Assistant director of the National Property Information Centre (NAPIC) Zailan Mohd Isa said at the same time the current system of sell-and-build has to change for the market to continue its evolution.

She suggested the industry opt for an alternative concept, one that can strike a balance between the interests of both buyers and developers. (NAPIC is under the Finance Ministry's Valuation and Property Services Department.)

Zailan was one of the speakers at Rahim & Co's recent one-day seminar on "Unleashing the potential of Malaysian property market", which  attracted 180 participants.

Do not overbuild

In her paper titled "The Malaysian Property Market", Zailan cautioned against overbuilding, given the current unsold units. According to Napic's latest data, the country, as at third quarter 2004, has an over-hang of 15,162 homes, 3,516 shops and 686 industrial units.

The value of these units stood at RM1.75 billion, RM835.1 million and RM299 million, respectively. Overhang is defined as a new unit that has been completed with certificate of fitness (CF) but remained unsold for more than nine months after its launch.

On top of these, some 1.2 million homes are expected to come on stream. This comprises 620,138 units of incoming supply and 588,507 units of planned supply to made up of units where construction work is in progress, unit starts and where the CF or temporary CF has not been issued as at Aug 31,2004.

Meanwhile, planned supply refers to units with building plan approval from the local authorities as at Aug 31, 2004, but where construction has not started. It also includes new planned supply of the period under review.

Zailan also pointed out that the performance of many newly launched schemes has softened. Developers therefore need to first gauge demand before building.

The government's role is to provide the data, not forecast, on how many units are required to be built for the masses, she stressed.

Credit expansion

Zailan also noted that credit expansion in the property sector has been disproportionate with the purchase of housing property and she is worried about the consequence  of excessive credit given to the property sector.

Bank Negara Malaysia's annual report 2004 shows that non-performing loans (NPLs) in the broad property sector has risen to RM20.84 billion from RM8.57 billion in 2003. The amount of RM20.84 billion ringgit represents 47.4% of the total RM43.96 billion worth of NPLs in 2004.

Zailan stressed that to overcome excessive supply, which is largely contributed by projects sited in less than prime location, comprehensive market surveys and pre-launch registrations should be carried out to gauge the demand for and viability of projects.

Another speaker at the seminar, Hall Chadwick Consulting Sdn Bhd director Kumar Tharmalingam, provided interesting insights into Real Estate Investment Trust (REITS) and its future in Malaysia.

Malaysia, which is going through the first phase of REITS, has its guidelines developed very close to that in the US, offered Kumar.