KUALA LUMPUR: While developers lauded the Malaysian government’s move to lower the threshold for foreigners to buy urban high-rise properties, a consumer group said such a move does not address housing affordability issues for Malaysians.
Federation of Malaysia Consumer Association (FOMCA) president Paul Selvaraj said as it stands, developers will continue to build properties that Malaysians cannot afford.
“There is clearly a mismatch here,” he told CNA.
Last Friday, Finance Minister Lim Guan Eng announced in his budget speech that foreigners will be allowed to purchase apartments or condominium units priced at RM600,000 (US$143,000) and above, having reduced the threshold from RM1 million.
The new threshold was proposed to overcome property overhang, he explained in a statement on Sunday, with unsold condominium and apartment units amounting to RM8.3 billion as of second quarter of 2019.
Mr Lim stressed that the measure would only apply to existing unsold units in urban areas – instead of new projects that have not been launched – and would only be implemented for a year.
Criticising the new threshold, Mr Selvaraj said properties in Malaysia would then be well within the reach of foreigners whose home currencies are stronger than ringgit, such as the Singaporeans.
“At S$200,000, the properties are cheaper than their Housing and Development Board flats.
“We become cheap homes for them. This also applies to Hong Kong buyers,” he said.
LOCAL CONSUMERS SHOULD BE PRIORITISED: FOMCA
Mr Selvaraj stressed that the underlying problem in the property market in Malaysia is that Malaysians could not afford to purchase the units offered by the developers.
The homes remained unsold simply because Malaysians cannot afford them.
“These homes are way beyond the reach of most Malaysians,” he said.
Referencing a study by Khazanah Research Institute, Mr Selvaraj said a median house price is 4.4 times the median annual household income in Malaysia.
An affordable home market is when the median house price is three times the annual household income, he added.
“It is ridiculous to say that no one is buying. The government and developers should take affordability into consideration,” he said.
It is the government’s responsibility to regulate the property market to ensure that the homes are affordable, he stressed.
Mr Selvaraj said an affordable home, according to Malaysia's central bank, should be priced at RM242,000, and yet only 25 per cent of the new housing launches in 2016 were priced below RM250,000.
"There was a gross oversupply of houses above RM500,000 and under-supply of houses below RM250,000.
"No wonder the mismatch between demand and supply," he said.
Mr Selvaraj expressed his worries that local consumers would be sidelined when the focus is on selling properties to foreigners.
NEW THRESHOLD WILL CLEAR UNSOLD UNITS
Meanwhile, the lower threshold spelt good news for developers and property agents in the country.
Real Estate and Housing Developers Association (REHDA) president Soam Heng Choon told CNA that developers believed it would reduce unsold units in urban cities.
“This is good, because this issue has been prevailing. If this new move can effectively resolve the matter, then why not?” he said.
Ms Angie Wong, who specialises in properties in central Kuala Lumpur, said lowering the threshold is a good move to digest the unsold units in the market.
She expects most of the unsold units to be snapped up by the end of the year.
“We have to look at the bigger picture. At the moment, there are insufficient funds to maintain (residential) buildings and this will make the cityscapes look bad,” she said.
Malaysia My Second Home (MM2H) consultant Florence Chin said while reducing the threshold may bring down the number of unsold units in certain areas, luxury properties should not be blamed as the culprits of property overhang.
“It is just like Hermes and Louis Vuitton. These brands have their own target market, similarly for homes that Tan Sris and Datuk Seris would be interested in and can afford,” she said, referring to the affluent people in the society.
READ: No citizenship for foreign home buyers under Malaysia My Second Home programme says Wan Azizah
STATES TO DECIDE THEIR RESPECTIVE THRESHOLD
Amid backlash over the new threshold, the Housing and Local Government Ministry said it was not part of the decision making process.
Minister Zuraida Kamaruddin said each state would decide on its respective threshold for foreigners to buy high-rise units.
There should not be a blanket rule on the matter, as the statistics in a state like Penang would be different from that in Kedah or Johor, she added.