Conditions that can derail growth in the property sector

In my last article, I touched on two reports that offered a very positive outlook for the property market in Malaysia and its neighbours in this region.

According to the Malaysian Property Market Report 2011, the property sector recorded a significant growth in the five preceding years, and the value of property transacted and the number of transactions also rose substantially in 2011, compared with the previous year.

And according to the Asia Property Market Sentiment Report 2012, Malaysians were generally quite positive about the property market, with more than half expressing a desire to acquire new property in the next six to 12 months.

Sadly, these upbeat sentiments could all change as a result of recent events and some prevailing conditions if they are allowed to continue unabated.

The most recent is, of course, the Bersih 3.0 rally and the ensuing violence that have certainly raised a lot of concerns, at the very least, about conditions in this country.

It may still be too soon to realise the full impact of the April 28 event. Nevertheless, the experience of our northern neighbour should give us some invaluable lessons on how a prolonged open show of dissent and how the authorities deal with such incidents can have an adverse impact.

The Red Shirts and Yellow Shirts rallies that brought Bangkok to a standstill for months in 2010 and which eventually caused the downfall of Prime Minister Abhisit Vejjajiva, should offer some invaluable insights.

Of course we have to concede that the Bersih 3.0 rally was on a much smaller scale, and it lasted only for a day, so the effects would be dramatically different.

But incidents such as Bersih and the Anti-Lynas protest also bring to light how people power causes can sometimes be hijacked and be diverted from the real issue.

In the property sector, for instance, it is not uncommon to see groups banding together to object to one thing or another in an upcoming project even if all conditions are met.

Things are aggravated further by a lack of clear-cut guidelines on what is and is not allowed in a project. When guidelines are not clear, city or local council officials are inclined to make decisions based on political expediency. In such instances, investors or developers usually end up with the short end of the stick.

Then there is the personal safety issue. A day before Bersih, 12-year-old schoolboy Nayati Shamelin Moodliar was abducted while he was walking to school from his home in Mont Kiara, Kuala Lumpur.

Thankfully, the boy was released unharmed just over a week later upon payment of a ransom. All the same, the incident has certainly raised concerns about the level of security in the Mont Kiara area.

Indeed, the police may tout facts and figures on how much the crime index has dropped over the years, and how safe the streets are now. But the reality is that parents are still worried and anxious about letting their children out of the house, and out of sight.

Another urban centre where personal security is an issue is Johor Baru. We may not like it that the Singaporeans complaint about rampant carjacking when they visit Johor, but we cannot deny that these things happen.

Apart from these, we are constantly being tested by natural disasters that rock this region. While Malaysia is not located in the Ring of Fire, the 2004 tsunami and occasional tremors only show that we are not exactly a safe distance from a major disaster.

Then, there are the man-made calamities floods and landslides caused by irresponsible and uncontrolled interference in the natural landscape.

What, you may wonder, do all these have to do with property' Put simply, disturbances of any kind public show of dissent, criminal activities or natural disasters are not good for the economy and, by extension, for the property market.

As mentioned earlier, we have done fairly well over the past few years. The economy has been growing at a steady pace, and property was selling well.

Many homebuyers have seen their investments record substantial increases in value in the secondary market, and are still looking forward to bigger gains.

However, this feel-good factor can very easily be reversed by any number of developments groups taking the law into their own hands, street crimes, another big natural disaster or worse a man-made calamity.

How well are we dealing with all these conditions' Are the authorities making the right moves' Do we continue to pander to the loudest voice, never mind what is right or wrong'

Value, location and design are no longer the only considerations when we look for a new home to buy. The security situation has also become a prime consideration.

We also now have to check if our new home is located in a flood-prone area, or if we are likely to feel an earth tremor.

The property sector is already facing so many challenges.

Recently, Bank Negara introduced stricter lending guidelines that substantially reduced the quantum of loan an individual could qualify for. That essentially means that fewer people will be able to get loans and among those who still qualify, the amount they can get will be much lower.

The impact will be significant and it may take some time before the market adjusts to the new lending regiment.

At the same time, costs to the developer continue to rise. Land prices, particularly in urban areas, are going up. The cost of building materials have been increasing over the past few years and is expected to rise further. The cost of labour has also risen.

Anymore uncertainty in the political front, or concerns about personal safety, will only make things worse. We cannot afford to continue on this road.

Teh Lip Kim is the MD of SDB Properties Sdn Bhd, a lifestyle property company. Bouquets and brickbats are welcomed. Send by e-mail to md@sdb.com.my.

By The Star