Finance Minister II: Recent developments freeze to eliminate non-serious players in property industry

KUALA LUMPUR (Nov 28): Putrajaya's recent freeze on new developments of shopping malls, offices, serviced apartments and condominiums priced above RM1 million is intended to eliminate property players who are "not serious" from the industry as they will "kill the serious developers", said Finance Minister II Datuk Seri Johari Abdul Ghani.

Specifically, these players do not have property development as their core business, he said at the Real Estate and Housing Developers' Association (Rehda) Malaysia's Annual Dinner 2017 tonight.

"We don't want these property players that come from the manufacturing or trading industry [for example], simply because they have a few million in cash and they start buying land and start trying to become developers.

"These are not serious developers, but if they keep coming in like this, they will kill the serious developers in the industry. So we want the people who come into the industry [to be] very focused on the property industry," he added.

Johari noted that some of these wannabe-developers are building high-end residential projects that are not sustainable and therefore are causing overhang in segments such as Small-office Home-offices (SoHos), serviced apartments and studios.

Hence, the freeze is intended to eliminate non-committal parties from the property industry, he said.

Meanwhile, Johari noted the difficulty of developing residential projects in prime areas and said that his ministry will speak to Prime Minister Datuk Seri Najib Razak to grant approvals to high-end residential projects in selected locations, such as Kuala Lumpur City Centre, where land cost is high.

"But for offices and shopping malls, please take a break," he said, adding that shopping malls and office spaces are in excess supply currently.

Newly completed projects have reported more than 70% vacancy rates as they face difficulty in attracting tenants, despite giving generous initial rental free periods, he said.

Separately, he mentioned that the government will consider reducing compliance costs for building affordable housing, in response to concerns raised by Rehda.

The association had repeatedly argued that developing affordable and low-cost housing is financially not feasible, given the rising compliance costs, development charges and land prices, among other factors.