KUALA LUMPUR, Nov 25 —The Najib Administration shrugged off today mounting speculation of an eventual property bubble in the country, claiming that despite figures showing otherwise, property prices in Malaysia had only surged by an overall of 3.3 per cent in the last decade.
Deputy Housing and Local Government Minister Datuk Seri Lajim Ukin told the Dewan Rakyat today that between 2000 and 2010, Malaysia’s property prices had not increased exponentially unlike what has been claimed by other parties, and maintaining that the country’s property prices were still the cheapest if compared to other Asian nations.
“Although in some hotspots there was an increase in prices but overall in Malaysia, there was only a 3.3 per cent increase, compared to other countries in Asia.
“In Singapore, it is 38.18 per cent, in Hong Kong 12.78 per cent and in Taiwan, 8.57 per cent.
“Therefore, the property prices in Malaysia is still the cheapest,” he said.
His declaration, made earlier today during Question Time, had invited flak from the opposition backbenchers in the House who stood up to rebut.
Khalid Samad (PAS-Shah Alam) interjected, arguing that the 3.3 per cent figure was inaccurate.
In response Lajim insisted on his figure and pointed out that it was accurate as it was a statistic from the ruling government.
“We are the government. Our statistic is right. The opposition is wrong,” he said.
Lajim was earlier responding to a question from Dr Dzulkefly Ahmad (PAS-Kuala Selangor) who had asked for concrete actions from the government in averting the phenomenon of a likely property bubble especially in certain “hotspot” locations but at the same time being fair to genuine first-time home buyers.
In his response, Lajim said that the government constantly monitored the real estate market to prevent such a phenomenon.
“The ministry works together with various agencies like the valuation and property services department, Finance Ministry and Bank Negara Malaysia to ensure that all Malaysians can afford to own homes.
“We have fixed a ceiling price for low cost homes to enable those earning below RM2,500 to be homeowners,” he said.
In a press conference later this afternoon, Dzulkefly insisted that according to the Property Overhang report by the National Property Informational Center for the third quarter of last year had shown that while a glut was emerging, prices of residential property had actually surged by a whopping 35 per cent in the past year alone.
“This is far above the income growth of the country and gives rise to concerns that the market is fast becoming unsustainable,” he said.
He noted that the report had shown that in the third quarter of last year, there was an overhang of 20,286 residential, 5,450 shops and 619 industrial units worth a whopping RM5.3 billion.
Of the 6,401 new residential units launched, he added, only 20.2 per cent had found buyers.
“If the RM5.3 billion overhang failed to deter the enthusiasm of the National Economic Model planners, let us consider what is in the pipeline,” he said.
Dzulkefly noted that the Finance Ministry had also reported another 44,954 residential, 4,605 shops and 794 industrial units were under construction as of the third quarter while projects approved but yet to be implemented comprised another 14,993 residential, 1,011 shops and 872 industrial units.
“The massive overhang constitutes not just a financial burden to the developers and their financiers, most of whom are financial institutions, but is also a waste of resources, or much worse, contrary to the 40 per cent carbon emission reduction as voiced by the Prime Minister in Copenhagen,” he said.
Also in Napic’s report, Dzulkefly pointed out that unsold properties in Malaysia had risen to 22.6 per cent of new launches in the second quarter of this year, from 19.5 per cent in the fourth quarter of last year.
For Kuala Lumpur, he added, unsold properties rose to 16.1 per cent from 15.8 per cent, while for Selangor, it rose to 14.6 per cent from 12.4 per cent.
“Checks on developments completed this year also show that vacancy rates remain at 50 per cent or higher,” he said.
Despite the surge in prices, Dzulkefly said, economic returns continued to face decline, thus contributing towards distorting the economy and plunging the country deeper into a “frightening” economic bubble.
Additionally, he also pointed to the ballooning household debt of Malaysians, comprising mainly household mortgages, car loans and personal financing like credit cards and debit cards, which stood at an all time high of RM560 billion as at August 31 thus year, as according to Bank Negara’s figures.
More fightening to note, Dzulkefly said, was that those facing personal debt problems were largely youths aged between 30 and 40 years old.
“Actually, some individuals start to have repayment issues when they are even younger because many of them do not have salaries that commensurate with their lifestyles. The problems start to snowball when they hit their 30s,” he said.
Dzulkefly also continued to warn of an impending property bubble and the likely costly deflation of such a bubble, similar to what happened in the aftermath of the 1997 Asian Financial Crisis.
“Since Malaysians tend to have short memories and have a penchant for the denial syndrome, it is pertinent to remind our political leaders and planners of the costly deflation og the property bubble.
“When the property bubble burst, the banking system was left with RM51.8 billion worth of non-performing loans, forcing the government of Tun Dr Mahathir Mohamad to form Danaharta Bhd to assume the NPLs and Danamodal to help recapitalise the banks,” he said.
Resulting from this move, said Dzulkefly, Danaharta had to assume NPLs worth over RM50 billion and had overnight become the country’s largest real estate owner with assets valued at RM3.63 billion while Danamodal had to inject RM11.7 billion to recapitalise banks.
“Going by the orgy or real estate developments in recent years, it is clear that both the regulators and the developers have forgotten the lessons from the crisis or have not learnt anything. That is both worrying and extremely regrettable,” he said.