Monday, June 16, 2014

Malaysian housing developers ignoring freebie guidelines

There are dangers in this. As developers do not follow the guidelines, it feels like they are getting desperate when comes to selling their launches. I did come across rebates by developers but I thought that it was them being creative in bypassing the laws, but never did I thought that they do not bother about abiding the laws itself.

The below article, is from Chang Kim Loong (The Star as highlighted to me) post as a warning sign that properties are cooling down but hopefully not to the tune of collapse. I can see that some of the properties in the secondary market are softening, but unless the government are clear on this, we do not know to how much.

Malaysian housing developers ignoring freebie guidelines
Malaysia home prices 13062014
SOME seven months after more cooling measures were introduced, home prices continue to inch up as developers prefer to offer rebates than price their products lower - PHOTO: BLOOMBERG
SOME seven months after more cooling measures were introduced, home prices continue to inch up as developers prefer to offer rebates than price their products lower.
Many appear to be not abiding by guidelines on "freebies". Some banks are also still basing their financing on the sales-and-purchase agreement (SPA) price rather than net selling price, a survey by the national House Buyers Association (HBA) has found.
On a more positive note, except for one small developer, the projects surveyed by HBA volunteers did not offer the easy financing developer interest bearing scheme (Dibs), which the government had banned from this year.
Brochures and other materials gathered by volunteers at various property fairs, however, indicate that many developers - even the bigger ones - are ignoring the guideline on so-called freebies.
"The guideline effectively bans all freebies from January unless they are converted in monetary terms and buyers given the choice of whether to deduct them from the house price," said HBA secretary-general Chang Kim Loong.
Some 20 large and established developers were caught flouting the guidelines as were 10 smaller or newer players. "If the big boys don't follow the rules, you can't expect the smaller ones to," he observed, adding that details of HBA's findings have been conveyed to the Housing Ministry.
Perhaps because Dibs is no longer available as an inducement, the practice of rebates has intensified compared to previous years.
In some cases, purchasers continue to get away with not putting down any cash upfront. Based on a rebate of a tenth (they typically range from 5-10 per cent) of the SPA price, a buyer only needs to apply for 90 per cent financing from the panel banks. But because legal fees on the sales and loan agreements are thrown in, the buyer can effectively buy a home without an initial down payment.
Using an established developer which had implemented such a practice as an example, Mr Chang said that its properties in a recent launch were sold at above RM700,000 (S$273,000) when the true value after rebates and freebies is closer to RM600,000. "Would it not be better to launch at RM600,000 and ask buyers to pay the required down payment of a tenth instead of artificially hiking up the price to RM700,000 and then hood-winking house buyers by giving rebates and freebies?"
While developers - and perhaps homeowners - prefer to see property values rise, new buyers are saddled with higher prices. And more affordable housing becomes a distant dream for many.
Developers maintain that prices of new homes will not dip because of a number of factors including the cut in electricity and fuel subsidies, as well as the introduction of a minimum wage, all of which have pushed up costs.
Meanwhile, the HBA also urged banks to stop abetting developers by offering easy loans. Mr Chang said that while the housing ministry has been very cooperative, the HBA would like to see greater enforcement and the "empowering of information" via the ministry's website. It should provide a list of errant developers so that house buyers can make more informed choices.


panaceaasia said...

Why are hotshot analysts recommending buys on property developers when the residential and commercial property sectors are saturated?

This is scary.

Khairie said...

Felicity, the article was written based on Chang Kim Loong's (HBA honorary sec-gen) column in StarBiz weekly early June. (Although Straits Times did call Chang further to clarify things.)

Bn911 said...

Hi Felicity, mind to get your opinion on Jobstreet, will u continue to hold it?

As at the date of this announcement, the Phase 2 review is still ongoing and is not anticipated to be completed by 1 July 2014. Accordingly, without prejudice to JobStreet's rights under the JobStreet SSA, JobStreet and SEEK Asia Investments Pte Ltd are in discussions to agree on an extension to the Long Stop Date under the JobStreet SSA and an adjustment to the consideration given the improved operational performance of JobStreet since a valuation of MYR1,730 million was agreed.

felicity said...

Yes, still holding on to it.