News: Economist Urge Developers To Rent Out Unsold Stock

Oct 30, 2019

With the current property overhang situation in Malaysia, Carmelo Ferlito, an economist with the Institute for Democracy and Economic Affairs (IDEAS), has urged developers to be landlords and start renting out their unsold units. 

This comes as developers are left with no choice but to deal with it given that many properties on the market are way beyond the reach of Malaysians, reported Free Malaysia Today.

Read here: Renting out your property? Here’s what you need to consider first. 

Bank Negara Malaysia (BNM) recently said that home prices in the country are “seriously unaffordable” by international standards, in which a home is considered affordable if its price is not more than three times the annual household income.

BNM Financial Surveillance Department Director Qaiser Iskandar Anwarudin noted that a newly launched home carries an average price of RM417,262 while the nationwide maximum affordable house price stands at RM282,000.

Ferlito believes that the housing glut is not necessarily a result of greed but of poor decision-making. As such, developers should rethink their strategies, he said.

He does not agree with calls for the easing of lending rules as this could have an impact on the banking sector and household debt.

“We want to avoid a subprime-style crisis,” said Ferlito, referring to the 2008 US subprime crisis, which was triggered by an increase in foreclosures as borrowers could no longer afford to pay their loans.

According to him, developers could wait for the property market to pick up again by offering their properties under rent-to-own schemes. However, he does not expect prices to drop into the so-called affordable category of RM300,000.

“For the unsold stock, probably one solution is for the developers to become landlords, to start renting out the unsold units and at least get some cash flow in.”

 

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