PETALING JAYA: The current state of the property sector is the result of many long-trending unresolved issues which were not dealt with at an earlier stage, says an economist.
Socio-Economic Research Centre executive director Lee Heng Guie said: “This is why we have an overhang and oversupply situation today.”
He said there is a need to look at demand and supply factors in greater detail.
Secondly, there is an obvious impasse between developers and banking and lending institutions.
He was speaking at the annual developers conference CEO Series: Surviving the Turbulence and World of Disruptions organised by the Real Estate & Housing Developers’ Association (Rehda) Institute yesterday.
“Why is Rehda telling banks to lend more when banks are saying they are lending enough?
“Rehda can go down to the micro level instead, ” he said.
Lee said loan impairment is already creeping up, as confirmed by the central bank last week. This means that people are beginning to feel stressed about paying back their loans.
He is bearish on the sector.
The property sector is part of the construction sector and if the property sector is stressed, and if nothing is done to stabilise it, it will pull down the construction sector, according to Lee.
On the overall economy, he said the global environment is becoming increasingly compressed.
Interest rates are low and yet there is no confidence to borrow because people are “uneasy”.
“Maybe this time around, there is limitation for the central bank to do more, which means the government needs to work harder in other policy intervention, ” he said while delivering his paper
“Reaching for the levers for enhancement in the Malaysian Economy by Realigning Priorities”.
“Does the government have enough policy tools to avert a financial crisis or global recession? If there is a bigger shock, you may not escape the fate of the recession and this is a big dilemma for central banks, including Bank Negara.
“So, the government has to step in with more policy tools because you cannot ask the central bank to continue to cut interest rates, ” Lee said.
He said the domestic economy is running on one leg – private consumption. He said consumer spending would be dampened if sentiment continues to be poor. Hence, the government has to step in with more policy tools instead of relying on the central bank.
Some money will flow into speculative elements if more risks are taken, he added.
Developer Sunway Group said there are structural issues within the overall domestic economy which must be resolved in areas like education and productivity levels which are affecting salary levels and youth unemployment.
Managing director Sarena Cheah said there are a lot of things corporate citizens like Sunway Group can do, but the government must step in when it comes to policies which involve structural issues.
She said the needed structural changes in education and employment would help to steer the overall economy, and by extension, the property development sector.
Rehda Malaysia deputy president Datuk Khor Chap Jen, the moderator of one of the sessions on global diversification, said it may be easier to do business outside Malaysia in certain locations because some countries may be more transparent.
“Some countries do not have much property overhang and there are reasons for this, ” he said, adding that real structural reforms are needed.
“The government really has to step in. The real estate industry and its issues are an extension of other factors in the larger economy, ” he said.
“I have not met a developer who is doing well this year. So, we are in challenging times, ” Khor said.
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