The Real Estate and Housing Developers’ Association Malaysia (REHDA), in a letter dated 7 March 2016, informed its Selangor members of this development after receiving a notice from the Selangor Housing and Property Board (LPHS).
“LPHS issued a letter informing that the state has decided to freeze the approval for all applications of service apartments, SoHos and SoVos submitted after 1 January 2016 for a period of 6 months, pending the issuance of new planning guidelines for such developments,” said REHDA Selangor chairman Datuk Khor Chap Jen in the letter.
When contacted by SunBiz, REHDA confirmed that the letter had been sent out to its members in Selangor. However, the association was unable to immediately respond to queries raised as it will only hold a meeting tomorrow to discuss the issue.
Freezing of property development projects is not new in Malaysia. The Johor government in December 2014 rejected applications for serviced apartments due to oversupply. A few SoHo projects in Penang were frozen due to their unclear status – whether they were commercial or residential properties.
Property experts lauded the Selangor government’s move to halt such developments in view of the current challenging times in the property sector.
Malaysian Institute of Estate Agents (MIEA) immediate past president Siva Shanker even opined that the state government should have done this two years ago.
“In the last few years, there have been a lot of apartments and condominiums being built and sold. That sector of the market is clearly oversupplied and the market started to feel the pinch last year.
“All those units will come into the market about the same time and it is going to create a glut, especially during a market downturn, the glut will be a double whammy,” he said.
Siva said the SoHo and SoVo segments are most severely affected by the oversupply and it will have the most effect during an economic downturn.
“The quantum of this segment is large enough and it has the power to drag other things down,” he noted.
According to statistics compiled by the National Property Information Centre (NAPIC) Selangor had 25,811 units of serviced apartments yet to be sold in the third quarter of 2015, with an incoming supply of 32,866 units. Figures for SoHos and SoVos were not immediately available.
UPDATE: Selangor had 4,302 units of service apartment yet to be sold in the fourth quarter of 2015, with an incoming supply of 33,647 units. As for SoHo, Selangor had 2,731 units unsold with an incoming supply of 9,623 units in 4Q15. Planned supply (projects with building plan approval but yet to be constructed) for serviced apartment and SoHo stood at 7,692 units and 3,446 units respectively.
A property analyst who declined to be quoted, however, said the ban should not be applied across the board as the supply and demand dynamic won’t be the same for different areas.
“Normally SoHos, SoVos and service apartments attract more investors, that could be one of the reasons for the state government to impose such a measure. But certain segments of service apartments are really needed. If you constrain the supply further, when the demand returns, you’ll push prices up,” he said.
Meanwhile, Siva pointed out that most of the service apartments in the country are not up to industry standard.
“Many of these units have been sold and marketed as serviced apartments because of the commercial title. Many of them don’t really have service. Serviced apartments are equivalent to hotels, you should have services like a lobby, concierge and room service,” he said.
News Source: SunBiz, The Sun Daily, 11 March 2016