Call for monetary incentives to boost take-up

The dismal outlook of the global economy and the adverse impact on the people’s sentiment is expected to further weigh down on the performance of the local economy and the various business sectors. The storm from the US financial crisis is still wreaking havoc across the continents with no end in sight.

As with most businesses, property sales have taken a severe beating, with property companies reporting sales drop of between 60% and 70% in the last few months. The near-term outlook for the property sector is likely to remain weak and industry players are expecting to see a prolonged slow demand in the coming months.

With more bad news of massive retrenchments around the globe, especially among multinational corporations, sentiment will continue to remain sluggish and buying decisions will be further put on hold.

The market has not bottomed out yet and any signs of recovery can only be seen around the third quarter of this year at the earliest.

With such sluggish outlook, industry players will continue to delay their project launches to avoid been caught in a low take-up situation.

During the current challenging times, it is safer for developers to be realistic and prudent with their project launches. Instead of moving into huge greenfield developments in uncharted territories, it will be better to consider smaller projects in established markets with fast turnaround time as the risk is lower. The fast completion of the projects will ensure smoother cash flow for the companies.

Developers with expertise for fast project turnaround and have strong branding advantage will be well sought after by landowners to enter into joint ventures to steer new developments.

As demand for high-end residential properties has eased substantially, industry players should look into building more affordably-priced houses within well planned and secure enclaves. Although these houses will have smaller built-up and land areas, the quality in the workmanship and materials used should not be compromised.

To promote greater interest in house purchase and give a boost to the industry, it will be worthwhile for the Government to consider providing a RM10,000 grant to first-time house buyers of property priced below RM300,000.

According to FIABCI Malaysia president Datuk Richard Fong, although the incentive will only cost the Government RM100mil if a total of 10,000 such grants were given out, it will be able to raise sales of RM2.5bil for the whole industry (based on average house price of RM250,000). This will be a much needed shot in the arm for the housing industry during the current sluggish market scenario.

Although the high unbilled sales recorded by property companies in 2007 will cushion them from turning into the red and tide them over this year and early 2010, earnings beyond that period, especially in 2011, will be severely impacted if sales do not pick up later this year.

With so much uncertainty still pulling sentiments down, any monetary incentives for buyers will go a long way to give a boost to the market.

Angie Ng is deputy news editor of The Star and she believes a helping hand from the Government for first time house buyers will help ease their burden during the current challenging times.

By The Star (by Angie Ng)