KUALA LUMPUR: A prominent economist has suggested that the government allow the market to adjust on its own instead of intervening in the property overhang by lowering the price threshold for foreigners to buy houses.
Speaking to reporters after a forum at Universiti Malaya here yesterday, Muhammed Abdul Khalid acknowledged the need to reduce the property overhang in the country but said a mismatch remains between supply and demand.
He said developers build too many high-end houses, adding that the reduction in threshold from RM1 million to RM600,000 would only clear unsold homes for the “well-to-do”.
When questioned, he said it “felt, looked, and smelled” like a bailout for developers.
“It’s better to allow the market to adjust itself, which means the only rational thing is for developers to lower their prices to make (unsold units) affordable for Malaysians.
“When you can’t sell at the current price, the rational thing to do is to reduce the price,” he said.
Khalid, who is Prime Minister Dr Mahathir Mohamad’s economic adviser, said the government should only intervene in the property market to build more affordable homes for the lower- and middle-income group.
Real Estate and Housing Developers Association president Soam Heng Choon recently defended the government’s decision, saying it would help developers release unsold houses and reinvest in affordable housing.
His comments came as consumer groups voiced concern over the move, fearing it would lead to an increase in property prices and the construction of homes which foreigners could afford but not locals.
The properties covered under the lower threshold are limited to high-rise stratified properties in George Town, Kuala Lumpur, Johor Bahru and some cities in Selangor.
Housing and Local Government Minister Zuraida Kamaruddin had said the reduction in threshold was put forward by the finance ministry, not hers.
Meanwhile, Khalid said the government was developing guidelines on remunerations for government-linked companies (GLCs).
“Data from the government shows that we (Malaysian companies) reward employees much less than other countries,” he said.
“We only reward certain employees better, especially CEOs who get multiple times what the average worker does.
“It is better to reward lower income workers because it is better for the economy. They spend, which benefits the economy, compared to overpaid CEOs who either save or spend it overseas,” he said after the forum titled “National Budget Dissection”.
He said there was a limit to how much the government could change in the private sector although it could do more in GLCs.
He added that the new guidelines would address this issue, voicing hope that they would set an example for the private sector as well.