‘Govt should get ready for property bubble to burst’

KUALA LUMPUR: The government needs to be ready for the property bubble to burst and respond with market-oriented solutions, said Institute for Democracy and Economic Affairs (Ideas) senior fellow Dr Carmelo Ferlito.

In a statement on its website yesterday, Ideas said Ferlito, in a new policy paper, had advised the government to downplay its role in the property market by reducing the number of government agencies and encouraging the private sector to get involved in the affordable housing market.

He said the high involvement of government agencies in the affordable housing market risked crowding out private initiatives and preventing restructuring from taking place.

“It is important to let the bubble burst. Too much credit will only delay the bursting, keeping prices artificially high and putting at risk the financial solvency of buyers.

“Without credit support, the crisis will happen faster, and force capital restructuring and prices to move downwards.”

He said the government should boost people’s financial literacy and encourage saving and possibilities offered by the rental market.

He added that the government might want to open and ease up regulations in the property market to foreigners who possessed regular working visas and were paying taxes to help the industry.

In his paper titled “Affordable Housing and Cyclical Fluctuations: The Malaysian Property Market”, he said the evolution of the Malaysian property market over the past decade had led to a large number of unsold properties in the high-end segment and partially unsatisfied demand for affordable housing.

He said the focus on the highend segment was justified by the strong demand and was, therefore, natural for investment to expand in the sector.

“However, it appears that unexploited profit opportunities are disappearing and a capital allocation restructuring appears necessary.”