TODAY’S property market can be summed up in two words – overhang and overpriced. But one man aims to change that. The Valuation and Property Services Department’s (JPPH) newly-appointed director-general Mohd Khairudin Abdul Halim sees data as a potential solution to regulate, monitor and strengthen the property sector, eliminating idle resources and regulating the pricing mechanism.
The first key step to achieving this is via a cross ministerial collaboration between the National Housing Department (NHD), under the Ministry of Housing and Local Government (MHLG) and National Property Information Centre (Napic), a department in JPPH which is under the purview of the Ministry of Finance, to develop a synchronised data platform called the Housing Integrated Management System.
Mohd Khairudin tells FocusM in an interview, that several “meetings, discussions and workshops have been held by the committee, comprising the two departments, to synergise the needs and requirements of both departments into the development of this system”.
Essentially, the platform will see the two parties working together to develop one single integrated system on housing, into which all data and information are channelled. Users can then extract and analyse the data based on one mutual source.
At present, MHLG and Napic collect and collate separate sets of data resulting in two sets of property data in the market for the use of stakeholders.
“Once this platform is completed, it will be a more accurate reflection of the true position of the property industry. This is very important, especially to policyholders and housing providers to understand the demand, supply and pricing mechanism,” he explains.
Khairudin points out that current issues such as insufficient affordable housing, a rapidly growing overhang in residential as well as commercial sectors and rising unsold units in new launches are causing market inefficiencies resulting in lengthy holding period and high liabilities among developers.
He draws attention to the need for an integrated and accurate set of information to enable stakeholders to make more informed decisions in terms of policies and rules that need to be set up to sustain the market and for approval of projects.
“If the government wants to approve a project, it must know if it is feasible. It needs accurate data related to the project, what are the existing projects by that developer, what is the existing demand for such projects, they need to know about the surrounding area and all this information should be from one reliable source,” he says.
“Otherwise, we end up with unsold property and this leads to an overhang.”
Khairudin is confident that with “everything in place”, plans will go accordingly and there will be potential buyers for a development, reducing developer holding period.
“Developers need to sell their property immediately and easily, otherwise they bear the liability costs of holding these unsold units,” he points out.
The new DG’s vision is to address all these problems so Malaysia will have a situation whereby all market activity will commence in a planned and regulated manner. He aims to set a precedent of developing one set of synchronised data that will better reflect the actual situation in the market.
When data has the answers
“We are now in a digital era and data is undoubtedly powerful but demand-driven data is certainly lacking in a way. With demand-driven data, we would be able to make better and relevant decisions to ensure the sustainability of the property market,” he opines.
Khairudin informs that at present JPPH has transaction data that can be used as baseline data to see the demand trends.
“For example, we can gauge which house type, price range and area have the highest demand. Some may say these data are historical in nature but at least we learn from history to more accurately chart the future,” he notes.
At present, Khairudin points out that there is a lag time of about six months before transactions are captured in the system. He attributes this to the process of home purchase which entails several steps including registering with the land office, which ultimately confirms a transaction has gone through.
In Korea, he shares, the system is more sophisticated, allowing transactions to be captured instantly and viewed by users.
Moving forward, Khairudin says JPPH has engaged with the Department of Statistics Malaysia (DOSM) to have the relevant questions relating to home ownership and home prospects included in the survey when they conduct the National Census 2020. This will provide a wider and more comprehensive coverage of data to work on, enabling the development of a demand pattern for housing in the country.
However, he points out that this will not provide an indication of price direction as it will not collect data on the price points of each housing scheme.
“Ideally if we can get all these data, it will be good, but it is also important to remember that you cannot equate valuation with sales price,” he points out.
Khairudin stresses that there is a significant difference between sales and market price, which is based on valuation, as sales price includes components and features besides the house price such as rebates, offers or lawyer’s fees and stamp duty.
“A valuer has to be careful when providing a valuation as there are severe repercussions of this sales price. If the property goes for liquidation, these extras cannot be claimed,” he says.
Khairudin is also the president of the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEP). This situation is particularly prevalent for condominiums that were purchased under the Developer Interest Bearing Scheme (DIBS), but are unable to fetch an equivalent price in the sub-sale or auction market now. Buyers are facing up to 30%-40% loss in value, resulting in dissatisfaction and even potential bankruptcy when they are unable to cover the loan price difference.
Khairudin informs that developers, through the Real Estate and Housing Developers’ Association (Rehda) have been informed of this situation and advised to ensure the sales price is reflective of the market price.
And then there’s the House Price Index
Unfortunately, all the frills and extras built into the pricing mechanism making up the launch price of homes have set the House Price Index (HPI) on a misaligned path, resulting in outliers.
According to Khairudin, Napic is aware of these outliers and efforts are underway to ensure it will not affect the analysis of the property market.
“Napic is really looking at the analysis of the outliers and how to filter them and get rid of all these factors. Only then can we get the true picture of the market value or worth of a particular property,” he assures.
How will this be accomplished? Khairudin notes that to cut the frills and extras maiming the data, the government policy needs to come into play. Developers must be engaged as should all the stakeholders from government agencies to valuation departments and this issue must be addressed head on.
“Otherwise developers will do what they want and valuation will do what they need to do and it will not solve anything,” he stresses.
Khairudin believes that policymakers play a pivotal role in ensuring that the agencies and departments concerned with house suppliers and approvals of all development have a “clear view of the horizon”.
“Monitoring should begin at the development order stage. A proper monitoring system and clear policies must be put in place to ensure things are more organised,” he points out.
He also draws attention to one of Napic’s fundamental roles, which is to collect data on finished, incoming and planned supply of property in all sub-sectors. With such data available, trends should be observed and development planned accordingly.
JPPH comprises three main divisions which represent the three key activities of the department. These are valuation via JPPH HQ and branches, training via National Institute of Valuation or INSPEN and Napic, which deals with data and statistics on property.
“By right, controls should be implemented to prevent overbuilding in a sector that is already reporting surplus. For example, if the office space in an area, say the central business district, is in oversupply and there is a high number of incoming supply and planned supply, perhaps the parties involved should re-look at plans to develop more of such projects,” he notes.
“The signals and indicators are all there. The Unsold Property Enquiry System Malaysia (UPESM) allows users to drill down and see what’s overbuilt in a municipality. It needs to be used effectively and its signals heeded by developers, authorities, policymakers and industry players as a whole.”
Khairudin observes that ideally, with all these statistics available, a trend that shows a slow take-up rate of high-end condominiums, for instance, should trigger controls for further development of such property and shift the focus and resources instead to what is needed by the public. – Feb 4, 2020
The future of valuation
As he steps into his role of heading the Valuation and Property Services Department, Mohd Khairudin Abdul Halim aspires to elevate the capabilities of the department’s 260 valuers in all its 39 branches, to adapt to the digital economy and Industry 4.0 changes and challenges.
The department is gearing up to roll out its New Valuation Information Systems (NVIS) programme by mid-year, which will reorganise the system of how to go about doing valuation. Once the system goes live, all information pertaining to valuation will be available online and easily accessible via phone or tablet.
Khairudin is also spearheading efforts to set up a committee with the Securities Commission (SC) to look into the valuation standards pertaining to the handling of cases that go to the SC.
“The committee will look at the provisions of the existing Malaysian Valuation Standards (MVS) to determine aspects that need to be included from the SC side, in terms of synchronising the standards and working hand-in-hand with professional valuers,” he says.
While property valuation forms the bulk of JPPH’s responsibilities, another up-and-coming area for the department is the valuation of plant and machinery and intangible assets.
“Valuation of plant and machinery is an area I am personally very passionate about, while valuing intangible assets is the way forward, as it is a growing field,” he tells FocusM.
Khairudin’s early exposure to valuation of plant and machinery came when he received extensive training in the discipline in New Zealand. Today, JPPH with Khairudin’s expertise has collaborated with an institution in Saudi Arabia to provide teaching, syllabus and curriculum structure to facilitate training of valuers in the discipline of plant and machinery there.
JPPH has embarked on a valuation exercise of the KLIA 1 and klia2. This exercise entails a thorough valuation of all assets, inclusive of runways, aerobridges and even the lighting system and baggage handling system.
It also inked an MoU with Rail Assets Corporation to conduct a valuation of its assets which include locomotives, sleepers and railway lines, among others. These projects are aimed at keeping a structured record of the value of these assets, which are technical and highly specialised, requiring a certain skillset to value.
The valuation of intangible assets sees the department conducting valuation of Malaysia’s tourism assets such as caves, forest reserves, rivers and even marine life. This will give the government a clearer picture of the existing value of these assets and resource allocation required for its preservation.
Khairudin says via the Business Valuation Association of Malaysia (BVAM), efforts are underway to equip more officers with business valuation qualification to undertake valuation of intangible assets.
He has also made it his mission to weed out illegal estate agents amidst mounting complaints from the Malaysia Institute of Estate Agents (MIEA). In his capacity as the president of the Board of Valuers, Appraisers, Estate Agents and Property Managers, Khairudin calls on the public to be cautious of agents who do not bear the real estate negotiator (REN) tag as they will not be protected in the event of problems arising from the transaction.