Vacancy tax: Long overdue

By Zaidi Isham Ismail

Take a night drive in Kuala Lumpur and the skyline will be dotted with high rise condominiums and office towers.

But after a couple of spins and tens of kilometers, the ugly truth will emerge - most of these buildings are empty.

These units are mostly unsold either due to poor demand or the buyers have failed to secure bank loans.

And the scenario is not just unique in Kuala Lumpur.

Almost all major cities from Penang to Puteri Harbour in Johor share the same fate - an oversupply situation compared to demand.

Thus it was a relief when Housing and Local Government Minister Zuraida Kamaruddin said last week that property developers of especially highrise condominiums or offices need to pay the vacant tax by next year.

This is to compel developers to plan and forecast carefully on the property market demand and supply situation and not simply launch projects at their whims and fancy.

The authorities must do something to curtail the greed and the lack of future planning by some highrise or even landed developers.

It is due to their lack of market study that has led to a glut of properties at present.

The property overhang is dire and can drag the sector down and dent the country's overall economic growth.

However, not all agree with the vacancy tax.

Property consultancy firm Knight Frank said that it is not fair to penalise just the developers as some state governments are equally to blame.

Meanwhile, Speedrent chief executive officer Wong Whei Meng reportedly said that the vacancy tax is not a good idea as it might heat up the property market which is already cooling down.

"What the government should do is to put a stop on the construction of high rise buildings in areas which have low demand," said Wong.

Regardless of what they say, the fact of the matter is Malaysia has a serious property overhang situation.

There is simply too many condominiums compared to those who can actually afford them.

And don't bank on the foreign buyers either such as those who participate in the Malaysia My Second Home programme.

They are not coming here to buy property due to COVID-19.

A slow property market is not good for the economy as it drags the country's growth lower.

Property overhang also incur holding costs for the developers thus dragging down their profitability.

This is not good for corporate Malaysia and draconian measures such as the vacancy tax must be slapped on the developer.

The tax is not new and is already implemented in Australia and Singapore.

The move by the ministry is long overdue but it is a much needed panacea for the country's property sector which has been in the doldrums for quite some time now. - DagangNews.com

The writer is former NST Business assistant editor.