THE oversupply of properties is the result of developers building unsuitable ones, especially high-priced houses because of their higher profit margins. Is it right to give incentives to bail out developers who build the wrong type of houses?
Policies should never be made to reward developers who strive to achieve high profit margins by building unsuitable high-priced properties and then have the government as a safety net in helping sell these properties.
Bailing out developers with unfavourable policies is wrong. The government should instead be sending out a signal that it will not tolerate developers who build inappropriate high-priced properties instead of affordable ones.
If these developers run the risk of bankruptcy, so be it. Why should the government be responsible for any losses?
In fact, these developers should be penalised with a vacancy tax where any property that is left vacant and unsold for a certain amount of time is charged a penalty based on a percentage of gross selling price. The higher the selling price of the property, the higher the tax quantum.
This vacancy tax is imposed when a property is completed but remains unsold for a certain period of time. Imposing a timeline and a tax will give the developer a sense of urgency to sell their inventory.
Such measures will force developers with high-priced properties to lower their prices in order to sell them more easily.
It is a win-win situation which leads to lower property prices and improve developers’ cash flow although the developer may incur a loss if development cost is higher than selling price.
In addition, properties will be put into the hands of locals who will benefit instead of foreigners and speculators.
Any property that is priced low enough can surely be sold. At property auctions, there is always a reserve price. If there are no bids, then the reserve price is lowered by 10 per cent in the next auction.
The lowering of price process continues until there is a bid and sale. Eventually every property is sold.
NG SHU TSUNG