KUALA LUMPUR (Jan 11): The government’s decision to freeze approvals for luxury property developments does not go in the right direction, according to Institute for Democracy and Economic Affairs (IDEAS) Senior Fellow Dr Carmelo Ferlito.

The government directive effective Nov 1, 2017 temporarily stops development of shopping malls, commercial complexes and condos valued above RM1 million until excess supply is cleared.

In a statement today, Ferlito however said this raises several concerns where the government is directly interfering with the market and lacks consideration of ramifications in adopting such a policy.

He said such a policy was an excessive demonstration of government powers to suppress the free market.

“Even if the burst of the Malaysian property bubble seems unavoidable, the proposed solution does not go in the right direction.

“The emerging of unsold properties is just the final symptom of a process.

“Government intervention at this stage would only impede the readjustment phase that is necessary for the property market to discover how to be consistent with the present economic system,” Ferlito said.

The peculiar nature of luxury products makes them less sensitive to cyclical fluctuations, and such a measure might generate panic among small investors, accelerating and aggravating the pace of the crisis, he added.

“What seems advisable, on the other side, is an information campaign, oriented to create awareness about the present property market conditions, in particular among those people who got involved in the bubble, without proper finance knowledge,” Ferlito said.

First published in The Edge Markets, on January 11, 2018.