Build to meet demand
08/04/2003  www. theedge.daily Reminiscences:By Shaik Osman Majid

Finally, the promulgation has been made. Approval for housing developments hereafter will be based on demand that is backed by research, announced Housing and Local Government Minister Datuk Seri Ong Ka Ting on March 27.

The measure is to prevent unsold properties, Ong explained. He has a cogent reason for initiating the move. At the end of last year, 54,265 housing units, valued at RM6.8 billion, remained in the inventory of developers.

Juxtapose this plight of most developers against the marketing strategy of the company that is building the Bandar Utama township and the intrinsic merits of research would be evident. This was reported in the City & Country pullout of The Edge (Issue 439, March 24).

Its cover story tells the astonishing tale of buyers queuing up for nine days before the launch. On offer were 200 two-and-a-half-storey link houses, already built, priced between RM588,000 and RM882,000.
Buyers knew what they wanted and they queued up for their choice lots. For many, the time spent in the queue was well spent as they managed to buy what they wanted. Those who did not obtain their preferred unit walked away. At the end of the day, only 10 units remained unsold.

From its register of 12,000 names, developer Bandar Utama Development Sdn Bhd realised the demand for the type of units it has to build and will have to build in later phases.

The list gives the company the financial profile of its prospective clients. That should explain why the company was able to sell 95 per cent of its units on the first day of the launch of its latest phase.

The buyers were not average income earners. All of them, including those who did not buy, had the money, or at least the capability to raise the finance, to afford the units at market price. In a nutshell, the company knew the demand through surveys it periodically canvassed through the press. It then built units, offering the buyers the houses they would move into.

Most developers, except those who build low and medium-cost houses, however, have little clue about their prospective clients, whether they are young, married or have children. Because they have little market information, they tend to stick to the time-honoured formula of building terraced houses or units in highrise blocks with three or four bedrooms. Their only marketing strategy is puff, extolling the merits of the location, its proximity to schools and detailing existing and planned roads that provide access to town and city centres. They expect their buyers to be all and sundry, as long as they can finance the purchase.
They rarely address the simple question: Who are in the market shopping around for a house? Are they bachelors, married couples or those in their mid-30s with children? What is their preference? Is it a terraced house or a unit in a highrise building?

Bachelors look to buy homes but only if they are in the high-income bracket. Most starting their careers have little choice but to share a rented apartment.

Many newly married couples might be able to afford to buy a house. But what would they do with a three- or four-bedroom unit?

It is obvious, then, that the most common shopper for houses would be couples in their early or mid-30s. This lot is spread over a broad income band. They want a home and their choice would invariably be determined by location.

Location is the other factor, besides research, for Bandar Utama's successful record over the years since it first entered the property market in 1991.

It chose to begin its development opposite the highly developed Tun Taman Dr Ismail in Kuala Lumpur and next to Damansara Utama, Petaling Jaya, both of them townships with the desired infrastructure and easy access through a web of roads to the city centre.

Housing developers who fail to heed this simple principle of marketing suffer. This is evident when one travels on the North-South Expressway. Along both sides of the highway are several abandoned housing projects and unoccupied built-up units, sad and silent sentinels of the ignorance of their developers.
They should have realised that houses built a distance away from the developed towns will not have willing buyers if they find no easy access to their place of work. Most of these projects are not provided with arteries of roads to towns.

Moreover, many of these projects were built without considering the simple fact that a residential area needs the support of a commercial complex that houses basic support services like sundry shops, restaurants, clinics, post offices, banks and so on.

When neither access nor amenities are available, few will buy. This should explain why a large number of units remain unsold in vast developments at places like Lembah Beringin and Bukit Beruntung, near Rawang.

Clearly, the current overhang in residential units should reinforce the need to conduct market surveys to gauge demand, not only from prospective buyers but also their preferred types of homes. Developers should also undertake research on whether the location of their projects will attract enough buyers to justify the investment to build.

This might be an amplification of Ong's statement but the ministry is equally culpable for the housing overhang. It was the authority that granted the initial licence to build each phase of a development. It should have realised that it was approving too many units, many in the wrong places.

Perhaps Ong would like to explain what the National Physical Planning Council, in which all the state planners sit, has done so far. Has it conducted surveys, or does it plan to, on the demand for houses and where the demand is? If not, it should stop wagging its finger at developers.

Shaik Osman Majid is a former teacher and journalist