Selangor freezes approval of new serviced apartments, SOHOs and SOVOs

PETALING JAYA: The Selangor government has frozen the approval of new property projects involving serviced apartments, small office home offices (SOHOs) and small office versatile offices (SOVOs) for six months amid the gloomy outlook plaguing the sector.
The Real Estate and Housing Developers' Association Malaysia (Rehda), in a letter dated March 7, informed its Selangor members of this development after receiving a notice from the Selangor Housing and Property Board (LPHS).
"LPHS issued a letter informing that the state has decided to freeze the approval for all applications of serviced apartments/SOHO/SOVO submitted after Jan 1, 2016 for a period of six months, pending the issuance of new planning guidelines for such developments," said Rehda Selangor chairman Datuk Khor Chap Jen in the letter.
When contacted by SunBiz, Rehda confirmed that the letter had been sent out to its members in Selangor. However, the association was unable to immediately respond to queries raised as it will only hold a meeting tomorrow to discuss the issue.
Freezing of property development projects is not new in Malaysia. The Johor government in December 2014 rejected applications for serviced apartments due to oversupply. A few SOHO projects in Penang were frozen due to their unclear status – whether they were commercial or residential properties.
Property experts lauded the Selangor government's move to halt such developments in view of the current challenging times in the property sector.
Malaysian Institute of Estate Agents immediate past president Siva Shanker even opined that the state government should have done this two years ago.
"In the last few years, there have been a lot of apartments and condominiums being built and sold. That sector of the market is clearly oversupplied and the market started to feel the pinch last year.
"All those units will come into the market about the same time and it is going to create a glut, especially during a market downturn, the glut will be a double whammy," he said.
Siva said the SOHO and SOVO segment is most severely affected by the oversupply and it will have the most effect during an economic downturn.
"The quantum of this segment is large enough and it has the power to drag other things down," he noted.
According to statistics compiled by the National Property Information Centre, Selangor had 25,811 units of serviced apartments yet to be sold in the third quarter of 2015, with an incoming supply of 32,866 units. Figures for SOHOs and SOVOs were not immediately available.
A property analyst who declined to be quoted, however, said the ban should not be applied across the board as the supply and demand dynamic won't be the same for different areas.
"Normally SOHOs, SOVOs and serviced apartments attract more investors, that could be one of the reasons for the state government to impose such a measure. But certain segments of serviced apartments are really needed. If you constrain the supply further, when the demand returns, you'll push prices up," he said.
Meanwhile, Siva pointed out that most of the serviced apartments in the country are not up to industry standard.
"Many of these units have been sold and marketed as serviced apartments because of the commercial title. Many of them don't really have service. Serviced apartments are equivalent to hotels, you should have services like a lobby, concierge and room service," he said.