This article first appeared in The Edge Malaysia Weekly on July 30, 2018 - August 5, 2018

Tan Sri Dr Zeti Akhtar Aziz’s appointment as chairman of Sime Darby Property Bhd has piqued the interest of property and banking circles. It is probably unprecedented for a former central banker — who used to ensure there were no price excesses in the markets — to lead a company in a sector that thrives on some form of speculative buying.

Sime Darby Property, Malaysia’s third largest developer with a market capitalisation of RM9.5 billion, has an overhang of unsold properties, but it is not the only one. All developers have had to deal with this situation in the past two years, and most analysts do not think the worst is over.

Indeed, it was Bank Negara Malaysia under Zeti that tightened lending for property purchases in 2014 to curb the speculative buying that had been driving up prices since 2010. The central bank was worried about household debt, which had risen to 88.6% of gross domestic product in 2016.

The problem, however, is not a lack of demand or an oversupply of properties. It is just that homes have become unaffordable to many because incomes have not risen in tandem with house prices and many people, especially young Malaysians, cannot get bank financing. We cannot, at the stroke of a pen, increase everyone’s wages without a concomitant rise in productivity. At the same time, it would be unwise to force banks to lend to those who may have problems servicing their loans, which will put both individuals and banks at risk.

What is needed is an out-of-the-box solution to get out of the gridlock the industry is in. Now that Zeti is seated on the opposite side of the table, perhaps she can find one.

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