A central authority and a national repository can significantly improve the ability to better distribute, monitor and manage the supply-demand imbalances. Developing a thriving rental market should also be on the agenda to temper the nation’s fixation on home ownership. Another issue that banks should be concerned with is the sizable surplus in commercial property. In contrast to affordable housing, the office and retail markets are in oversupply. In 2016, the vacancy rate for prime office space in the Klang Valley stood at 21.8%, outstripping the regional average of 6.2%1. Monthly rentals of prime office space in Kuala Lumpur are the lowest among regional cities. Over the next few years, the significant incoming supply of large projects is likely to aggravate supply conditions in this segment. Signs of oversupply are also emerging in the retail segment in major urban centres in Malaysia. This can be traced to the abundance of shopping malls. You may be surprised to learn that there are as many as twenty shopping malls just along the 40km stretch of the LDP highway. It is equally astonishing that the prime retail space per capita in cities like Johor, Penang and Kuala Lumpur is actually higher than regional megacities such as Shanghai and Beijing, and also higher income cities such as Singapore and Hong Kong. A significant increase in vacancy rates, and the ensuing price corrections, are risks that the Bank has highlighted as far back as 2013.
This requires banks to have a finger on the pulse of the economy, to closely observe the micro transformations that are taking place, and to keep abreast of future financing opportunities, particularly in new areas of growth. To this end, banks will need to think ahead and begin to invest in developing the organisational capacity to study, distill and generate innovative solutions to effectively and efficiently meet new financing needs. With the development of alternative financing such as crowd funding, P2P, private equity, venture capital, factoring and leasing, it will be imperative for banks to consider how they can complement and support these arrangements more effectively. We are living in interesting times, shaped by forces that bring to the fore contrasts in economic and financial developments. These developments have important implications on how we govern, do business and engage externally. It has never been more important for the banking industry to be more engaged, agile and responsive. I do believe that our banks are well-placed to adapt to changes going forward. It is incumbent on the banking industry to continue to strengthen its foundations and address gaps that may appear through business and economic cycles. Banks cannot be oblivious to the changing tide. Our economic prosperity is very much influenced by the ability of the industry to play its intermediating role effectively.