It may also worsen the crisis in the property sector, Institute for Democracy and Economic Affairs (IDEAS) senior fellow Carmelo Ferlito said in a statement.
He said this move was a direct interference by the government in the market.
Ferlito said it was not a solution in the right direction, adding that it impeded the sector from going through a readjustment phase in order to adapt to the present economic system.
“Such a measure might generate panic among small investors, accelerating and aggravating the pace of the crisis,” he was quoted as saying.
He said the move also does not consider the ramifications of adopting such a policy.
“It is an excessive demonstration of government powers to suppress the free market.”
Second Finance Minister Johari Abdul Ghani had announced the freeze on approvals for shopping malls, commercial complexes and condominiums valued above RM1 million in a New Straits Times report on Nov 19.
He said the decision had been made by the cabinet following a Bank Negara Malaysia (BNM) report warning that unsold residential properties were at a decade-high level.
He also said it was a temporary move until excess supply in the market was cleared.
Ferlito said luxury products were less sensitive to cyclical fluctuations and hence halting approval for luxury development was not the right policy.
He said an information campaign to create awareness about present property market conditions seemed advisable.
This was particularly so for people who got involved in the property bubble without proper finance knowledge, he added.
Consultant: Any freeze will have impact on land or property valuation