Cheaper homes Vs cheaper cars

In one of the desperate effort to be popular amongst the voters especially the young and now restless lot in the last round before the 13GE, Opposition Leader Anwar Ibrahim threw the notion if they win, no import taxes and AP’s for cars. Cars would be cheaper and more affordable to many more Malaysians.

The retail prices of cars keep rising. Its due to steady rising cost of imported cars and shrinking of value of exchange rates. In the quick snapshot, that notion makes a lot of sense for individuals especially the young people. They are more vibrant, energetic and dynamic in their everyday lifestyle. Disparaged by the hassle of public transportation and the peer pressure of an upcoming lifestyle of a metropolitan dweller, wheels are one of the deemed essential in maintaining their ‘reputation’.

Anwar maximized the popular notion in the last salvo of making his politics still relevant, especially when a lot of him and his fraudulent political antics are being uncovered and exposed straight in his face.

However, the more growing concern for the more matured and strategic-minded Malaysians should be the notion of ‘cheaper homes’ versus ‘cheaper cars’.

Over 2,000 new residential property launches in Klang Valley and Penang

Everywhere in Malaysia, retail price of new homes and value of existing properties have been on the upbeat trend. The average house price increase for 2011 is recorded at 6.1% per annum. A survey conducted shown that 62% of respondent believe that house price index would increase within the next six months of 2012. Around metropolitan and suburban of cities such as Kuala Lumpur, Penang, Johor Bahru and Seremban, the steady increase of value of new and existing properties does not commensurate the increase in average household income.

Around many new property developments launched within Petaling Jaya or Johor Bahru for example, retail price of a new two story linked house is doubled within seven or eight years ago. It is an across the board phenomena. Even true for matured neighbourhoods. Yours Truly bought into a 25 years old township ten years ago, which was ten times what the retail price was when it was first occupied in 1977. Today, the same property is being valued for a ‘forced sale’ rate by the bank at more than double to what Yours Truly paid in 2002.

A typical campaign for a newly launched two story house outside Kajang

After reaching a certain level in their professional career or narrowing within any organizational pyramid structure, it is unlikely for many to be earning three times as a full time employee compared to what they earned ten years ago. The Valuation and Property Services Department (JPPH) found at the end of 2011, the average house price now is calculated at RM 220,000.00.

That is about 11 times more than the GDP per capita which is RM 20, 552.00 and almost 5 times average salary for a Malaysian worker, which is at RM 48,000.00 per annum. For someone or a couple to buy a RM 220,000.00 property, the average mortgage is RM 1,800.00 per month or RM 21,600.00. That is 45% of an average Malaysian gross salary.

In simple terms, an average worker in Malaysia cannot afford to buy a home. Especially if they are cari makan in one the metropolitan cities. As Malaysians, they are trapped in the middle class dilemma. They cannot benefit from government subsidized low and lower middle cost housing projects. However, they cannot afford the houses in the open market.

Typical yet to be occupied house for sale

No doubt part of Prime Minister Dato’ Seri Mohd. Najib Tun Razak administration’s Economic Transformation Plan is to provide affordable homes. Hence, schemes are being introduced such as under Syarikat Perumahan Negara Bhd (SPNB) and Perumahan 1 Malaysia Sdn Bhd (PR1MA) to look into ways to address the demand for affordable homes. However, this effort is inadequate.

Some State Government Economic Development  Corporations (SEDC) get lands from the State Government and develop for massive affordable housing schemes, which include homes for the under privileged and poor. It is effective in some states but in some states where land is very valuable such as DAP controlled Penang and PKR controlled Selangor, this effort is no longer active and they are more interested to pander to lucrative property development proposals. State Government Agencies in these states are more interested to privatise or hive off  lands to private property developers for lucrative and high end luxury projects.

Average of 60% price increase index on building materials, across the board

All of these are not withstanding the fact that the Federal Government must do more to ensure that building and construction materials remain cheap enough so that the effort to translate the ‘affordable housing’ for Malaysians is achieved. An uptrend growth of an average of 60% price increase index on building materials, across the board within eight years is a push fact0r for cost of home building.

However, the most important factor in determining the value of any property development project or proposal is the land. Unchecked, land could be a commodity that is being abused especially by market speculators.

The disparity of housing prices in very stiff and unadaptive to the market demands. IT is simply because, they are interested to sell and fair value

Opposition such as Anwar Ibrahim and his band-of-economists should make this ‘home ownership in-affordability’ as agenda. It is more meaningful than trying to canvass for votes from younger or first time Malaysian voters. Especially in Selangor, the average house price increase index is the highest in the country, standing at 8.9%.

They should combat all elements that make homeownership an expensive feat. Particularly, in Selangor where the house speculators market is very rampant. This is the single most destructive element in why houses are getting more and more expensive through a short space of time.

Transactions for home ownership for Malaysia is estimated in the neighbourhood of 350,000. This strongly suggest that home speculators market is very much strong. As Gordon Gekko described it in the second Wall Street, “Speculators are mother of all evil!”.

RPGT from 2011 onwards

Opposition should be constructive in demanding Federal Government on initiatives. In the last Bajet 2012 presented on 7 October 2011, Real Property Gains Tax (RPGT) was increased. However, it is hardly an effective tool in combatting the house speculator practices. If Selangor Pakatan Rakyat Government could make those who benefitted the Bumiputra discount to pay  back the difference when they dispose their property in Selangor, then they should demand for stiffer RPGT rates should be introduced for the first five years of home ownership.

As a measure against property speculators especially the much needed homes for all walks of the society across the board, RPGT should be capped up to 50% in the five years of disposal of the asset. Especially for second, third and so forth homes where the family unit already occupying a particular home and the disposal is not about the family upgrading to a better dwelling.

They should also demand that any second onwards of properties acquired which mortgage have not been settled to only be allowed a maximum of 60% housing loan. It automatically means that the second or more home buyers would have to fork the initial 40% in cash. Any properties that is acquired before the property developer surrendered to the buyer should be disallowed for any sub-sales or transfer to third party.

Housing price index according to categories

Affordable house ownership is something young Malaysians need to be aspired and look forward to, more than  a cheaper car. Anwar as the ‘One Ringgit Economic Adviser’ for Selangor should be sincere to tell the newly graduates and young people in the workforce that unlike cars which depreciate through time, property gains value.

Unless the Opposition under former Finance Minister (1991-1998) is insincere in their champion for the plight of average Malaysians under the ‘Buku Jingga’. Then again, when Anwar Ibrahim was the Finance Minister, negligently allowed with knowledge that the property market was at its epitome of speculative boom to a point of seriously affecting the banking industry. Some of these bankers and property developers were his cronies.

Needless to say, Opposition must do ‘constructive politicking’ to ensure that the Malaysian consumers all own affordable homes.

*Updated 1000pm

Published in: on August 28, 2012 at 16:52  Comments (17)