Category: Swhengtee News Published: Monday, 24 September 2012 08:00
National Budget 2013 May Have The Wrong Focus
Housing Prices Are Not Expensive In Malaysia
Unlike most other Asian countries, Malaysian homes are not as expensive comparatively and remain one of the lowest in the region. “Compare cities Kuala Lumpur to Singapore, Jakarta, Bangkok, Hong Kong and even Ho Chi Minh City, the average ratio of income to prices make Malaysian property investments affordable and attractive” says Gavin Tee, Founding President of Swhengtee International Real Estate Investors Club
He adds, “While the reports of property prices in Asia indicate that they have risen on the whole due to globalization, the country’s rising prices are lower comparatively and from that perspective, housing prices are actually competitive.
“Of course if one were to scrutinize every country, there will be pockets of development where prices are at premium and Malaysia is no different due to demand and salary spread. Only selected areas are expensive and compared to property available in the market, this is actually a small percentage. Most housing prices start just under RM400K and if you factor in basic living costs, owning a house should be quite affordable without being too thrifty”.
Transportation Costs Are Expensive, Not Housing
This reasoning takes a different turn however when factors like affordability comes into play. Malaysians spend a big portion of their income on transportation costs alone every month. It is not uncommon to see a family of two, husband and wife, with 2 cars each, who work in the city, splurging over RM3000 per month on hire-purchase repayments, petrol, parking and toll costs!
“That is a big reduction in disposable income for the family where so much money go out to transportation, rather than being invested in housing. This is unhealthy and improper. Where a single person is able to spend an average of RM1500 per month, this same money is good enough to be comfortably invested in property valued at RM300K!
The average citizen of Malaysia face this problem of transportation expenditure every month leaving them little room to move for housing investments, and so it is from there that they say housing prices in the country are very expensive.
The Government Should Make Policies That Help the Average Citizen Directly
“There are two ways at least where the Government may help ease the citizens’ ability to own housing property. The first is to reduce car prices no matter the brand and the other is to improve and increase public transportation where people may freely reach anywhere in the city by bus, train or other public transportation modes”, suggests Gavin.
“What the Government needs is to put out a budget that emphasizes on building a good infrastructure that eases the burden of its citizen. At this moment, people are forced to stay close to the city or at city’s edge because of work and this demand drives up prices further in that sector. A good infrastructure which includes a comprehensive transportation system frees people to choose accommodation away from city centre”.
A more immediate or temporarily measurement is to build more affordable house in city areas. He states, “Federal and State Government have plenty of land in Johor Bahru, Kota Kinabalu, Melaka, Kuala Lumpur and Petaling Jaya, etc, whereby many mega projects, sprawling commercial development and high-end housing are being proposed to be built. The Government should propose in Budget 2013 to build affordable houses to solve the immediate problems as these will provide lower cost housing to medium-income families and also reduce travelling expenses for younger working executives”.
Plenty of Affordable Homes
However, Gavin stresses that, “More than 90% of the housing prices at Rawang, Seremban and Klang for example, are still affordable to the average wage earner, and that comes with a more relaxed quality of life. If the infrastructure is smooth and efficient, people who work within the city do not need to stay at expensive areas at the city limits and commute instead. As it is, there are still a lot of housing available to be taken up just 30km radius from city centre”.
He adds, “A good infrastructure eases the burden of the citizens and reduces congestion in the city as well, so the idea is not to increase taxes nor tightening belts, but to improve connectivity”.
It is interesting to note that where property prices are high in foreign countries, their public transportation network are efficient and ticket costs low.
Expensive Price Perception Due To Commercial Rentals
“The price increase in general is largely contributed by the increase in commercial property demand and price”. Gavin stresses, “Commercial properties are the main force in pushing property prices up but they do not need as much measures and control policies because commercial properties always adjust themselves in the market through business profitability.”
He adds, “The rise of commercial prices will not affect the affordability of housing properties. Unlike Residential property, commercial properties are sensitive to business viability and condition. Commercial property prices will adjust and respond immediately to the rise or drop of rent.
The public are mixed-up with the hike of commercial property and fear that “Housing is expensive”, which is not the actual situation. In fact, the costs of high-end condominiums in KL’s city centre, Mont Kiara and Johor Bahru are ‘way too low’ compared to other types of properties outside these areas and even worse still if comparing with countries like Singapore City where it is 10 times higher.”
However, Gavin stresses, “This does not apply to residential properties which must take a different view. This perception that residential property prices are rising at the same rate as commercial properties is inaccurate because commercial property prices are sensitive to business viability and conditions, where else residential properties do not follow the same process”.
Malaysians Have Plenty of Choices
While he advocates better property market potential, he also understands that not everyone is able to buy property immediately and those who cannot afford it have the alternative to rent, “Sometimes, we need to weigh options and if they can find a choice accommodation lower than the 4.5% bank loan interest rate of owning a property, then it can be the wise decision of that moment”. Rental rates remain low in most parts of the country and this easily allows Malaysians to find accommodation.
Young Malaysians for example should not feel pressured by family or society to over-stretch beyond their current means by buying expensive property. “The Malaysian residential property market is so diverse with new projects coming up everywhere, all the time, there is no fear that they will lose out by renting if they are not ready” advices Gavin.
He concludes, “The point is that there are plenty of options for young Malaysians when it comes to property and owning a house is not a too much burden, however our Government ought to look at the real problems at hand; improve infrastructure and that itself will solve a few issues for the long term”.