More people would afford to buy houses if not for the speculation, say property experts.
BUDGET2014
PETALING JAYA: Speculation is the main cause in the price hike of houses, while other causes such as buying of property by foreigners have also contributed to the ever expanding dilemma.
National House Buyers Association (HBA) secretary-general Chang Kim Loong said that if it is not due to speculation, more people would afford to buy houses.
“Speculators have taken advantage of the low stamp duties to accumulate multiple properties,” he said, explaining that speculators manipulate property prices with developers.
Chang also said that a low Real Property Gains Tax (RPGT) has been a reason which has fuelled false demand and excessive speculation.
PAS research centre executive director Dzulkefly Ahmad also admitted that speculation is indeed the main cause of price hike and must be tackled using appropriate measures.
“The announcement made by Bank Negara Malaysia (BNM) governor [Zeti Akhtar Aziz] weeks ago that it would not be introducing any more cooling measures to handle speculation and price hike was met with mixed feelings.
“However, many would believe that measures would ultimately be put in place albeit cautiously so as not to stifle growth because growth is also construction-driven and the construction industry is closely related to the property market.
“Regardless, prices of housing are high and are increasing, so measures are needed to solve the problem,” he said.
Parti Sosialis Malaysia (PSM) national treasurer A Sivarajan also agreed that speculation has been going for far too long.
“The RPGT should be increased to reduce speculation,” he said.
Internal migration
However, a property expert who declined to be named said that an increased RPGT would not affect the demand of houses.
“If they increase it a further 5%, its impact won’t be much. Also, speculation does not happen everywhere as it depends on the location,” he said.
The RPGT was re-introduced in 2010, and the government has been increasing it gradually. In Budget 2013, the government revised the RPGT to 15% from 10% for properties sold within two years and for properties sold between two and five years, the rate was revised to 10% from 5%.
Professor at the Universiti Tun Abdul Razak Graduate School of Business, Barjoyai Bardai meanwhile said that many consumers have taken advantage in buying property, only to sell it back.
“And this in turn might trap low income buyers who have been advised to buy property at the last minute, only to find out that the price then does not go up,” he said.
Although speculation remains a major factor in the increasing price of houses, other factors have contributed in the national problem, too.
The property expert claimed that a higher demand for houses especially in the Klang Valley has contributed to the price hike of houses.
“The price hike is due to internal migration, people from small towns move to the Klang Valley and every year that happens as we have fresh graduates who migrate here, which has led to the higher demand of houses.
“Price of houses also increase because construction costs have likewise increased,” he said.
He also said that buying of properties by foreigners is not the main factor in the increase of property prices.
“We do not have many foreign property buyers. Even in Iskandar (Johor Baru), Singaporeans do not buy the properties there much,” he said.
No comprehensive planning
Sivarajan however disagreed and said that the many foreigners and expatriates buying properties here have led to the cost of the overall market price of houses to increase, citing the Iskandar project.
He also lamented that there is a huge gap between what the working class who struggle with minimum wage can afford and the price of houses.
“The rule of thumb for anyone buying a house is that the repayment cannot be more than a third of what they earn.
“A vast majority of people, those from the bottom 40% who earn between RM1000 to RM1500 can only afford houses around the range of RM40,000. But, there is no decent housing that is below RM100,000,” said Sivarajan who added that the working class lack affordable housing schemes.
“Public housing schemes like the People’s Housing Programme (PPR) are supposed to be transit homes, but we find that people have been staying for more than five years.
“This is because they can only pay rental, there is no way they can afford to buy a house,” he said.
He also opined that there has been no comprehensive planning made by the government from the start.
“Yes, for example, they build low-cost housing at Bukit Beruntung. However, travelling there is near to impossible as there is no public transportation.
“And if the government builds houses below RM100,000, it is out of the reach of the urban poor. This is all the consequence of ill-planning by the government,” he said.
Barjoyai however quipped that the rising price of properties is a natural phenomena in the economic cycle and happens every 10 years, ending when the property market peaks.
Commenting on foreigners buying property here, he admitted that it is more rampant in Johor.
“By allowing them to buy properties here, it will improve our economy as it will broaden the scope of the country’s property market, making it more competitive,” he said.
He also said that as the country is moving towards developed nation status, the migration rate will increase.
“By 2020, 70% of Malaysia’s population will be living in urban areas. Lodging would be a critical problem as the rental would be expensive,” he said.
Commenting on Federal Territories Minister Tengku Adnan Tengku Mansor who said that people should not be buying houses if they cannot afford it, he said: “That’s the right statement, now is not the right time to buy properties.
“People should not be buying beyond their means,” he said.
Also read:
Next: Immediate measures needed to control spike in housing prices
[This is part of a continuing series in the run-up to the Budget 2014 to be tabled by the Finance Minister on Oct 25.]
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