The Malaysian dream of OWNING A HOUSE

The constantly soaring house prices in recent years have not only affected the people's ability to buy houses and causing endless speculation, but have also affected the healthy development of the real estate industry in the long run. Therefore, the government has proposed some measures in the Budget 2014 to curb the problem as expected. The measures include increasing the Real Property Gain Tax (RPGT) to 30% for properties disposed of within holding period of up to three years; increasing the minimum price of property that can be purchased by foreigners from RM500,000 to RM1 million; and prohibiting developers from implementing projects with Developer Interest Bearing Scheme (DIBS).

Compared to the maximum 20% of RPGT for properties disposed of within holding period of up to two years in 2007, and the current 10% to 15% of RPGT for properties disposed of within holding period of two to five years, the increased RPGT and minimum price of property that can be purchased by foreigners, as well as other measures are believed to be able to effectively curb real estate speculation. Cooling down house prices could also prevent bubble crisis for the industry. According to the survey results of some industry information centres, there is a significant phenomenon in which the supply of new real estates is much more than the demand, not only in Selangor and Johor, but also in the city centre of Kuala Lumpur. If they do not control the prices timely, once a real estate bubble emerges, the country's economy is bound to suffer.

Not that easy to curb speculation, unless the bull is already tired

The measures to curb housing speculation are easier said than done. The government has continuously introduced different measures over the past ten years but is still unable to lower house prices. Instead, the prices have kept soaring and today, they have exceeded the people's affordable level. In the recent five years, house prices soared particularly in urban areas like Kuala Lumpur and Johor Bahru. A double-storey house originally priced at RM300,000 has now been speculated to RM800,000 to RM1 million. The people's income increment rates are unable to catch up with the soaring rate of house prices. Ordinary people's ability to purchase a house has been weakening, pulling them farther and farther from the dream of owning a house. Therefore, it is in an urgent need to curb the problem as soaring house prices will inevitably resulted in a society in which the rich will become richer and the poor becomes poorer. The bigger the wealth gap, the more difficult it will be to achieve social stability.

Although members of the general public are holding expectations for the measures, many still prefer to buy second-hand houses. The substantial increase in the RPGT might cause some house owners to delay the sale and result in worsening shortage of second-hand houses. In such a case, increasing the RPGT might worsen the situation. As for increasing the minimum price of properties that can be purchased by foreigners, some industry players are worried that the measures might discourage foreign investors and for us, we are worried that developers might build more luxury houses to meet foreign buyers' market. In fact, luxury houses costing at least a million ringgit has already been very common in the market. Take Johor Bahru as instance, Singaporeans have actively invested in real estates there, causing house prices to unstoppably soar and local people can hardly afford a house.

To assist ordinary people achieve their dream of owning a house, in addition to curb soaring house prices problem, the government also gives incentives to private developers and through the Perbadanan Perumahan Rakyat 1Malaysia (PR1MA) and Syarikat Perumahan Negara Berhad (SPNB), more affordable and mid-priced houses will be built. These houses priced between RM45,000 to RM170,000 should be able to assist many middle and low income earners, as well as young people to achieve their dreams. However, these publicly-funded housing programmes must be equipped with basic facilities and a certain level of quality. In addition, public transportation system must be enhanced so that home buyers can purchase cheaper houses in remote areas. It is believed to be able to help stabilising house prices.

mysinchew