PUTRAJAYA TOO SOFT: Beware of housing bubble after out-of-control price rise

The rapid and massive housing price hikes in the country over the past few years have left middle and low-income earners dumbfounded. As house prices have gone beyond the affordability of the general public, "I can't afford a house" has become the frustrating cry of many wage earners and young people.

The sustaining housing price hikes mean that wage earners have to work hard and save money for a few years more and postpone their house buying plan. They have no choice but to accept the fact. Urban Well-being, Housing and Local Government Minister Datuk Abdul Rahman Dahlan has called on the people, particularly young people in urban areas, to change their mindset of "I'm now 25 years old and it is time to own a house", and consider renting a room or a house first.

However, in some big cities like Kuala Lumpur, rentals could be high and in the long run, it is afraid to be the main consideration of those who do not own a house whether renting is really more cost-effective than buying a house with investment potential.

In fact, for most young people, regardless of how prices rise, owning a house will always be a very important part of their life planning. It is a traditional concept, particularly among the Chinese.

Questions that have always plagued those wishing to buy a house is, have the current house prices reached the top limit? When will the prices fall? When would it be the best time to buy a house? Would there be a housing bubble?

These are matters of debate. Some people believe that house prices have started to decline after its heyday, while some do not share the same thought. Some in the market said, when everyone thinks that house prices will fall, the prices will never fall.

Five or six years ago, people can still find terrace houses costing RM150,000 to RM250,000 in Kuala Lumpur and Johor Baru. But, today, an ordinary terrace house in Kuala Lumpur and Johor Baru costs RM500,000 to RM700,000. The house prices in some smarter areas of Kuala Lumpur have even gone up by three times!

Despite some government policies, such as increasing property transfer tax, raising the threshold of foreign property ownership and levying new real property gains tax which have more or less slowed price hikes resulted from excessive speculation, house prices remain high. Even if house prices fall in the future, it is impossible to return to the prices five years ago.

For instance, the situation in Johor Baru has recently slowed down and there are also signs of oversupply. However, house prices remain high and it seems that a new phenomenon has emerged in the housing market, namely prices surge when the demand is high, but prices do not fall when the demand is low. In fact, the housing market has not entered a downturn.

As house prices remain high in urban areas, the urban well-being, housing and local government minister encourages the people to stay in rural areas as house prices in rural areas can still be considered reasonable. However, as the minister said, one of the important conditions to convince the people that it is better to stay in rural areas is, the government must first enhance the public transport system connecting urban and rural areas. Otherwise, many people will still choose to stay in urban areas where it is near to their workplaces.

In any case, the warnings and suggestions made by some economic experts are worthy of our attention. They opine that the house prices in some urban areas have indeed gone excessively in recent years and it is necessary for the government to adopt some measures to curb uncontrolled price hikes, to ensure the stability of property prices and prevent the repetition of real estate bubble, so that public discontent can be reduced. – mysinchew.com