April 4, 2017
Recollections & Reflections – A weekly column by Aziz Hassan
IT is one of the most critical sectors in any country’s economy and one which provides something that every adult eventually would like to own.
Some economists, in fact, insist that the measure of a truly successful government is the extent to which it can provide homes for the people.
That prices of residential properties have been shooting through the roof since recent years is beyond dispute, with the increase in many instances hardly a consequence of economic factors.
Worse is when prices escalate although there is an obvious over supply and properties remain unsold for some time.
In one area about 10 kilometres from the Kuala Lumpur city centre, prices of medium and high cost apartments increased by about 350 per cent and 150 per cent in less than eight years despite having no new developments that would trigger such an increase.
Real estate agents will simply say it’s the market price but the economic numbers just do not add up.
Part of the answers could perhaps be found in the findings of a survey by the Khazanah Research Institute made public in November 2014 which stated that Malaysian developers enjoyed a higher profit margin of 21 per cent compared to that taken by those in the United States, United Kingdom and Thailand.
In terms of median income, Malaysian home prices were 5.5 times the annual median income when the affordable level was three times. This means that from this perspective, prices here were higher than those in Ireland and even Singapore.
Further, research in nine states showed that despite a decline in the cost of labour, materials, machineries and equipment in 2011 and 2012, prices of homes continued to rise.
Then there is the issue of affordability which people like to quote in their statements.
If the findings by the institute could not be disputed it simply means that a person earning a fixed salary of RM6,000 monthly will not be able to pay for most of the homes we see advertised for sale in the cities and major towns.
The alternative is to look for a home away from the urban centres but this may mean having to rely on public transport.
Unfortunately, the kind of public transportation system with good connectivity is only available in the Klang Valley and that too still limited in terms of its reach.
News reports on the institute’s findings didn’t say on whose table the findings will end up.
The institute also recommended that a multi-agency national housing survey be undertaken but nothing else has been heard about this since.
Those who track the property development sector are aware that for years most developers seemed reluctant to adopt practices that have proved to work in the west, like the build now sell later concept and also the use of building systems in construction that can reduce construction time by about 30 per cent and also lower the cost by a similar percentage. Most remain reluctant until today.
Why the reluctance is unclear and why the government has not been seen to be doing more to convince developers to see the benefits is hard to understand.
It is for all the above reasons that the initiative by Johor’s Sultan Ibrahim Sultan Iskandar to recently to reveal a housing scheme like never before is god-sent.
The lucky ones in the state will have a chance to own a freehold landed property with a built-up of close to a 1,000 sq. ft. with three bedrooms for no more than RM100,000.
Not only is the price that low. Buyers need to pay a deposit of only RM1, with the loan from Bank Rakyat covering a 100 per cent of the price.
The sultan did say in a press interview that he may extend the scheme to other states. People elsewhere in the country must be praying hard for this to happen.
But as usual and not surprisingly, there will always be people who mock such an initiative and that one of them should be a former senior editor and federal minister is the pits.