Where does the money go?


RECENTLY I was offered an easy loan with just 5.8% interest rate after activation of my credit card.

There was no pre-qualified questions asked when the sales personnel approached me through the phone. As I had no intention to get funding, I did not take up the offer.

It is understood that the “attractive” rate was offered to attract potential customers. If there is a delay in repayment eventually, the rate would jump up according to the interest incurred on the credit card outstanding balance, which ranges from 15% to 18% per annum.

When I asked around, I found most of my family members had on at least one if not more occasions being offered an easy loan, credit card balance transfer, personal loan, or other credit facilities via phone calls every month.

This contrasts with what I had heard from friends and peers from the property industry regarding housing loan. There have been complaints about stringent requirements for housing loan application and low approval rate. They have this question in mind – where does the money go?

Their concerns are understandable when I see the home loan approval rates was only hovering around 50% for the past few years. In 2013, the approval rate was at 49.2%, it improved slightly to 52.9% in 2014 but went down to 50.2% in 2015.

According to the group president of the Real Estate and Housing Developers Association (Rehda), Datuk Seri FD Iskandar, rejection rate for affordable housing loan applications was more than 50%, and the strict housing/mortgage lending conditions were denying aspiring owners their first homes.

Based on Rehda’s survey in the second half of 2015, loan rejection was the number one reason for unsold units, and affordable homes top the list.

For example, an individual or family with a combined household income of between RM2,500 and RM10,000 are eligible to apply for PR1MA homes that cost between RM100,000 and RM400,000. However, with loan eligibility based on net income, many with their existing commitments such as car loan or credit card outstanding payment, are not able to secure a loan for an affordable home. This dampens the effort of helping qualified households in owning their first homes.

Looking at the situation, I am puzzled with different treatments given to loan application. At one end, there is an easy access for personal loan and credit card financing. On the other, stringent requirements are imposed on housing loan. It seems like the priority has been given to spending on liability instead of asset.

If we look at it from the business perspective, credit card, personal loan and easy loan offer higher profit margin to the banks with interest rates ranging from 12% to 18%, compared to housing loan interest which is about 4.5% to 5%. This may explain the shift of focus among the banks.

Central bank concerned

Reports show that our household debt stood at an alarming 87.9% of GDP as at end of 2014 – one of the highest in the region. It is comprehensible that Bank Negara is concerned with the situation, and would like to impose responsible lending with housing loan.

However, when we look at the details, residential housing loans accounted for 45.7% of total debt, hire purchase at 16.6%, personal financing stood at 15.7%, non-residential loan was 7.7%, securities at 6.5%, followed by credit cards and other items at 3.9% respectively.

A recent McKinsey Global Institute Report highlighted that in advanced countries, housing loans comprise 74% of total household debt on average. As a country that aspires to be a developed nation by 2020, our 45.7% housing loan component is considered low.

Looking at the above, it is ironic that our authorities and banks are strict on funding a house which is a basic necessity and asset for people, but lenient on car loan, personal loan, credit card and other easy financing with higher interest rate, that tend to encourage the rakyat to overspend on depreciating items.

It is common nowadays to see young adults paying half of their salary for car loan, and people go on extravagant holidays or purchase luxury items which rack up their credit card balance. As such it is not surprising that the number of counselling cases took on by Credit Counselling and Debt Management Agency has also shown a worrying upward trend, with the number of cases leaping by 20,000 from 2013 to 2014. There was an average of about 35,000 counselling cases annually from 2008 to 2014, but that figure rose to approximately 60,000 in 2014.

It is important for the authorities and banks to encourage prudent lending and spending, re-look into high housing loan rejection rate, and consider to tighten lending conditions of other loans, such as personal loan and credit card. These will encourage the rakyat to channel their money into assets instead of liabilities, and improve the financial position of the people and the nation in the future.

By Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He is the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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Mar 12, 2016 Datuk Alan Tong has over 50 years of experience in property development. He is
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Feb 16, 2016 Datuk Alan Tong has over 50 years of experience in property development. He
was the World President of FIABCI International for 2005/2006 .

 

 

 

Penang construction industry in 2016 to stay flat


It is expected to generate RM6.8bil in jobs in 2015

GEORGE TOWN: Penang’s construction industry is expected to stay flat this year with a value of about RM6.8bil, which is almost the same in 2014.

“The RM6.8bil mark is one of the highest in the history of the construction industry in Penang.

“Due to the economic slowdown, it will be difficult to surpass this figure,” said Penang Master Builders and Building Materials Dealers Association president Datuk Lim Kai Seng.

Lim said the bulk of the projects were hotel and mixed development schemes.

PMBBMDA president Datuk Lim Kai Seng: ‘Due to the economic slowdown, it will be difficult to surpass this figure (RM6.8bil).’

“For the first six months of this year, the value of jobs given out reached RM2.68bil for 171 contracts.

“Of that total, some 153 are from the private sector while the remainder are government contracts,” he added.

The value of contracts from the private sector is around RM2.47bil, while government contracts total RM214mil.

The business contracts generated in 2014 was revised to RM6.8bil from RM4.8bil announced previously, after taking into consideration projects tendered out in late 2014.

Lim said that the association was confident that there were at least over RM4bil contracts given out in Penang in the second half of 2015.

These contracts, he said, were for mainly new hotels and mixed integrated developments.

Some of the big projects are from IJM Land Bhd with a gross development value (GDV) of RM486mil, Eco World Development Group Bhd (GDV: RM600mil), Mah Sing Group Bhd (GDV: RM1.005bil), Sunway Bhd (GDV: RM150mil), Ivory Properties Group Bhd (GDV: RM1.156bil) and Ideal Property Group (GDV: RM1.8bil).

Lim pointed out that the construction cost for the projects would come up to about 40% or about RM2bil of the total RM5bil GDV.

“The renovation will cost about 30% or RM600mil of the RM2bil spending for construction works.

“We can expect spending of over RM800mil for construction and renovation works annually for the next three years from these projects alone,” he added.

Lim said the new shopping malls being planned now would also generate about RM3.5bil worth of jobs for the local construction industry over the next five years.

“This means that there will be about RM800mil to RM1bil worth of construction jobs given out in Penang per annum starting from next year,” he said.

These shopping malls include Penang Times Square Phase 3 which will have a net lettable area (NLA) of 230,000 sq ft, City Mall Bayan City (300,000 sq ft), Southbay Plaza (424,000 sq ft), Penang World City (1 million sq ft), Sunshine Tower (2 million sq ft), The Light Waterfront Mall (1 million sq ft), Mall@Southbay City (750,000 sq ft), The Designer Village (400,000 sq ft), Ikea & Ikano Power Centre (NLA not available), and a mall project by Belleview Goup (1.5 million sq ft).

By David Tan The Star

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Save Penang Hill from the greedy


Uphill battle: A hiker passing by a vegetable farm on Penang Hill overlooking Air Itam.

Treasured heritage seems to be losing its charm to illegal farms and development

THE stall at the Air Itam market in Penang is said to offer the best asam laksa in Malaysia.

Rain or shine, it pulls in the crowd.

The ingredients for the dish such as ginger bud (bunga kantan), mint leaves (daun pudina), laksa leaves (daun kesum) and kalamansi limes (limau kasturi) come from Penang Hill, which is less than 200m away.

Farmers who cultivate the land at the hillslope sell their produce at the wet markets on the island.

The fertile hillslope from Air Itam to Paya Terubong is cultivated with vegetables and fruits.

Demand for the produce is so great that farmers are illegally clearing the hillslope to expand their farms.

About 2km from the market along Jalan Paya Terubong, there is a trail leading to a hillslope.

Lately, hikers and mountain bike enthusiasts have been using the trail to reach the 135-year-old Cheng Kon Tse Temple, nestled on the slope of the hill.

Travellers can see vegetable farms and fruit trees on both sides of the trail.

There are nutmeg trees, kalamansi lime trees, papaya and banana trees.

The vegetables include lemon grass, lady fingers and sweet potato.

As one continues walking up, a large swathe of hillslope which had been cleared near the telecommunication towers comes into view.

The bald patch can be seen from the Paya Terubong road below.

The slopes on Penang Hill have been cleared by farmers over the past few decades.

Such illegal hillslope clearing has been raised by environmental groups but there has been no firm action from the authorities.

A former Penang Island City Councillor claimed that he had provided pictures of the clearings to state leaders and that he had also raised the matter with the Consumers Association of Penang and Malaysian Nature Society.

“The press should continue to highlight the issue so that something is done finally,” said the former councillor who did not want to be identified for fear that the farmers might go after him.

“Penang Hill is our heritage. But no one seems to bother,” he said.

Besides Penang Hill, bald patches are also appearing on hills in several parts of the island.

Bukit Relau in Jalan Bukit Gambier has been dubbed “botak hill”.

There is also hill clearance in Bukit Kukus in Paya Terubong and Bukit Laksamana, a water catchment for the Teluk Bahang Dam.

More and more hillslopes are going bald because of developers and contractors who cleared the land without the authorities’ approval.

The clearings are done on weekends and smoke can be seen from far when the trees are burnt.

A large swathe of land has also been cleared at a place referred by hikers as level 45 station.

It should not be difficult to nab the culprits since there are cemented trails all over the hillslopes in Air Itam and Paya Terubong.

When The Star reported on Feb 14 last year that more bald spots could be seen, a state exco member said they had pictures of the illegal activity and that action would be taken against the culprits but till now, no one knows what the action is.

It is troubling that all this is happening under a state government which emphasises on Competency, Accountability and Transparency.

Penang Hill seems to be losing its charm.

Yet, the state government seems to be focused on mega projects and land reclamation.

At a state assembly sitting last month, Chief Minister Lim Guan Eng said the Penang Island City Council was using drones to check on illegal hill clearing and CCTVs would be installed next year to monitor illegal earthworks.

The spate of hill clearings has prompted the Penang Forum, a coalition of public interest NGOs, to hold a forum on Save the Hills of Penang tomorrow.

Hopefully, the outcome from the event will reach the right ears.

There is a compelling need to save the hills from greedy farmers and developers.

Comment by K. Suthakdar

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Malaysian property market is still ‘sparkling’


Away from the city: Developers are now turning to more affordable areas outside the Klang Valley like Negri Sembilan.

Continuing an examination of the property sector post Budget 2016, Sunday Star discovers that, despite high prices, investors remain upbeat because demand for property continues to outstrip supply many times over.

INVESTOR Ahyat Ishak says for the rakyat, property prices are “beyond annoying”.

They see all these new properties springing up – but, he points out, these are not “rumah mampu milik” (affordable houses) and are only “rumah mampu tengok” (houses you can look at but not own) for most of us because of the high prices.

“Property has become something of a bad taste in the mouth and people have become negative. And the market feels negative even though property prices continue to rise,” he says.

Although there is this “huge disconnect” between what’s being built and what people can buy, many developers continue to “defy gravity”.

“They do business as usual and offer properties beyond afforda­bility,” says Ahyat, who runs workshops for potential property investors and is the author of the 2013 bestseller, The Strategic Property Investor.

Dr Daniele Gambero, a marketing and strategic consultant for developers, says over the past few years developers have been over-delivering high-end, high-cost properties.

Towards the end of last year, however, they started developing more affordable areas further out from Kuala Lumpur, such as south, east and west of the city within the Klang Valley, as well as in places like Semenyih near Selangor’s border with Negri Sembilan and Nilai, Negri Sembilan.

Gambero says most of the big property developers in the country have had launches in these areas, quoting as an example, Malaysian Vision Valley, a 108,000ha development extending from Nilai to Port Dickson in Negri Sembilan.

He notes that developers have been buying up land in these areas at affordable prices like RM15 to RM25 per square foot compared with several hundred, or even several thousand, ringgit they would have to pay for land in the Klang Valley or KL.

At such prices, he points out, developers can actually build affordable houses of say 1,600sq ft to 1,800sq ft, which are reasonable sizes for families, and which are in such high demand.

“But instead of doing that, one of the things I find a bit funny is that developers have been building huge homes of 2,500sq ft to 3,000sq ft.”

Doing the math, Gambero points out that a 1,600sq ft house selling at RM300 per square foot would come up to RM480,000, but a 3,000sq ft house at RM300 per square foot would cost a whopping RM900,000.

“So unfortunately, developers have again brought the end house price to an unaffordable level!” says Gambero who is the CEO of the REI group of companies and who is an Italian expatriate who has been in Malaysia for almost two decades.

He has been doing extensive research on per capita income, household income, and the value of affordable homes in both Selangor and KL, which represents one-third of the country’s population and says that, “If you get it right here, then you can replicate it in other areas”.

He breaks the figures down into categories.

There is this ‘huge disconnect’ between what’s being built and what people can buy, yet developers ‘defy gravity’. – Ahyat Ishak

For Selangor, he estimates the need for low-cost houses is relatively low as only 8.2% households need houses that costs RM120,000 and below, while the figure in KL is 6.2 %.

The majority of households (63.6% in Selangor and 61.6% in KL) can afford houses priced between RM260,000 and RM600,000 (see chart for break down).

Gambero notes that only 15.4% in Selangor and 16.3% in KL can afford houses above RM500,000 up to a maximum of RM700,00.

“But if you look at what the big property guys are offering, most of the houses are above RM600,000. It doesn’t make sense,” says Gambero.

And, he points out, banks are no longer providing 90% financing for these huge houses because of overpricing.

“Banks are not stupid. They have been doing their homework and they have been coming up with the same conclusion that I have been coming up with, which is that there is going to be an oversupply of big homes and you (developers) are not going to clear your stock.”

Gambero points out that in the last three to four years, more than 60% to 65% of the supply of houses that developers built have been directed toward the top 20% of Malaysians who hold 40% of the country’s wealth.

“These are the people who can afford to buy whatever the market is throwing at them.”

But what about the rest?

You don’t hear of prices dropping. Because demand is 10 to 20 times higher than the supply of homes. – Dr Daniele Gambero

Prices won’t drop

Adrian Un has been involved in a number of property launches.

And he says that it is not true the property sector has been lacklustre.

One has to just look at all the pictures on Facebook and other social media sites to see that there are still a lot of people queuing up to buy properties.

“These are actually people queuing up to buy. I have seen huge numbers placing their cheques to buy. Whether they are first time buyers or not, we don’t know. But the situation is not as bad as being portrayed in the media or as claimed by the developers.

“The buying sentiment for units costing from RM300,000 to RM800,000 is still pretty much positive,” says Un who is the CEO and cofounder of Skybridge International, a property education and investment company.

But with everyone saying property prices are now sky-high, are there still properties out there going for RM300,000 or RM400,000?

Un says developers have been building small shoebox units of about 450sq ft to 600sq ft to entice Gen Y people to enter into the property market. These are priced between RM300,000 and RM500,000 and are often near the LRT and other amenities.

“So even if it is RM700 per square foot, a young graduate earning RM3,000 calculates it based on his affordability to pay the instalment. So he sees it as being quite affordable because the absolute entry level is RM400,000.

“A lot of the Gen Y have been on a learning curve on how to be a millionaire.

The Gen Y see owning a property as an investment. It also gives them bragging rights. – Adrian Un

“They are starting off early to be financially free and see owning a property as an investment. It also gives them bragging rights,” he says.

So these small units are still very much in demand and selling, he says, even though the rental might not be enough to cover the loan instalment.

“It’s already happening now. Demand for these units (to rent) is not big in numbers. Buyers would have to lower their expectation on the rent. So over the next one or two years, it is going to be a renters’ market. And it still boils down to location – if you are within 12km to 15km of the city, and there is a good infrastructure hub with the LRT and amenities like a shopping mall and hospital nearby, I don’t think it will be that bad,” he says.

It is the higher end properties priced at RM1mil and above which are struggling, says Un.

He says sales for these have been slow because many investors have already chalked up a lot of loans over the last four to five years for properties, so it is not as easy to secure more financing to buy another.

For Un, it is the secondary market that is going to struggle next year.

This is because there is a mismatch of perception between owner and buyer: the owner is positive the price of his house, even though it might be old, has climbed substantially but the buyer will not be willing to pay that price because he has an alternative to go to, which is the primary market to buy a new house.

Un agrees that banks are very careful when giving out loans these days. Instead of one valuation quote for the property, he says, most banks now demand for quotes from two valuers.

“Valuers are very cautious. They are professionals, so I don’t think they are willing to give the offered price for a new housing area that has just been completed.

“Once a house is completed and the seller asks for a sky high price, the valuers will not justify his asking price.”

But says Un, even with the mismatch, the price of landed semi-detached properties and bungalows will not drop.

He reckons to have bought a house priced at more than RM1mil, the buyer would need an income of at least RM15,000 a month to qualify for the loan, and logically the buyer would have to be at least 28 years old to earn that kind of money. So at that age, he says, the buyer would probably have understood how borrowing costs work before making the purchase and would have the holding power.

“He will hold it until the market recovers,” he says.

Optimistic about the economy

Two weeks ago, Budget 2016 was tabled in Parliament.

With regards to housing, there was no change in the measures already in place to curb property speculation, such as real property gains tax (RPGT) rates and prohi­biting developers from offering the Developers Interest Bearing Scheme (DIBS).

For Un, there was not a single exciting thing for the housing industry in the budget. But this is not unexpected, he says, because the industry was not anticipating any freebies or goodies anyway.

He says the measures implemented over the last two years have “somewhat worked” to cool down property prices “a bit”.

“For the government to do away with the RPGT or actually come back to DIBS now will create some kind of uproar among the public.

“I don’t think they want to be in the bad books of the public,” he says.

So naturally, he says, “affordable housing” was the main property sector element in the budget, devised to please the people.

Ahyat, however, has a more upbeat take on Budget 2016 for the housing sector.

He says while there was nothing big for the housing sector itself, there are huge plans for development and infrastructure.

He loves that RM5bil has been allocated to develop Malaysian Vision Valley and that RM7bil has been earmarked for developing a KL International Airport “Aeropolis”.

He feels “vindicated” that RM11bil is being pumped into Cybercity Centre in Cyberjaya because, while other investors shy away from Cyberjaya, he is one of the few who see potential there.

For him, the MRT II Sungai Buloh-Serdang-Putrajaya line coming up, which will be completed in 2022; the LRT 3 line from Bandar Utama to Johan Setia, Klang, which will be ready in 2020; and the KL-Klang Bus Rapid Transit (BRT) are exciting. There are also plans to build new hospitals and upgrade airports, he points out.

He says these are clever ways to spur growth, although it does not solve the massive problem of spiralling house prices and income levels that do not rise as fast to keep up.

“The budget is not a magic tool to fix problems. It is the Government’s forecasted expenditure,” he says.

Ahyat says he likes to “sniff” at the direction of development.

“I follow the infrastructure and investment. The moment they talk about billions in development, I stop, take a look and follow the money (to invest).”

Gambero’s first impression when reading Budget 2016 was that it was like an “economic crisis budget” where “you keep low, try to find shelter, stay put and wait for the next year to pass”.

But after reading through it for the third time, he finds it a “pretty decent” populist budget.

It is good, he says, that Sabah and Sarawak are getting funds to complete their long-awaited Pan Borneo highway, and that there are incentives, subsidies, and tax exemptions in the budget that will put more money in the pockets of the people.

“Increasing the welfare of the bottom 60% of the rakyat will definitely spur, in the medium term, the housing market. They might find enough money to buy a long-awaited home.”

Gambero sees the Malaysian Vision Valley development as “just the opening chapter of a totally new history of infrastructure for the southern corridor” and he loves the BRT because, unlike trains, buses are flexible and can go anywhere.

For him, Malaysia’s economic fundamentals are in the right place.

He says the GDP is quite steady although this has decreased a bit, the unemployment rate is still very much under control, foreign reserves are still very high, the economy is still developing, and the current account balance is still positive even though crude oil prices have dropped.

He says most international agencies have given Malaysia a positive outlook even though Malaysians themselves like to “cry and look down on the country”.

“The worst thing right now is the political instability. That is not a small joke.

“We have this political uncertainty about the future. A lot of laymen are asking ‘what if’ and ‘what comes next’ and saying that ‘if the Opposition takes over, the country will be a mess’, and ‘if Umno keeps ruling the country there is a big question mark about the future’, and ‘who is going to rule Umno? Do you choose someone based on loyalty or capability?

Despite all this uncertainty, Gambero remains optimistic about the economy.

“We have to take shelter for the next three to six months, but some shy signs of recovery are already visible.

“It will be more visible after Chinese New Year. The general feeling is that after the Chinese New Year, consumer confidence will begin rising and the housing sector will start moving ahead again.”

He says Malaysia’s under-supply of houses is still high compared with general demand.

He points out that even though developers have been experien­cing negative sales in the last few months and that there are a number of uncompleted sales with buyers pulling out because of uncertainty and perception, developers are still not dropping prices.

“There has been a big fall in the number of transactions in property this year but prices are still stable. You don’t hear of prices dropping. Because demand is 10 to 20 times higher than the supply of homes.”

He reckons Malaysia has at least another seven to eight years of a “sparkling” property market.

By Shahanaaz Habid, The Star/|Asia News Network

Malaysian income: bread and butter, affordability of owing a house


JUST a few months back, a social media post on food price comparison between United Kingdom and Malaysia went viral and attracted plenty of attention.

This interesting post offered a peep into the average cost of living and purchasing power of Malaysians nowadays.

A Malaysian, Rysherz Rayn, posted on his Facebook that with about £5 (around RM33.50), he could purchase bananas, a box of grapes, 10 apples, an ice lettuce and five packets of his favourite chocolate in London. In Malaysia, the same items would add up to about RM44.

He went on to share that £5 is an hourly pay for a part-timer in UK. While in Malaysia, the average hourly pay for a part-timer is at about RM4. In other words, to afford the same items that a British buys with an hour pay, it may cost an average Malaysian 11 hours of work.

The post created a lot of discussions, some expressed shock and disappointment, others thought UK is too far away for comparison. To make it more relevant and familiar for Malaysians, I did a quick price check on Australian food.

Based on online information and personal experience, buying essential items such as a dozen eggs, 1kg of apples, a lettuce, and a loaf of sliced bread cost about A$9 (RM28) in Australia; on the other hand the same items come up to about RM20 in Malaysia.

In Australia, the minimum wage per hour is A$17.29 (RM53.50), while ours is only RM4.30 based on the minimum monthly wage of RM900.

Though this situation doesn’t paint the overall picture of the living standard in Malaysia, it does illustrate our average cost of living and purchasing power.

If we take a bigger picture, our issue of bread and butter relates closely to brick and mortar, which is the roof over our heads. When our wages are stretched in purchasing daily items compared to other countries, there is no surprise that our housing affordability level is also low.

According to the “Making Housing Affordable” report released by Khazanah Research Institute (KRI) in August, Malaysia’s median house prices were 4.4 times median annual household income in 2014. This signifies a “seriously unaffordable” housing market because an “affordable” market should have a “median multiple” (median house prices as a multiple of median annual household income) of 3.0 times based on global standards.

If we only take Kuala Lumpur into the computation, the median house prices is even higher at 5.4 times (based on annual median income of RM91,440, and the median for all house prices in Kuala Lumpur at RM490,000). Housing for Kuala Lumpur is categorised as “severely unaffordable”.

It is good that KRI reported the issue and highlighted that our country should gear towards improving the elasticity of housing supply and respond to the needs of all segments. However, other than supply, we should also look into the fundamental issue of our income level.

I remember when I first started working in 1961, my salary was RM628 and my first car was a Peugeot 404 which cost RM7,724. A single-storey house in Klang during that time was RM13,000. It cost me only one year of my salary to buy a car, and less than 2 years’ salary to afford a house.

Young graduate

However, a similar car today costs around RM100,000, and a landed house in Klang easily costs RM350,000. Looking at the salary of a young graduate which ranges from RM2,000 to RM3,000 nowadays, it takes 3 to 4 years of their salary to buy a similar Peugeot or equivalent car, and 10 to 15 years to purchase a house.

A recent news article pointed out that, only one out of two PR1MA housing loan applications are approved. It is ironic that even with affordable housing, the rakyat can’t afford a home.

The scenario and comparison above show the challenges of our young generation in securing a house today. It is unfortunate that when our car and house prices grow as a result of inflation and demand, our income doesn’t grow in tandem.

I also remembered in the 1970s, Malaysia and South Korea were started on the same level playing field in terms of gross domestic product (GDP).

According to data from International Monetary Fund (IMF), our estimated nominal GDP per capita in 1977 was US$1,084 (RM4,791), while South Korea was US$1,042 (RM4,605). During that time, when I travelled overseas with our strong currency, people in those countries looked up to me.

However, the IMF data shows the estimated GDP per capita in South Korea today is US$28,338 (RM125,256), while Malaysia is only US$10,654 (RM47,091). Other regional countries such as Taiwan and Singapore are also progressing at a fast pace, in which their estimated GDP per capita now are US$22,464 (RM99,293) and US$53,604 (RM236,935) respectively.

Back to the fundamental issue of our housing affordability, other than providing more affordable housing, the Government needs to move the rakyat up the value chain and increase the nation’s income level.

We know that the authority has been aspiring to do so under the 11th Economic Development Plan. One of them being to attain a per capita income of US$15,000 (RM66,000) by year 2020.

To expedite this, the Government and relevant authorities have to improve the competitiveness and productivity of the nation, so as to catch up with the other countries in the region.

When we talk about the affordability of our brick and mortar, the most fundamental way is to address the underlying problem of our bread and butter, i.e. our income. Until and unless our wages buy us more eggs and rice, it will be a challenge to afford a house.

– Viewpoint Food for Thought by Alan Tong The Star

Datuk Alan Tong has over 50 years of experience in property development. He was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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Ageing together: it takes a nation, family; more children if you can afford to


Chew mei funTHE Government cannot face the challenges of an ageing nation alone, Deputy Women, Family and Community Development Minister Datin Paduka Chew Mei Fun says.The problem requires a joint effort involving the Government, local councils, developers, insurance companies, non-governmental organisations (NGOs) and individuals, she says.

“Everybody must be responsible and do their part,” she insists.

Giving an example, she says developers should plan townships for senior citizens to grow old within the community “like one big family”.

She says local councils also play a very important role in ensuring that the roads and buildings are accessible to the elderly.

To encourage collaborations between the NGOs, the Government gives incentives to corporations to run corporate social responsibility projects, she says.

She says individuals have to plan for old age by keeping healthy and active and saving for their future needs.

On plans to build more homes to accommodate the growing number of seniors, she says the ministry hopes to de-institutionalise homes because a family environment is always better.

However, legislation forcing grown children to care for their parents, is “not the way”, she stressed.

She says cultivating values like filial piety by stressing on the importance of family bonds through education, is preferable.

“We have nine (registered) old folks homes nationwide with a total of 1,590 residents.

“And, there are an additional two homes housing more than 200 bedridden residents, 70% of whom are above age 60.

“If we accept residents too easily, some will just send them to us because it’s convenient,” she says, adding that five activity centres for seniors will be built in addition to the existing 45 nationwide. The number will be increased steadily.

She says ‘caring complexes’ housing both seniors and orphans are in the pipeline.

“The idea is for kids to cheer up the seniors while learning from their elders,” she says.

She says better health services have led to Malaysians living longer with couples now having to care for their children, parents and grandparents.

Acknowledging that it’s a huge financial burden, she says the ministry is trying to educate young couples on how to better plan for their family.

Explaining that family planning isn’t just about birth control, she says it entails managing family finances.

“We’re not asking couples to give birth blindly but if you can afford to, you should have more children,” she says.

On June 14, Sunday Star front paged how urban parents can expect to pay as much as the combined price of a luxury car and a semi-detached house to raise a child up to degree level. The report followed a remark by Women, Family and Community Development Minister Datuk Seri Rohani Abdul Karim urging Malaysians to have more kids to address the projected shrinking population.

National Council of Senior Citizens Organisations Malaysia president Datuk Dr Soon Ting Kueh is “very disappointed” that the country’s seniors were left out of both the 10th and 11th Malaysia Plan, lamenting that the elderly are a neglected lot.

“There is no social security for the old,” he points out.

Calling for a national forum to be held fast, he cautions that the country may reach aged nation status even before 2030.

“Everyone will grow old. The only question is when.

“We must tackle these challenges together but the Government has to spearhead the solution with a detailed development plan.”

While supportive of the Government’s call for couples to have more kids, he feels that it won’t solve the problem.

Suggesting a private pension fund be set up, he says it will ease the financial burden on families caring for their old parents while giving the seniors a sense of independence.

Seniors who are poor and without family must be cared for by the Government, he insists.

“There aren’t enough government old folk homes nationwide,” he says.

“We need at least 90 but we don’t even have one per state.”

Those who can afford private nursing homes are also suffering, he says.

He estimates there are some 4,000 private centres nationwide but only slightly more than 200 are regulated.

“Some pay between RM500 and RM600 to live in very poor conditions where seniors are hosed down instead of getting a proper bath.

“These unlicensed homes are stinky and the living conditions very undignified,” he says.

He feels that country’s healthcare system also needs to be improved.

“The waiting time is too long and there are not many geriatric doctors.

“The seniors will be dead by the time they get treatment,” he says, only half-in-jest.

But, he stresses, the seniors themselves must grow old with dignity by keeping active.

Soon’s deputy, Susan Suah, says there’s a need for aged-friendly housing.

The interior designer is working to come up with building guidelines. Some problems in current housing include the lack of bathrooms on the ground floor, switches that are too high up and poor lighting, she says.

“We have rooms for maids but not for old parents?,”she says adding that aged-friendly homes must be made mandatory.

Universiti Sains Malaysia (School of Social Sciences) associate professor Dr Saidatulakmal Mohd notes that while some supermarkets and shopping centres have started becoming aged-friendly, none of the new housing developments are.It’s worse when residential houses are converted into nursing homes for the elderly as it has been proven to be non-conducive to their wellbeing.

“We don’t need to wait until Malaysia becomes an aged society. Many of the elderly are already being abandoned and abused, she says.

“While it’s easy to point to the Government for a solution, it’s important to note that welfare aid for seniors has risen over the years.”

To cover rising public healthcare costs, she anticipates higher taxes for the future generation.

But unlike their parents, youngsters today don’t expect their children to care for them in their old age.

“This is because they are facing financial hardship providing for their family while supporting their aged parents and don’t want their children to go through the same thing,” she explains.

She calls on the Ministry of Women, Family and Community to bring back the ‘elderly in the community’ initiative to promote active ageing.

To be a developed nation by 2020, we need active seniors who can contribute to the nation but this is only possible if aged-friendly infrastructure is ready and the elderly are financially supported.

“In the UK, I saw seniors shopping for groceries, paying their own bills and eating out – which is rare here.

“In Malaysia, seniors are seen as ‘abandoned’ if they do these things themselves.

“The perception needs to change.” – The Star/Asian News Network

Related:

Not ready to age

Penang property in steady demand, will the housing market facing a glut?


Investment-friendly: A file picture shows visitors at the recent Star Property Fair in Penang. Affin Hwang believes that property developers with land bank and established presence in Penang will benefit from rising property demand.

PETALING JAYA: An increasing population in Penang coupled withlong-term property demand will be supported by major projects driven by public-private partnerships (PPPs), according to Affin Hwang Capital Research.

Among the PPP projects, the largest being the RM27bil Penang Transport Master Plan (PTMP), could be awarded by September. Singapore’s Temasek Holdings also has a proposed joint venture with Penang Development Corp (PDC) to develop an RM11.3bil business process outsourcing centre and an international technology park.

The research house said in a report that its top stock picks for infrastructure and property exposure to Penang were Gamuda Bhd, IJM Corp Bhd, and Eastern & Oriental Bhd (E&O).

It said the Penang government had pushed for the economy to move up the value chain by encouraging knowledge-intensive and innovation-led manufacturing and services.

“Property development companies such as E&O, Eco World Development Group Bhd and Ewein Bhd are embarking on new large-scale mixed development projects in the state with total gross development value (GDV) of RM60bil,” it added.

E&O has the highest exposure to Penang with property development projects in the state comprising 77% of GDV totalling RM34bil.

The multi-billion ringgit PTMP has seen keen interest, with six consortiums submitting bids to be the project delivery partner (PDP) while Affin Hwang Capital understands that discussions for the joint venture with PDC were in the final stages.

“The joint development agreement is expected to be inked in July or August. Work on the BPO Prime is expected to start in the first quarter of 2016.” The entry of Temasek would also attract more Singapore companies and other foreign investors to Penang.

“We believe Gamuda will likely be appointed the PDP for the project. Also, being one of the largest contractors in Penang, IJM Corp is expected to win a substantial portion of construction work for the PTMP,” it said.

“The Penang government also managed to convince Hewlett-Packard to choose Penang as the location to set up its new RM1bil manufacturing facility instead of Iskandar Malaysia.”

The plant would produce high-speed inkjet printer heads for the global market.

A ready pool of skilled workers out of a total workforce of 797,700, developed infrastructure, established information technology eco-system, and consistent and investment-friendly state government policies could be the reasons why Penang continue to be attractive compared with Iskandar Malaysia.

The island’s popularity with tourists, diverse culture, historical attractions, beautiful coasts and famous cuisine were added attractions.

“We believe property developers with land bank and established presence in Penang will benefit from rising property demand in the long run.

“Job creation from rising investments in industrial and service sectors should support population growth from organic expansion and inbound migration,” said Affin Hwang Capital Research.- The Star/Asian News Network

The housing market in Penang today

With an abundance of newly built high-rise condominiums, is Penang facing a property glut?

Malaysia’s population crossed the 30 million mark in February 2014. According to the Population and Housing Census 2010, about three in 10 people fall in the 20-40 years old age group – the one most likely to be firsttime home buyers. By 2020, that group is projected to grow to 11.3 million. In Penang, the current estimate for this age group is at 0.6 million, or 36% of the state population. The average property price in Penang currently stands at RM336,521. Even with the 50% stamp duty cut, middle-income earners with two dependents can only afford houses priced at RM300,000 and below [1], and looking at the current national average price for all types of properties, RM300,000 is well below the average (Figure 1).

Besides increasing prices, public concern is on whether or not the property market is overheated; many suspect that currently there is an oversupply of properties, especially in Penang. The current existing stock of residential properties can house more than six people per household (Table 1), and as smaller households are the global trend for developed and developing countries, statistics indicate that there is still a growing demand for housing.

Source: The Malaysian House Price Index Q1-Q2 2014, National Property Information Centre (NAPIC).

To meet market demands and expectations, a steady addition of incoming and planned supply to the existing property stock in Penang is still expected in the near future. Based on the population projection given by the Department of Statistics for Penang (1.75 million in year 2020), Malaysia Property Incorporated found that there is an oversupply of about 45,000 units this year and 22,000 units by 2020 [2], assuming that the average household size stays at 3.98 people and housing supply stops after 2015.

A growing demand for housing with a potential oversupply of properties sounds contradictory enough, begging the question: will the potential glut be for a certain type of residential property, and are the right kinds of properties being built in the right areas?

Whither the low-medium cost housing?

On Penang Island, the most densely populated district is in the north-east; the area encompassing George Town, Jelutong, Air Itam, Gelugor, Tanjung Tokong and Tanjung Bungah still remains one of the most sought-after places for property. Despite limited land spaces, incoming and planned unit supply to this district has seen no sign of abating.

However, in recent years, the south-west of the island, where the airport and the industrial area are located, has become the hottest investment spot for bigname developers. The highest growth of property supply on the island is expected to be in this area, with the likely addition of 17,518 incoming units (33.3%) and 17,058 planned units (32.4%).

Source: Property Market Report First Half 2014, NAPIC and own calculation
Source: Property Market Report First Half 2014, NAPIC and own calculation.

On the mainland, the more populated central Seberang Perai (SP) is expected to see more new housing units in coming years, compared to north and south SP. The opening of the Second Penang Bridge and the announcement of a series of development projects in Batu Kawan, including IKEA and branch campuses of University of Hull and KDU University College, certainly give south SP a huge appeal for future housing development. So far, the housing demand there has not
jumped markedly. However, as a prelude, following the announcement of the projects, land prices in south SP skyrocketed to between RM50 and RM60 per sqft, compared to previous prices of RM8 to RM9 per sqft
[3].

Within the high-rise category, there is a trend of developers preferring to build higher value condominiums (Table 3). In coming years, especially on Penang Island, a higher proportion of new highrise units will come from condominiums. Although the construction of low cost flats is emphasised by both the federal government and the Penang state government, the supply of such units is slow and short in coming – at just half the number of the future supply for condominiums. The future supply of medium cost flats also cannot catch up with the supply rate and units of condominium, indicating that
condominium sales seem more profitable for developers and that there may be an oversupply of higher value high-rise units in the near future.

Probably as the result of an influx of affluent local or foreign buyers, the supply for bungalows (detached) units has increased significantly. Service apartments have also become a new niche in the property market; the number of service apartment units is expected to double.

Source: Property Market Report First Half 2014, NAPIC and own calculation
Source: Property Market Report First Half 2014, NAPIC and own calculation.

The island factor

Penang Island’s attractiveness as a place to invest or settle in can be seen from its property prices; one condominium unit on the island normally costs more than twice or thrice that on the mainland. The same goes for the price of landed properties (Table 3).

Although this tendency is likely to persist for some time, the number of residential property transactions slowed down on the island for the first three quarters of last year whereas property sales in SP were generally unaffected (Table 4). Due to market-cooling measures – i.e. the introduction of more stringent real property gains tax (RPGT) and maximum  loan-to-value ratio for individual and non-individual borrowers – laid by the federal government and Bank Negara to curb property speculating, the upward price index trend for both landed properties and high-rise units slowed down significantly for the first half of 2014. Given that the number of sales was also at a lower level in the third quarter compared to the previous year, property prices on the island for the latter half of 2014 were probably stagnant.

Source: Residential Property Stock Table Q2 2014, NAPIC
Source: Residential Property Stock Table Q2 2014, NAPIC.

With the implementation of the goods and services tax (GST) on April 1, firsttime home buyers may rush to make property purchases in the first quarter of 2015 to avoid paying the incremental cost. Although residential properties fall under the “Exempt Rated” basket of goods, property prices look set to increase due to the inflation cost of construction materials. According to a market survey, developers are facing ever higher compliance costs. Therefore, it is unlikely that house prices will drop this year when higher inflation is expected. Meanwhile, the “Youth Housing Scheme” announced in Budget 2015 may encourage young families from lower and middle income groups to make their first home purchase. Under the scheme, those who qualify and are selected will be given RM200 monthly financial assistance by the federal government to pay the loan instalments, 50% stamp duty exemption on loan and transfer agreements as well as 100% loan financing.

Source: Residential Property Stock Table Q2 2014, NAPIC
Source: Residential Property Stock Table Q2 2014, NAPIC.

Old is gold

Interest from investors in George Town’s pre-war heritage properties has never been greater since the city was inscribed as a Unesco World Heritage Site in 2008. Under the draft of the George Town Special Area Plan, there is a total of 4,665 buildings located within the core (50.2%) and buffer (49.8%) zones. Given the immense potential for capital appreciation or gain from investments, these heritage properties are in red-hot demand. With the booming tourism in George Town, many investors have transformed old, neglected heritage shop houses into boutique hotels or commercial premises.

Before the repeal of the Rent Control Act in 1999, there were very few transactions and the price index did not move much for properties situated within the conservation zones. Since then, the compound annual growth rate for such properties from 1999 to 2013 was at 12.7% [4]. For the first half of last year, the average price for pre-war properties in George Town registered a new highest record at RM1,300 per sqft.

Source: Henry Butcher Malaysia (Penang) and NAPIC
Source: Henry Butcher Malaysia (Penang) and NAPIC.

Similarly, the number of pre-war property transactions also soared especially after 2008 (Figure 2). However, despite the new highest record of average transaction price, there were fewer property transactions last year; the Penang Real Estate Market Research Report on pre-war properties published by Henry Butcher Malaysia (Penang) [5] suggests that the prewar heritage property market has more buyers than it has sellers due to a limited supply of good listings. Because of this, the pre-war property market price could be very much distorted. For example, in March 2012, a 2,000sqft shop house
along Lebuh Pantai (considered a prime heritage area) was sold at RM4mil (or RM2,000 per sqft) [6] – an isolated case but way above the average market price nonetheless.

Since the number of pre-war heritage buildings in the historic George Town is fixed and more than a thousand of such properties were transacted since 2008, the proportion of “sellable” properties in the market will shrink by year while market demand for such properties remains high. Hence, it is reasonably expected to see even steeper transaction prices and fewer transacted pre-war property units in years to come.

 By Lim Chee Han
Lim Chee Han received his PhD in Infection Biology from Hannover Medical School, Germany. He is a senior analyst in the economics section of Penang Institute.

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