Housing affordability: Neither BN nor Pakatan can point to stellar record

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An article in the Guardian caught my attention – Ghost Towers: Half of newly built towers fail to sell.

Some points from the article:

  • half the 1,900 ultra-luxury apartments built in London last year failed to sell
  • they lie empty even as first-time buyers struggle to find an affordable home
  • a record 3,000 unsold luxury new-build homes (usually priced at over 1m pounds)
  • rich overseas buyers have slowed to a trickle
  • construction began last year on 1,900 apartments (more than £1,500psf) but only 900 sold
  • high-end apartment is 2,000 sq feet; so selling for £3m
  • another 14,000 unsold apartments £1,000-1,500psf
  • UK average price is £211psf
  • luxury housing glut would take three years to clear
  • but developers have 420 towers (at least 20-storeys) in the pipeline
  • 58% of demand in London is for homes priced below £450psf, but only 25% of homes being built are at this price
  • Developers turning to local buyers

Now just substitute pounds with ringgit (without converting), and isn’t that pretty much what is happening in Malaysia?

Check out this quote:

Henry Pryor, a property buying agent, says the London luxury new-build market is “already overstuffed but we’re just building more of them”.

“We’re going to have loads of empty and part-built posh ghost towers,” he says. “They were built as gambling chips for rich overseas investors, but they are no longer interested in the London casino and have moved on.”

Pryor says developers of luxury blocks lining the Thames have failed to sell homes despite offering discounts, incentives and freebies – including free furniture, carpets and curtains and even cars.

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Another real estate investment firm boss says:

He says hundreds of Asian investors who had bought London developments off-plan in 2015-16 in the hope of making a quick profit by selling apartments on closer to completion have instead lost hundreds of thousands of pounds.

“We need ‘affordable’ one- or two-bedroom apartments priced at £500,000. We don’t need swimming pools and empty rooftop bars with no one living at home to buy drinks at them. There’s just way too many £1.5m-£2m-£3m flats that all look the same.

I remember reading some time ago that many of the foreign buyers of London property were Malaysians and Singaporeans.

Now lets see if homes in Peninsular Malaysia are really affordable. A common measure is that average price of homes should not be more than three times the annual income level.

House price-to-income ratio

“Severely unaffordable”!
6.9 – KL
6.3 – Penang
6.2 – Malaysia
5.1 – Selangor

“Seriously unaffordable”
4.8 – Terengganu
4.7 – Pahang
4.5 – Johor
4.3 – Kedah

“Moderately unaffordable”
4.0 – Perak
Perlis – 3.3

And the most affordable state is:

2.4 – Malacca

(Source: The Edge, 23 October 2017)

Let’s look more closely at why house prices are beyond the reach of many in KL and Penang:

What Penang residents can afford

B40 – RM118,000 (for the bottom 40% of the people)
M40 – RM230,000 (for the middle 40%)
T20 – RM442,000 (for the top 20%)

Average – RM195,000

Actual Penang prices (end-2016)

Terraced houses – RM447,000
High-rises – RM340,000
All Penang houses – RM410,000

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So the lower-income group can only afford homes priced at RM118,000 and the middle class just RM230,000. These folk make up 80% of the population. Are there enough homes below RM150,000 for the bottom 40%. Or below RM250,000 for the bottom 80%? You see the mismatch?

Similarly for KL.

What KL residents can afford:

B40 – RM192,000
M40 – RM380,000
T20 – RM727,000
Average – RM327,000


Actual KL prices (end-2016)

Terraced houses – RM759,000
High-rises – RM479,000
All KL houses – RM749,000

Source: The Edge, 23 October 2017

Why are house prices so high?

Here are some factors that could have led to higher property prices:

  • Influx of easy money with quantitative easing in the US led to hot money pouring into the property market here
  • Influx of large numbers of foreign buyers eg Singapore property players and China buyers
  • Low interest rates prompt buyers to buy in the hope of achieving a higher return
  • Quandrupling of densities in Penang from 30 homes/acre to 128 homes/acre pushed up land prices across the state. These higher densities were supposed to encourage developers to build more affordable homes, but did that happen?
  • Allowing reclaimed land to be treated as freehold (when there is a strong legal argument for treating them as leasehold) further pushed up land prices
  • Higher land prices, accompanied by higher densities, have both contributed to higher house prices
  • Sale of state land to developers for mostly high-end housing instead of state development corporations managing it.
  • Planning for more reclaimed land, which will inevitably result in more high-end housing.
  • Developers building for wealthier overseas buyers in the hope of reaping higher profits
  • Leaving the housing market to full blown market forces. The result: developers prefer building for wealthy overseas buyers so that they can reap maximum profits
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Final thought: For every home completed and unsold in Malaysia (20,867 in all in the first half of 2017), there are 3.2 more homes under construction and unsold (68,245 homes in all). And the overhang? 14,776 homes. (Source: The Edge, 4 December 2017)

If you think there is no solution to this crisis, check out what Sungai Siput MP Dr Jeyakumar Devaraj has to say here and here.

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41 Comments on "Housing affordability: Neither BN nor Pakatan can point to stellar record"

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Rita
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Rita
Change will only come when Malaysians are suffering more. Right now, many are still complacent. Despite all the scandals and abuse of power, many are still living in their small cocooned world and asking “What’s in it for me?”. The sacrifice of Rafizi as whistleblower of NFC scandal is in vain. The opposition is so fractious and self-centred that I do not mind not voting this round. Just let the whole country go down further more before everyone wakes up. They need to see that they have no jobs and can’t even withdraw money from their accounts because the country… Read more »
shriek
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shriek

Please name which country is housing stellar apart from singland. Singland build public housing as lky wants people to defend their home and country

Zhang Meiyou
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Zhang Meiyou

In the 70s Penangites laughed at Singapore HDB pigeon homes compared to terraced homes in Penang island. Today go see Singapore HDB anytime better maintained than any medium cost condominiums in Penang.

glissantia
Guest
glissantia

The overhang in malls and office space is worse.

Though China is so large and hard to manage, we regularly hear heartening news from there. In the case of its housing bubble, it has launched a comprehensive, detailed policy and plan to promote the renting of houses as a solution.

Kiong
Guest
Kiong

The sudden exit of the Parkson departmental store as a tenant from the Maju Junction Mall in Kuala Lumpur is another sign of challenging times for retail stores in Malaysia.

https://www.thestar.com.my/business/business-news/2018/02/02/parksons-exit-a-sign-of-tough-times-for-retail-stores/#dsDjApIbvO93GUs0.99

Ho Wan Lai
Guest
Ho Wan Lai

Housing affordability part of Malay Dilemma 2018?

http://www.atimes.com/mahathir-2-0-new-malay-dilemma/

Sundaresh
Guest
Sundaresh

No housing dilemma for most Malay civil servants since accommodation is provided by government for their families to expand with procreation.

Jasmine
Guest
Jasmine

They prefer to buy cars instead.

Ho Wan Lai
Guest
Ho Wan Lai

RM72K homes a hot debatable issue on Anilnetto.com not too long ago. Anil revisits the past again to be contentious topic for GE14 road shows from all parties?

gooner
Guest
gooner

No reason to bring in politics here. This is a global phenomenon, mainly arising from a low interest rate environment since 2008 (as you pointed out too). Free market economics work in cycles – in terms of the property market, it peaked a few years back and now we’re experiencing a slowdown – eventually it will be priced by market forces. Whether it will be a cushioned bottom-up or a big crash remains to be seen.

Kiong
Guest
Kiong

Properties are now investment commodities – for appreciation in value, not so much for living in, as heavily promoted by the likes of Gavin Tee.
http://www.swhengtee.com.my/
This is an unfortunate reality to many, but money making opportunity to some.

Ho Wan Lai
Guest
Ho Wan Lai

Affordable Penang homes on display at Komtar :
DUA RESIDENSI at Teluk Kumbar on island and JIRAN RESIDENSI at Kampung Jawa Butterworth.
Price from RM72.5K hope Anil can elaborate further to inform those in need of affordable homes.

bigjoe
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bigjoe

LOL. Dr. Jeyakumar may be a wonderful soul but he is no builder of much of anything RM50 psf construction cost? No way. His analysis and arguments are leftist everyone and everything should be sacrificial selfless fantasy.

tunglang
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tunglang
Some blokes support property as an investment, notwithstanding housing is generally a social need (generally = 99% : 1% super-rich). One fine day, water & food will be an investment commodity (futures trading?) & many will not be able to afford to survive on. While the super-rich will continue to disrupt basic human needs of humanity. That’s AOK??? Pls examine your hearts. One fine day, disparity between the haves & have nots will reach beyond redemption to the extent many will become slaves to the super-rich via lifelong borrowings, low wages (now, low wages not the fault of workers but… Read more »
rilakkuma Penang
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rilakkuma Penang

tunglang have yr children applied for RM72.6K Telouk Kumbar condo developed by PDC ?

shriek
Guest
shriek

Ah pek can do wonders behind the rubber tree. Scream global warming but drive 4wd. Scream about high density and too much construction but live in condo.

Kiong
Guest
Kiong

Teluk Kumbar – Affordable Housing Scheme B (Type C)

Selling Price From RM 72,500
Built-up Area From 700 sqft

https://www.propertyqueen.com.my/new-property/43107/Penang/Teluk-Kumbar/Teluk-Kumbar-Affordable-Housing-Scheme-B-Type-C-

tunglang
Guest
tunglang

You need to wear Bata shoes to promote affordable housing in Penang!
Also, be careful to share your lifestyle here lest you invite a joker spinner!

Roy
Guest
Roy

This one is affordable, not touched by Gavin Tee who targets higher end ones.

Ho Wan Lai
Guest
Ho Wan Lai

Teluk Kumbar nor far from USM and air itam now that roads are extended so good choice

Jasmine
Guest
Jasmine

Can rent one room to USM undergraduate.

tunglang
Guest
tunglang

You don’t qualify for affordable housing, so why advertise?

Kiong
Guest
Kiong

Check up Gem Residences in Prai, promotion at Queensbay Mall on 3rd day of CNY 18 Feb:
http://www.belleview.com.my/residential/gem-residences/

Mah HS
Guest
Mah HS

Malaysian Institute of Estate Agents (MIEA) Sarawak chapter president Alex Ting has expressed his disappointment over the government not emulating the success of Singapore’s Housing Development Board (HDB) model.

“The success of the HDB has somehow not been implemented in Malaysia.

“Many people in this industry are very disappointed, and the public ought to be even more disappointed,” he told a press conference in Petaling Jaya, in conjunction with the release of the “MIEA Property Market Sentiment Report 2018.”

https://m.malaysiakini.com/news/411347

Kiong
Guest
Kiong

“Proptech will certainly change the way we invest in property,” says Dato Sri Gavin Tee, President of Swhengtee Group. The increasingly robust tech-enabled apps and software, and more sophisticated hardware will drive the real estate industry towards a more transparent setup where we will see faster completion at every stage of the building and buying process, he said.

http://www.swhengtee.com.my/Swhengtee-News/The-Launch-of-Malaysia-Proptech-Association.html

Ho Wan Lai
Guest
Ho Wan Lai

Property expert Dato Gavin Tee predicts housing demand to rebound and pick up in 2018, citing one belt one road strategy in China to bring in investors from abroad.

Personally I witness many vacant condo units being illegally rented out to foreign workers further damping the prices for those low medium cost units, and locals can now cohabitat with foreign cultures to bring more definitions to 1Malaysia inclusive of Banglasia concept.

tunglang
Guest
tunglang

“Property expert Dato Gavin Tee predicts housing demand to rebound and pick up in 2018, citing one belt one road strategy in China to bring in investors from abroad.”
Either this is a fantasy or a false hope out of desperation of cari-makan.
Mr Tattoo (of Fantasy Island), where are you now?

Jason
Guest
Jason

I think there is limited money making opportunities for Chinese in malaysia so many turn to speculating properties as interest is low in the last few years.

Sundaresh
Guest
Sundaresh

MCA should also pressure Najib to open As1M to chinese.

Kiong
Guest
Kiong

Malaysia’s 1st Chinese property investment TV reality show “Anyone Can Be A Property Millionaire” 房地产投资电视真人秀 will be on air in February 2018 on Astro AEC channel 301 featuring Dato’ Sri Gavin Tee as the mentor and 8 properties millionaire stars including celebrity and model, Amber Chia.

http://www.ingr.club/tag/gavintee

tunglang
Guest
tunglang

Smells like, looks like, sounds like that billboard promotion selling a Mr Zhang going to be the richest man in the world!
Same tactics of money game strategy of pulpit preaching to the bewildered innocent.

Kiong
Guest
Kiong

Life is all about timing. Buy low sell high.
There are people who work full time as property investor, part time in money game, and gain profit to set for early retirement. Wrong timing and you face the risks of losing it all. tunglang could check his ba qua horoscope before venturing in high risk but high return speculative game.

tunglang
Guest
tunglang
The property bubble will burst sooner. Look at the signs: 1) Dream housing billboards (3-in-a-row) gone as fast as Speedy Gonzales at the flyover facing Masjid Negeri + traffic coming from Ayer Itam. Wrong target marketing! 2) Many empty homes (dark windows @ night) at most newly built properties. 3) Housing agents gnashing teeth at the state of the property market. 4) Slowdown in furniture business given a brief respite by needs for furnishing replacement due to the recent 2 floods. But pre-CNY sales will still see some slowdown. 5) Rows of refurbished prewar houses still waiting for tenants to… Read more »
DaMing
Guest
DaMing

Just blame salary not rising fast enough because Malaysia has little value added activities but rely on cheap foreign labor. Better salary in Singapore.

Jason
Guest
Jason

Working Singaporeans could use their CPF for monthly payment towards HDB home purchase, subsidised by PAP government. Today HDB flats are better than any medium range private condominiums in Malaysia in terms of quality and features.

tunglang
Guest
tunglang

Better salary in SingLand but very rude? What’s the point???
After counter row with Singaporeans, Johor Immigration tells visitors to behave
https://malaysia.yahoo.com/news/counter-row-singaporeans-johor-immigration-tells-visitor-behave-074900361.html

Sundaresh
Guest
Sundaresh

Sour grapes?

shriek
Guest
shriek

Of course lah. Ah pek cant hear how former kedah mb has to say? Pg lang go to singlang to kuli but s singland come to pg to throw money to invest

Kiong
Guest
Kiong

Dangerous but cheap, Penang residents say about life at low-cost flats

https://www.themalaysianinsight.com/s/35691/

Many of the PPR tenants continue to disregard community living.

shriek
Guest
shriek

If housing bubble burst, very happy for ah pek. He can roll and twist like his era, king cat elvis the pelvis. Price down, ah pek may buy a few lot like hunting fir cheap curry mee and become land lord. Ah pek can retire in peace and collect rent. Any cheap rent like cheap curdy mee or one ton mee?

tunglang
Guest
tunglang

You are trying too hard to shriek incomprehensible!
NK surely pat your back!