What is driving up property prices?

38
231

Low capital gains taxes, easy access to bank loans, speculative buyers and foreign investors…

Blog reader Malaysian gives us an insight into the investment or speculation in the property market:

I am telling you from the mouth of an agent:

Question: Why is it that each time a project is finished, so many units are up for sale?

Agent: Many of the buyers are investors who are only interested in making a fast buck.

Isn’t that unfair to genuine buyers who cannot get one because it is artificially ‘sold out’? Isn’t the 5 percent tax on property sold within five years good enough to discourage investors?

Agent: Ha! What is 5 per cent property tax compared to the gains they make once they sell off their investment?

How do they have so much money to buy or easily get a loan?

Agent: You don’t pay much for the 1st instalment, the rest is paid by the bank during the construction and once it is ready, there is a rush to sell them ASAP! That’s why you see so many units to sell once the keys are handed over. Some even have more than one unit!

You mean the bank can give them a few loans?


Agent:
My guess is – either they use their relatives’ name to obtain loans or those investors are good customers for the bank since they often repay their loans fast.

Why is the property market value so high?

Agent: Greedy owners who refuse to be realistic. Demand from foreign buyers push up the prices too.

So, Anil, it is no secret that there are many investors in new projects!

It is not just in Penang. I have been involved indirectly in the property market for five years now. The government should increase the property tax more to discourage these investors.

Please help to support this blog if you can.

Read the commenting guidlelines for this blog.
Subscribe
Notify of
guest
38 Comments
Most Voted
Newest Oldest
Inline Feedbacks
View all comments
Jacky

I just so hope tht the ‘property bubble’ will pop on Penang soon! That will teach these greedy suckers a good lesson. The government is also not thinking with the right head when it comes to protecting the interests of locals.

The government couldn’t care less because the higher the property prices, the more and the faster they change hands, the better for the government – more RPGT and higher stamp duties!

Will someone please put a needle in the property balloon!

Remy

Rising price of property was not curbed because the inept Housing Minister Chor CH is only focusing on tong sampah issue since 2008.

grkumar

What do you mean by the “low average income” of the ordinary Malaysian worker. What do you define as the “ordinary Malaysian worker”. Who is he or she? what wage or socio economic bracket do they belong to and how do you calculate that?

Judging by what you wirte about this fictitious worker, there would also then be a “high and a middle income” for the “ordinary and the extraordinary” Malaysian worker.

By implication of what you write, these other groups must also exist.

Erwin

In the last 2 years, the price of cement has gone up from RM10.50 per 50kg to RM17.50, the price of steel has gone up from RM1000 per ton to RM2600.

If you want cheap housing, perhaps you can go to rural area and build atap house or mud house.

tunglang

How much % of steel & cement made up the price of houses? I surmise a lot of greed & surreal demand went into it’s made up.
Ordinary workers in housing development?
I am sure there are many Indons than Malaysians at work sites!

Samuel

Meanwhile in Johor, those rich Singaporeans and expatriates look at Johor property as cheap commodity!

http://www.themalaysianinsider.com/malaysia/article/for-singapore-expats-johor-homes-a-steal-as-malaysians-in-housing-pinch/

Penangites should be thankful that they do not have Singaporeans as close neighbours!

tunglang

Penangites should be thankful that they do not have Singaporeans as close neighbours!

You may be wrong when & if Air Asia secures cheapo direct flight from Singland to Penang. By then, Penang will be weekend haven for recuperation (from stress frenzy SingLand) & non-stop makan-makan. Then the choice of a cheaper-in-Sing-dollar holiday Penang home is not bad an idea in the minds of KiaSu-KiaLeow Singkahpoh Lang.

Tigerz67

Yes, its a difficult issue to solve. You need a holistic approach to this issue, namely good long term planning. For the short term, government can implemet some rules, for example, 1st home buyers get 1st pick of new development. Or 1st home buyers get a subsidy of some sorts (but must hold on for 5 years or more and cannot rent out). Govt intervention in the form of directly buidling homes must be carefully done. Govt cannot provide the best of locations as they must adhere to a certain budget. But what the govt can do is provide so… Read more »

Andrew I

Yo, Gherks. Long time no see. Good suggestions. Shame you didn’t have these gems when you and your siblings were in power for 53 years. You make a great opposition. We’ll vote you in when Pakatan cannot deliver in 53 years time.

See ya. I hope I didn’t huirt your feelings or made you sad. It’s the truth after all and I’m a Penangite, so no need for me to shut up.

moo_t

It seems many people REFUSE to see INFLATION also play a big part on investor mentality. Again, it is an issue created by mismanaged government. Bolehland(TM) Locked up market by cronyism will make things WORST. Let me give an example : A middle income family, having with 50k saving in bank. With Bolehland 5~8% inflation rate, the 50,000 values will diminish. So to PROTECT the money VALUE, one must find way to against the diminishing saving. – Fix deposit? Well, Bolehland BNM control the interest rates and enable an syndicate like bankers ring, no bankers will beat the odd offer… Read more »

moo_t

And without a proper investment to safeguard everyone saving, that will lead most people pour money into property market.

So in the short, it is the overall government policies that cause the property speculation, fooling around with the property gain tax WILL NEVER solve the problem.

Mark

I analyse that there are several reasons for this high property price.
1) high land prices, 2) rising cost of bldg materials,3)greedy developers who wants to reep huge profits,4)sales tactics of developer where they jack up the price and after that give discount such that the buyer can get 100%loan without paying huge initial downpayment or none at all. So,this is artificial price jacking.
As for the second hand property,the(cracy) prices are simply called by the seller but no takers(exception may be a few of those want the property bcos their business is nearby or suits their needs).

Kevin

I agree with everything said by the agent except for one point which I have raised before. When the units are completed, the speculators will have to rush to sell off their properties, at an even higher price, to make profit and return the bank loan. Right? How is it that for so many years, all these speculators are able to find buyers so quickly at such high prices. Otherwise, surely the bubble would have burst a long time ago. It means either Penangites are filthy rich, the population is larger than what we think it is or foreigners are… Read more »

pizi87

Worries many of us, especially young professionals what more low income people. We have a hard time to get the basics running well for us.. Lets change the gov (federal) to begin with!

bigjoe99

Gossip is not analysis. Property market in Malaysia favours the developer for historical reason to encourage investments in housing supply..Developer hold on to land and even supply without any penalty while the macro favours rising property prices.. The current high property prices is basically the fault of central banks – they are printing money making the economy inflationary and property is an inflation edge. Issues of speculation and others are very marginal reasons compared to the above..There are no simple solutions and politicians promising it are hot air..The real sound solution to mitigate is rising income first so that everyone… Read more »

grkumar

what a load of crock. You cut and paste comments from the commentary on the US economy which has no application to the Malaysian economy and parade as an analyst. Where is the proof of the Central Bank “printing money”. The term “printing money” is a euphemism for the Central Banks role in creating liquidity. Except that in the US they literally “print it as well in the process creating hyperinflation. You are full of it.

moo_t

Let’s go back to the basic of economy : Why “speculator” in Bolehland(TM) prefer to play property speculation? Rather than investing on other items that may bring continuous/sustainable income?

Answer : Bolehland(TM) government locked up the market so bad that, many economy activities is OUT OF REACH of many. So property “speculation” become the “investment” haven..

And still, majority of Bolehan think government should “control” the price, which given the incumbent to locked up the market and give it too cronies. Now guess who is the real sucker?

spencer

RE: Bolehland(TM) government locked up the market so bad that, many economy activities is OUT OF REACH of many.

Ya, locked up exclusively for cronies like Syed Mokhtar.

watch out, super broadband biz will be monopolised by consortium of u know who.

Malindo may be swallowed by (a crony) later and “he” can match AirAsia by enticing skilled management from AirAsia !

majorthamts

I live in Cheras, Selangor. I bought my double-storey intermediate unit at 300K in 2006. Recently an agent approached me offered and 620K, however my neighbors are saying that my house can fetch 750K, Is this justified?

Yang

As it is a willing buyer and willing seller.

A unit bought in early 70s for 26k was sold for 1.3 million in 2011

semuanya OK kot

Remember, “ruling” a country is a “cannot loose” proposition where it is hard not to make huge profits. If real estate prices go up too much, your developer friends are happy and will make you happy. If the people who loose out make enough noise, you announce that you are concerned for their welfare and simply spend public money to redress the situation, this time under wasteful, sub–standard projects.

Yang

Affordable housing is not just a problem in Penang or Malaysia. It is throughout the world so don`t just simply put the whole blame on the LGE state govt. In fact the LGE state govt are doing a very remarkable job on this matter

Kevin

Actually it is a problem in Malaysia, particularly in Penang and KL, more than in other developed countries. I am not saying it is LGE’s fault or Najib’s fault. But that is a fact nobody can deny. Ppl here have an average income of 3k a month but the average apartment (at least 1000sf) in pg costs about 500k while a bungalow would cost at least RM 3 mil. In Australia the average income is AUD 5000 while a bungalow there costs AUD 1 mil, often less then that in the suburbs. In Sg, the average income is SGD 5000… Read more »

Yang

Kevin, Why refer to Australia which is such big country with a small population. Why did you not refer to Hong Kong, Singapore, Taiwan, Japan & Korea. You can also refer to most European country. May be you want me to refer to Africa !!!!!!

Kevin

If you read my comment wholely I am sure you would have noticed that I did refer to Sg as well. Because of it’s size and population density, similar language and culture, Sg would be an ideal comparison for us. I did state that a quality apartment in Sg would cost SGD 300-400k and with their average income of SGD 5k, they can more than afford to buy a quality home there. In the case of Pg (also an Island and of a much lower density than Sg) a quality apartment will cost at least RM 500k while average income… Read more »

Sze Tho

Kevin: prices have gone up in Singapore. You can’t say quality apartments cost 300-400k in Singapore. My sis bought a HDB flat in Ang Mo Kio 2 years ago for 500k. Current prices are about 560k.

There are many reasons for the current high prices.
We can’t blame it all on speculation.

Curiously, many Malaysians complain, but are still willing to fork out high prices to stay on the Island and selected locations of Klang Valley.

Yang

Increasing RPGT tax will not solve the rising property prices just like the share market. Building more LC, Low Medium and Medium cost project will solve the problem. The problem is developers now are reluctant to build LC, LMC and Medium cost projects as it will not bring them much profits. It is the state govt in Penang and Selangor that are forcing them to do so and in return developers are asking for the sky because they know the state govt need them more. Developer in one recent LMC unit refuse to sell as LMC price which is upgraded… Read more »

Yang

Unless they are willing to incur very substantial losses

husain

The prices going sky high is also due to the stupidty of the gov. increasing the civil servants housing loan to rm400k and repayment period till their grandchildren continue with the loan. Bloody stupid self centred ruling. Can you imagine the private sector employees trying to buy a low cost house ? More often they are not qualified. The price of roti canai and tea tarik went up because of vote seeking interests like increasing civil servants COLA to rm300 per month. How about the productive sector that is the private sector working their … out only to feed the… Read more »

Gerakan K

We don’t care what drives up property prices, but it must be stopped !!! LGE must stop approving HIGH END condos for foreigners.

Penang for Penangites !!! Housing quota must be implemented. 90% for locals and 10% for foreigners. Restrict new housing projects, e.g. 50% for low cost housing, 30% medium cost, 10% medium high, 10% high end housing.

This is Penang local issue, non-Penangites do shut up.

Yang

If this is the case, you are living in Selangor. So buzz off and look after you mini market.

Yang

We certainly must care why properties prices go up. We must find out the reasons and only then can we find a solution to it. We cannot simply said Stop approving high end condo for foreigner. We cannot just get emotional and become moronic about a particular person such as LGE just because one supports the Cheat and Cheap. We need local just as we need foreigners. In fact foreign investments are the life line of many countries. Ong was right. If we just keep building low cost and medium cost projects, Penang would soon become a big ghetto. With… Read more »

tunglang

The greedy developers & insider staff, the couldn’t care less bankers, the slow to act / proactive amendment of housing legislations & tax rules & the MM2H loopholes. And of course the greed-inspired speculators & property gurus who paint surreal property sales market & too good to be true business prospect @ career talks. With Kia Su mentality of genuine home buyers at the mercy of tricks of trade & property market manipulation, who’s to blame but those mentioned above. This is one scenario of a country divided & ruled based on discriminative policies that eventually drive those disadvantaged to… Read more »

Yang

Tunglang
What can we expect of developer or any business entity. The govt must play its part instead of siphoning our money for other purposes

This is what one developer of a public listed co. said

As business entities, we have to meet profit expectations of shareholders as well, and building homes and selling them at RM42,000 or below is certainly not going to help meet those expectations.”

tunglang

As business entities, we have to meet profit expectations of shareholders as well… I have the intimate experience of dealing with one developer whose prices for medium cost condos shooting up from below Rm200K in January 2011 to Rm300K today! Those are properties in Butterworth. Now isn’t that over-expectation of profit in the face of frenzy property chase? What we expect is reasonable pricing & not ‘cut chicken throat’ out of greed! As moo_t mentioned: Bolehland(TM) government locked up the market so bad that, many economy activities is OUT OF REACH of many. So property “speculation” become the “investment” haven…… Read more »

Vicky

Prices are high in Penang because:
1) Scarcity of land in the island
2) Location – people are paying a premium to be close to city centre of work place.
3) Lifestyle – people are paying premium for the ‘address’
4) Good LGE governance – attracting foregin buyers especially Penangites who have decided to return after making money abroad e.g. Singapore.