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

A 35-storey tower just outside your front door

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

Some points from the article:

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.

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

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:

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.