If numbers were to tell a story, the numbers provided by the National Property Information Centre (Napic) is very telling.
Between January and March of last year, about 750 units of residential units costing slightly more than RM1mil and above exchanged hands. For the first three months of this year, a total of 1,168 units in the same pricing category were sold. That is an increase by more than half in a short span of a year.
With the exception of housing categories between the RM50,000 and RM100,000 range, the six categories between RM100,001 and RM1mil showed an increase in the number of transactions.
Prof Joseph Gyourko, a housing economist from the University of Pennsylvania, says “low real interest rates certainly play a role in determining any asset price, including housing.”
“However, my research indicates that it is not the only, or even dominant force, in the United States. Other forms of easy credit such as low equity downpayment requirements, extension of credit to very risky borrowers who should be renters, not owners, and the like, probably play an important role.
“We are just engaging in research on this in the United States, and do not yet have the answers. I view it as a necessary but not a sufficient condition for a pricing bubble to develop.” he says.
Gyourko says most Asian markets are heavily influenced by China, both indirectly from growth in its huge economy and (in some cases such as Singapore and Hong Kong) capital flows from China into local housing markets. “Whatever you think is going to happen to China pretty much tells you what is going to happen in these other markets. I suspect they will be highly correlated,” he says. He predicts prices in Hong Kong, China and Singaproe will take a hit in the next one to three years.
Both China and Singapore have introduced various measures to cool their property market. In September 2009, the Singapore government tried to coll speculation by abolishing developers’ interest absorption schemes, and followed that with two additional rounds of measures in February and August this year to make it increasingly expensive for speculators to flip properties.
“(The Singapore government) is sending a clear signal to investors that it is going to stop the price boom. The fact that it is doing the third round is a signal that it is going to do whatever it takes,” says Gyourko.
There have been talks in Malaysia that Bank Negara may introduce similar measures.
Gyourko says there must be a political will to deflate bubbles, if there is one. Gyourko, who has been studying China’s property market and been privy to Singapore’s, says shifting a lot of money into property purchases is not permanent or sustainable.
Over-leveraged property buyers may be in danger of defaulting on their loans and that will send property prices down, he says.
Gyourko also questions retirement savings funds (or Malaysia’s equivalent of Employees’ Provident Fund) to be used to pay for homes. “Retirement savings should be kept separate from housing expenditure.”
A source from a property developer says the real problem is banks extending loans to 65 or 70 years old.
“At 40, one is still able to take a 30-year loan. That is the real issue here. At the end of the day, housing is about affordability.
“While the Government may talk about introducing anti-speculation measures, there is another issue that it is not addressing. Does it have schemes which allow ‘genuine buyers’ who want to upgrade to better properties?”
A source from a property developer says he hopes Malaysia will not become a rent culture similar to Britain.
There, young people could not afford to buy their own homes because prices have been driven up so high. The foreigners have bought so much into the British market and whacked up the prices that the locals cannot afford to buy but have to rent.
“I see something similar happening in KLCC area. It is the rich foreigners who will buy these RM3mil to RM4mil condominiums and it will be the locals who will rent from them in years to come.” - By Thean Lee Cheng (The Star)
8 comments
What this professor (above) says makes sense
Easy & low interest credit, ridiculously high loan margins, extending loans to 70 years old!, dipping into retirement funds (EPF) ...... all these are recipe for fuelling the rampant speculations and escalation of property prices leading to a 'bubble'
while other countries are taking second or third rounds of measures to curb the speculations and reduce price escalations, Bank negara is still yet to act !!!
Having a decent roof over our heads through affordable housing is a basic necessity especially for the 'genuine buyers' people who are the most exploited and held to ransom by the greedy speculators and developers.
this foot-dragging by bank negara is very IRRESPONSIBLE and shows their INCOMPETENCY !
this central bank is USELESS ..... wasting taxpayers money
DPiazza Condo in Penang alot of "Construction Gangster", Developer is X-scan Penang, Gangster company is YC construction(name they use in Dpiazza) Think twice before you buy.....
this government promote 'high debt' society !
History has shown whenever financing and very high margin loans are made easily available, greedy speculators and developers will take advantage of the situation and push up the house prices immediately even to ridiculously high levels
the biggest losers are masses, the genuine buyers who end up deeply in debt, have to pay more money to service the interest on the loan, even have to resort to depleting their retirement EPF funds, they become 'slaves' to their house mortgage ....
the biggest beneficiaries are 'the industry players' the bankers , developers, the speculators who reaped huge profits
that's how the rich get richer ..... at the expense of the poor and needy !!
We need a price correction to bring down the prices to a more affordable level
and the central bank lack of urgency to address this situation is indeed telling !
This government seem to have no genuine interest in taking action to curb speculations and provide affordable to the masses
The people should translate their dissatisfaction and anger into votes at the coming 13th general election and kick out this BN (Barang Naik) !
I am not sure if this Professor is a real estate guru just like Azizi Ali.
Lets say they government would control the property prices example a RM1million house at Gurney drop to RM700k. Does this makes sense a house at Carefour Seberang Jaya RM350k drop to RM250k? A low cost flat at Juru RM35k drop to RM25k?
Are you kidding me?
Stop being naive.
In Singapore I can agree the property prices would drop. Reason being is that a low cost flat 700sqft is selling at SG400k. The problem in Pg island is that I can easily buy a low cost flat 700sqft at Jelutong or Farlim or McCallum Street below RM100k. If the price of a unit cost RM300k than I can totally agree with this Professor ideology.
Do you think the bank and government are stupid?
At most they will maintain the property prices in Pg for short term and future increase slowly. If they were to implement as this Professor prediction the whole northern region property prices will effect including SP, Bertam, Sg Dua and Kepala Batas.
Btw my father house in SP 2-storey SemiD today worth RM350k and if the price drop to RM 250k those of you who are bitching around about the house prices in Pg island should get a unit there since the environment and quality is as good as Setia Pearl Island. Half price mah and good to stay.
house prices fast escalating, inflated by excessive speculations & by unethical greedy developers keep increasing the prices as they like , no control on them ... like daylight robbery
& the authorities are turning a blind eye to all this !
the government must be responsive & act fast if not the situation will only get worse
the people especially the genuine buyers' are waiting anxiously for your anti-speculation measures
nothing new but inflation is happened in our country.
Curb price speculation
The Star Says . . .
RISING house prices are a double-edged sword.
Those who already own them will welcome the higher prices simply because that means more profit when they sell the properties, especially those who have invested in them in the hope of making a gain.
But for those who are aspiring to buy their first house, an unrelenting and prolonged rise in property prices will result in decent abodes being priced out of their grasp and with it a concomitant decline in one key factor in the quality of life.
The needs of the larger population are better served by the availability of popular housing at reasonable prices.
That means a stable supply of good houses matching demand without excessive speculation to push up prices.
In terms of policy, it is therefore important to ensure that land is made available for housing and there is a good mix of development to ensure that a spectrum of demand is catered for.
It is important to realise that if supply is skewed to the higher end and the demand is made to increase by encouraging foreign buyers for instance, this reduces the available resources for local demand and therefore raises the prices of all housing.
That is an undesirable consequence which is further exacerbated by financing schemes which encourage speculation.
There are currently many housing schemes, both for landed properties and condominiums where all the buyer has to do is pay 5% or 10%.
He does not have to pay anything else for between two and five years, the cost of that being built into the price of the house.
Effectively that enables a qualified buyer to place a leveraged bet that the property will appreciate.
If it does, by say 10% over two years, that amounts to a return of 100% on the deposit of 10% over the period, before transaction costs. It is therefore easy to see how such arrangements encourage speculation on the housing market.
The authorities, especially Bank Negara Malaysia, are considering moves to cut the speculation by raising the initial deposit for buyers who already have a house. That is a move that should be welcomed because it helps check undue speculation without burdening the first-time house buyer.
There are signs that a property bubble may slowly be inflating.
If speculation pushes prices so high that there are no genuine buyers who want to buy for staying and no takers for rental, the inevitable result is that there will be a collapse in prices.
It is far better that steps are taken now to moderate the increase in property prices, especially since indications are that speculation is part of the reason why the prices are going up in the first place