Do you know that more pedestrians get killed on zebra crossings than on unmarked crosswalks? And ironically, the introduction of childproof lids on medicine bottles led to a substantial increase in child poisonings in United States?
“What causes that?”
I picked up the puzzling facts above when I revisited the book – What the Dog Saw by Malcolm Gladwell.
The author shared that pedestrians often compensate for the “safe” environment of a zebra crossing by being less vigilant about oncoming traffic, which causes higher risks of accidents. On medicine bottle childproof lids, adults became less careful about keeping them out of the reach of the children, and this led to more child poisoning cases.
Gladwell explained this phenomenon with the theory of Risk Homeostasis. It states that under certain circumstances, changes that appear to make a system or an organisation safer in fact do not. Human beings have the fundamental tendency to compensate lower risks in one area by taking greater risks in another.
I find the theory interesting as it can be applied in many aspects of our lives. It reminds me of the cooling off measures imposed on our housing industry and the market conditions we are facing now.
Our country has introduced a series of cooling off measures on the housing industry since 2010 and this was especially escalated with Budget 2014. Among the measures are the 70% loan policy for third property purchases, housing loan limits calculation based on net income instead of gross, and loan tenures reduced from 45 years to 35 years, the removal of Developer Interest Bearing Scheme (DIBS) as well as the revision of Real Property Gain Tax (RPGT) rates.
The above measures were introduced to cool down the housing market and to control the rising property prices. However, according to recent news reports, despite the total transactions of residential properties dropping about 10% to 246,225 units in 2013, the number recorded growth last year, with total transactions increased to 247,251 units.
Statistics for Klang Valley and Penang properties from Savills Malaysia and Raine & Horne International Zaki + Partners respectively showed that the prices of different types of residential properties remained strong despite the introduction of cooling off measures.
In the Klang Valley, the price of terraced houses and high-rise residences recorded 8.6% to 18.5% growth year-on-year in the first quarter of 2015. During the same period, similar properties in Penang gained 12% to 17% in price.
On the other hand, statistics from National Property Information Centre (Napic) showed the number of transactions in the secondary market has been dominating the residential property market, with its market share ranging from 78% to 87% in 2010 to 2014.
The price increase for residential properties and high demand in the secondary market were the evidence of monetary inflation due to quantitative easing (money printing) measures around the world, and strong demand driven by a young and growing population in our country.
How do we know the demand is real?
According to PR1MA CEO Datuk Abdul Mutalib Alias on his recent Astro Awani’s dialogue session, PR1MA has 1.02 million registrants in its system now. This validates that there is a great demand for homes among the rakyat. Unfortunately, the housing industry has been producing less than 100,000 units per year for the past two years which was a clear mismatch between demand and supply.
Reviewing the situation, the cooling off measures seem to be counter-productive as they discourage an increase in the supply. The measures do not help to encourage developers from offering more units or new project launches as home buyers adopt a “wait and see” attitude. When demand exceeds supply, property prices can only move upward.
While we understand the good intentions behind the cooling off measures, they may result in heating up the market instead when the shortage of housing especially affordable homes is not resolved. To address this, the Government must fill the huge gap and offer more affordable homes.
The authorities are in the position to build more affordable homes with their land resources, their ability to convert agriculture land for residential use, and to speed up approval process. If the local authorities can move away the hurdles soon, the chances of overcoming the low supply situation will be better. This will achieve the objectives of providing more affordable homes to the nation as demand and supply will adjust to reflect the market condition.
As shared earlier on the theory of Risk Homeostasis, some changes intended to make a system safer can actually make it worse. Putting cooling off measures in place that do not resolve the root cause may backfire on us, and heat up housing prices.
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. - By The Star
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