Incomes to Buy Houses

The government is insisting that the houses in Klang Valley is still affordable. But facts may speak differently.

The survey published in the local paper, gives the average income per month to own the property in various areas...

It seem the cheapest place to own a property is at the following locations...
- Melawati - with monthly income of RM9,360
- Nilai - Income of RM9,430
- Bukit Subang - RM 9,670

The highest being Mont Kiara at RM20,160.


The salary is not going up as fast as the rise of the house price. In 1985, the price of a linked house in Subang Jaya was RM200,000. Now it is RM1mil. An average buyer would spend about quarter of their salary to buy the house. Now, they have to crop about half of the salary.

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Klang Valley Land Transactions Records

The followings are records of land transaction in Klang Valley, extracted from theStar newspaper 17 Aug 2013.

1. Segambut  -  Freeland -  Industry Land  -  960 acres -- rm167 per sq ft
2. Taman Wahyu - 99 yr - Building  -------  12.38 acres -rm135 per sq ft.
3. Sungai Buluh ---60 yr - Industrial ------- 6.549 acres  -rm 298per sq ft
4. Klang           ---99 yr - Building --------- 60.0 acres   - rm 19
5. Jalan University - 99yr - Industry -------- 5.95 acres   - rm480 per sq ft
6. Kota Kemuning - 99 yr - Building ------- 1172acres -- rm 11 per sq ft
7. Tropicana          - 99yr -- commercial --- 6.41 acres -- rm 416 per sq ft
 

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Slowdown in Property Market

According to Malaysian Institute of Estate agents, the property transaction for the first half of 2012 showed a trend of slowing down. Until today, there was no sign of the reversal in the slowing down trend and it is expected that the trend will continue until 2013.

The blames was put on the exorbitant price, stringent banking rules and the general cautious sentiment.
The explanation for the trend are as follows:

- The asking price is too high. In 2010 and 2011, the residential properties saw an increase of about 30%, a figure which was too high and if left uncheck, it was going to burst the bubble. Various measures were taken and the trend starts to plateau.

- There was no meeting of mind between the seller and the buyers. The gap is rather too high thus preventing the closing of the deals.

- There was disparity between the asking price and the evaluated price. Take for example, a house with the asking  price of RM1 million, and the evaluated price is only RM800,000/ With that value, the bank loan is probably only RM700 thousand.

- The banking sectors had revised the way to calculate the eligible amount, it is no longer based on gross income. The calculation is made based on net income.

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Affordable House in Malaysia

The prices of the houses in Klang Valley is increasing at too fast a rate.
If we take the salary of fresh graduates in 1070s and 2012, then we will understand why the majority of the are very concern...

House Prices in Klang Valley and years to pay,
                                                               
                                                                 
Salary fresh graduates => 1970 --900/month         and   2012 -- 2500/month

                                          1970s              2012                 
- Single storey terrace  =>35,000  ......=>300,000
- Double story terrace  => 50,000 ...... => 750,000
- Banglow                    => 150,000 ..... => 5 millions

Years to Pay/exclude interest
- single storey terrace         3.2 year              10 years
- Double storey terrace      4.6 years             25 years
- Banglow                         14 year                166 year

The ETP, envisages to become a developed nation in 2020 with the per capita income of 48,000 from 24,000 in 2009. Using a simple estimate, the fresh graduate is expected to draw monthly salary of 10% of percapita, RM2400 in 2009 and RM4800 in 2020.

With the rising price we are actually worst off, a single storey terrace will not be costing RM300,000 in 2020. The price of houses in USA is probably much cheaper that in Malaysia.

I am glad our petrol is still cheaper...http://www.kshitij.com/research/petrol.shtml
You may download ETP report: ....http://etp.pemandu.gov.my/annualreport/upload/ENG_Annual_Report.pdf 

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Building Affordable Houses

Beautiful House

Viewing the prices of the newly launched houses, it confirms the fear of the middle class in Malaysia. The prices of homes are in fact beyond the reach of the majority of the population. The worry is worsen by the lack of effort by the government and its agencies.

In order to understand the drivers that pushed the prices up, it is worth to review the cost contents of the housing development. The following are the major cost elements:

a. Land Cost
Twenty years ago, the cost of land constitutes to about 10% of the project cost. Now the cost is reaching to 30%. The basic reason is land scarcity. It use to cost about RM10 per sq foot, now the same plot can cost up to RM300 per sq ft. It is expected that the land price to continue to increase.

b. Holding Cost
The approval of a project can easily take 3 years to complete. The main delay is the waiting for the approval from the different agencies. The longer the waiting the higher is the cost.

c. Unsold Units
It may come to be a surprise to many that there are still 1000 of units uncompleted or unsold. Driving around  in the town of Nilai or Salak Tinggi, near the KL international airport, there are uncompleted units and unsold unit. The worse is the situation in Bukit Beruntung, where more than half were abandoned projects. Simple logic tells us that the developers were losing millions. They have to make up somewhere else.

d. Building Material
The average price of material are on the rise. Cement and sand are more than double in the last 10 years. The developers will certain have to pass the price to the customers.

The effort to building affordable houses will certainly require commitment from the main players, especially the government. It is wrong for government to consider itself as a business partner, the government should be the custodian of the citizen.

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The Cost of Klang Valley Properties are Too High

The price of the houses in Klang Valley is too high. However the government and its politician still have the heart to argue that our pricing is still low. This is what they say... " we have compared the price with our closest neighbors, our price is still very low. In Singapore, it cost 5 times the price.

The politicians who said such are likely to fall into one of the following groups:
- they are that thick, that they are not able to analyse the situation logically.
- they are intending to confuse the targeted groups like the majority in the traditional vilages.
- they are too rich to bother about the fate of the general mass.

A. The monthly wage structure

1980 - upper middle income     => RM3,354     2012 ===> 10,208
         - Lower Middle income   => RM1016               ===> 8,000


B. House Prices in Klang Valley

1970s                                                                             2012
- Single storey terrace  =>35,000  ................................=>300,000
- Double story terrace  => 50,000 ................................ => 750,000
- Banglow                    => 250,000 .............................. => 5 millions

What a middle income groups can effort
70s - detached house
80s - terraced house
90s - apartment
2012 - low cost couse

The government can do alot in this. Most of the increased are due to speculators and practices of the industry.

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