Property consultants forecast the property market to remain slow for the rest of the year. Will the average middle-income earner be able to afford the house of their dream now?
COMMUNICATIONS executive Michelle (not her real name) has been house-hunting for a while now but has yet to find a property that suits her budget.
Having been in the workforce for nine years, Michelle, 33, feels it is time to buy her own house. But with the prices of residential properties in Malaysia skyrocketing over the last two years, her prospect of getting her dream home looks bleak.
“Back in 2009, my friends were telling me to buy my own place but at that time, my priority was to travel. Around last year, when I was finally ready to commit to getting a house, prices weren't what they used to be any more.
“A decent 1,000sq ft (93 sq m) apartment that used to cost around RM200,000 to RM300,000 is now RM500,000 to RM600,000. That is far beyond what I can afford,” she laments.
From early 2010 up to the end of last year, residential properties in good locations within the Klang Valley have seen a sharp spike of between 20% and 40% in price, a trend which has caused grave concern for potential house-buyers.
But how is the scenario looking in 2012?
According to KGV International Property Consultants executive director Anthony Chua, the first half of the year has been generally quiet.
“There seems to be a breather in the residential market. It's definitely not as busy compared with the same period last year. (The number of) inquiries with us have also lessened significantly,” Chua says.
He explains that inquiries in 2012 with KGV on high-end properties (above RM2mil) have gone down by about 30% compared with the first half of last year. Inquiries on other segments (between RM1mil and RM2mil, and below RM1mil) have also gone down but not as drastically.
Reasons for this could include tighter lending guidelines set by the banks and buyers taking a more cautious approach on their investments this year.
(Following Bank Negara's new lending guidelines, which came into effect on Jan 1, loans are now approved based on net income compared with gross income previously, in addition to the need for more documentation. The new guidelines are intended to help keep household debt in Malaysia to reasonable levels.)
Chua: ‘While interest in property purchase has waned, prices are still going strong for landed property.’Chua adds that there was a lot of speculation in the property market in the past two years, and that the market is due for a correction.
“The economic scenario is not as rosy and people are expecting things to worsen, which could be why they are hesitant to invest. And to a lesser degree, it could also be the coming general election, which is causing some uncertainties,” Chua says.
Paul Khong, executive director of property consultancy CB Richard Ellis (M) Sdn Bhd, shares similar sentiments.
“The number of buyers (for properties above RM3mil) has dropped by about half with the stricter bank-lending guidelines, which has eliminated the speculative group (of buyers).
“For properties below RM2mil, the market is relatively active with more real transactions. With the new lending guidelines in place, many investors have disappeared from the radar,” Khong says, adding that those who want to purchase their third property now will need 30% in cash for downpayment.
“So, to buy a RM3mil property, they'll need RM1mil in cash if it is their third property. Previously, RM400,000 was enough,” Khong says.
Interestingly, Chua notes that while interest in property purchase has waned, prices are still going strong for landed property.
However, sellers are seen to be less aggressive this year.
“They seem to be less demanding and more willing to accommodate. Last year, they would have said this is my price', and would have refused to budge,” he says.
Property consultants forecast the property market to remain quite slow for the rest of the year.
Khong: ‘The number of buyers (for properties above RM3mil) have dropped by about half.’ >>
Even so, for average middle-income earners such as Michelle, the current prices of properties in various locations within the Klang Valley (refer to chart) leave her with few options.
“I don't even dare look at landed property any more. Even apartments at relatively good locations cost RM400,000 and up.
“For my budget, an apartment around RM200,000 to RM350,000 would still be quite comfortable,” says Michelle, who currently lives with her family in Petaling Jaya.
A mass communications graduate from the United States, Michelle draws a salary of about RM5,000 a month, which goes into paying for her car loan, household expenses, utilities, and credit card bills.
“Household expenditure doesn't just cover grocery shopping. I also have to pay for medical bills, car maintenance and repairs as well as give my parents some money too,” she says.
“As banks are now looking at net income, the loan amount I qualify for is unlikely to be enough for me to even afford an apartment in the Klang Valley.
“Sure, you can still get cheaper houses in places like Bukit Beruntung, but it's just too far away. My life is here. At the rate property prices are going, the thought has crossed my mind that I may never be able to afford a place of my own.”
It's not just within the Klang Valley that property prices have escalated.
Early last month, it was reported that residential property prices in Penang have shot up by more than 25% over the past five years.
Condominium units in Batu Ferringhi, Tanjung Bungah and Gurney Drive, with sea-front views, are being sold at astronomical prices, in some cases beginning with RM2mil for a 1,000 sq ft unit.
Houses which cost about RM500,000 in 2007 now cost RM800,000 an increase of about 30%.
Chang: ‘An entire generation of young adults could be locked out of property investments.’
Raine & Horne Malaysia director Michael Geh was reported as saying that the increase was among the steepest in the Pulau Tikus, Gurney Drive, Tanjung Tokong, and Tanjung Bungah residential neighbourhoods, which experienced a 25% increase in prices of condominium units.
Other areas where prices of condominium units and terrace and semi-detached houses have shot up by at least 25% are Bayan Baru, Sungai Ara, Minden Heights and Batu Maung.
Medium-range housing schemes in George Town neighbourhoods of Perak Road, MacCallum Street, Jelutong Road and Sungai Pinang have also not been spared an apartment located in such a neighbourhood cost RM180,000 in 2007 but is now RM250,000.
It is precisely with this concern in mind that the National House Buyers Association (HBA) has come up with a 10-point proposal to the Government, to find solutions which it claims will hopefully bring prices down.
Among the proposals are for the Government to unlock its land banks in various locations and give priority to affordable housing projects rather than high-end properties.
The HBA is urging the Government to take the lead in developing affordable homes and not leave it to property developers.
It has also proposed that those who buy homes under the affordable housing projects (with a proposed price range of RM150,000 to RM300,000) be barred from selling their property until after 10 years. Before the 10-year period is up, they should only be allowed to sell the house back to the Government.
The association has also proposed that the Government impose a higher stamp duty and real property gains tax as well as tighter mortgage rules for those buying a third and subsequent properties.
HBA secretary-general Chang Kim Loong notes that with the way prices are climbing, the majority of young working adults will not be able to afford to buy a home.
“I'm talking about young people from around the age of 25 to 35 years old, with an average income of about RM3,500 per month.
“The rule of thumb is that a third goes into paying for your home.
“But with RM1,000, many will still not be able to afford it. The consequence of this could be that an entire generation of young adults could be locked out of property investments,” he explains.
A question that needs to be asked, however, is whether HBA's proposal for “affordable housing scheme” by the Government will be able to meet the needs of the urban middle-income earners such as Michelle.
“There are several factors to consider. The location, for example,” Michelle says.
“If the design and quality is decent, then yes, I am willing to consider it. But this doesn't mean we have to settle for bad quality homes, with cheap construction materials.”
COMMUNICATIONS executive Michelle (not her real name) has been house-hunting for a while now but has yet to find a property that suits her budget.
Having been in the workforce for nine years, Michelle, 33, feels it is time to buy her own house. But with the prices of residential properties in Malaysia skyrocketing over the last two years, her prospect of getting her dream home looks bleak.
“Back in 2009, my friends were telling me to buy my own place but at that time, my priority was to travel. Around last year, when I was finally ready to commit to getting a house, prices weren't what they used to be any more.
“A decent 1,000sq ft (93 sq m) apartment that used to cost around RM200,000 to RM300,000 is now RM500,000 to RM600,000. That is far beyond what I can afford,” she laments.
Soaring interest: Prospective house buyers at a property launch. — Filepic
But how is the scenario looking in 2012?
According to KGV International Property Consultants executive director Anthony Chua, the first half of the year has been generally quiet.
“There seems to be a breather in the residential market. It's definitely not as busy compared with the same period last year. (The number of) inquiries with us have also lessened significantly,” Chua says.
He explains that inquiries in 2012 with KGV on high-end properties (above RM2mil) have gone down by about 30% compared with the first half of last year. Inquiries on other segments (between RM1mil and RM2mil, and below RM1mil) have also gone down but not as drastically.
Reasons for this could include tighter lending guidelines set by the banks and buyers taking a more cautious approach on their investments this year.
(Following Bank Negara's new lending guidelines, which came into effect on Jan 1, loans are now approved based on net income compared with gross income previously, in addition to the need for more documentation. The new guidelines are intended to help keep household debt in Malaysia to reasonable levels.)
Chua: ‘While interest in property purchase has waned, prices are still going strong for landed property.’“The economic scenario is not as rosy and people are expecting things to worsen, which could be why they are hesitant to invest. And to a lesser degree, it could also be the coming general election, which is causing some uncertainties,” Chua says.
Paul Khong, executive director of property consultancy CB Richard Ellis (M) Sdn Bhd, shares similar sentiments.
“The number of buyers (for properties above RM3mil) has dropped by about half with the stricter bank-lending guidelines, which has eliminated the speculative group (of buyers).
“For properties below RM2mil, the market is relatively active with more real transactions. With the new lending guidelines in place, many investors have disappeared from the radar,” Khong says, adding that those who want to purchase their third property now will need 30% in cash for downpayment.
“So, to buy a RM3mil property, they'll need RM1mil in cash if it is their third property. Previously, RM400,000 was enough,” Khong says.
Interestingly, Chua notes that while interest in property purchase has waned, prices are still going strong for landed property.
However, sellers are seen to be less aggressive this year.
“They seem to be less demanding and more willing to accommodate. Last year, they would have said this is my price', and would have refused to budge,” he says.
Property consultants forecast the property market to remain quite slow for the rest of the year.
Khong: ‘The number of buyers (for properties above RM3mil) have dropped by about half.’ >>
Even so, for average middle-income earners such as Michelle, the current prices of properties in various locations within the Klang Valley (refer to chart) leave her with few options.
“I don't even dare look at landed property any more. Even apartments at relatively good locations cost RM400,000 and up.
“For my budget, an apartment around RM200,000 to RM350,000 would still be quite comfortable,” says Michelle, who currently lives with her family in Petaling Jaya.
A mass communications graduate from the United States, Michelle draws a salary of about RM5,000 a month, which goes into paying for her car loan, household expenses, utilities, and credit card bills.
“Household expenditure doesn't just cover grocery shopping. I also have to pay for medical bills, car maintenance and repairs as well as give my parents some money too,” she says.
“As banks are now looking at net income, the loan amount I qualify for is unlikely to be enough for me to even afford an apartment in the Klang Valley.
“Sure, you can still get cheaper houses in places like Bukit Beruntung, but it's just too far away. My life is here. At the rate property prices are going, the thought has crossed my mind that I may never be able to afford a place of my own.”
It's not just within the Klang Valley that property prices have escalated.
Early last month, it was reported that residential property prices in Penang have shot up by more than 25% over the past five years.
Condominium units in Batu Ferringhi, Tanjung Bungah and Gurney Drive, with sea-front views, are being sold at astronomical prices, in some cases beginning with RM2mil for a 1,000 sq ft unit.
Houses which cost about RM500,000 in 2007 now cost RM800,000 an increase of about 30%.
Chang: ‘An entire generation of young adults could be locked out of property investments.’ Raine & Horne Malaysia director Michael Geh was reported as saying that the increase was among the steepest in the Pulau Tikus, Gurney Drive, Tanjung Tokong, and Tanjung Bungah residential neighbourhoods, which experienced a 25% increase in prices of condominium units.
Other areas where prices of condominium units and terrace and semi-detached houses have shot up by at least 25% are Bayan Baru, Sungai Ara, Minden Heights and Batu Maung.
Medium-range housing schemes in George Town neighbourhoods of Perak Road, MacCallum Street, Jelutong Road and Sungai Pinang have also not been spared an apartment located in such a neighbourhood cost RM180,000 in 2007 but is now RM250,000.
It is precisely with this concern in mind that the National House Buyers Association (HBA) has come up with a 10-point proposal to the Government, to find solutions which it claims will hopefully bring prices down.
Among the proposals are for the Government to unlock its land banks in various locations and give priority to affordable housing projects rather than high-end properties.
The HBA is urging the Government to take the lead in developing affordable homes and not leave it to property developers.
It has also proposed that those who buy homes under the affordable housing projects (with a proposed price range of RM150,000 to RM300,000) be barred from selling their property until after 10 years. Before the 10-year period is up, they should only be allowed to sell the house back to the Government.
The association has also proposed that the Government impose a higher stamp duty and real property gains tax as well as tighter mortgage rules for those buying a third and subsequent properties.
HBA secretary-general Chang Kim Loong notes that with the way prices are climbing, the majority of young working adults will not be able to afford to buy a home.
“I'm talking about young people from around the age of 25 to 35 years old, with an average income of about RM3,500 per month.
“The rule of thumb is that a third goes into paying for your home.
“But with RM1,000, many will still not be able to afford it. The consequence of this could be that an entire generation of young adults could be locked out of property investments,” he explains.
A question that needs to be asked, however, is whether HBA's proposal for “affordable housing scheme” by the Government will be able to meet the needs of the urban middle-income earners such as Michelle.
“There are several factors to consider. The location, for example,” Michelle says.
“If the design and quality is decent, then yes, I am willing to consider it. But this doesn't mean we have to settle for bad quality homes, with cheap construction materials.”
BY LISA GOH lisagoh@thestar.com.my
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