My immediate next-door neighbours, Angie and Ratna, both sold their double-storey linkhouses in USJ 9 in recent months.
One is an intermediate 24ft x 75ft lot that went for RM652,000, while the other unit, a 29ft x 75ft end lot, fetched RM630,000. The intermediate unit has a bigger built-up area.
Ratna bought the end lot about two years ago from Fiona for about RM430,000. It was a bit rundown but she renovated it and rented it to a gynaecologist before she moved in. Now, the house has been sold to a young couple — a veterinarian and his wife.
As for Angie, she has occupied her house for 19 years.
These days, such houses are marketed as super-links to denote the relatively large built-up as developers now build houses with smaller built-ups than in the past. Unlike the 24ft/29ft by 75ft units of yesteryear, which my neighbours and I bought for about RM170,000 in 1992, the super-links of today in a prime area almost always cost more than RM1 million.
Ratna reminded my wife that my end-lot house, which I feel is among the “neatest” on the street, could fetch RM700,000. I believe it is worth more that that with the renovations that we have put in and the Kelana Jaya-Putra Heights LRT extension under construction, within walking distance just 500m away. Proximity to the LRT is a key factor in determining future price and value, according to many property consultants.
I told my wife, why don’t we test the market and put a RM850,000 price tag on it? Maybe in this crazy market, with limited prime land left in Kuala Lumpur and the Shah Alam area, there will be a crazy buyer or property agent willing to bite.
But then again, even if I managed to get my dream price, what could I get now for RM850,000? If it is a prime area, I doubt I can get a house of a similar size to mine.
If I do, it is likely to be one with a smaller built-up. The nearest new project is Sime Darby’s latest phase at Putra Heights, The Glades, which offers a range of products that all exceed RM1 million. The cheapest —the Mews, comprising 1-storey and 2½-storey townhouses — range from RM1.35 million to RM2.68 million. The Ensemble, comprising 3-storey and 3½-storey super-links, cost between RM2 million and RM4.6 million.
At the intersection of Persiaran Kewajipan — where the LRT runs through — and Persiaran Subang Permai at USJ 1, a studio unit at the mixed commercial and residential Da Men project starts from RM350,000, which is more than the smaller landed terraced houses in the area.
With house prices escalating in the last few years and showing no signs of easing despite the expected slowdown in the world economy and a eurozone crisis nowhere near an amicable solution, buyers are disappointed that developers are not putting enough houses on the market that the majority can afford.
They are not building houses for the 70% to 80% of households in the country that earn below RM3,000 a month. In short, there is a mismatch between supply and demand.
Who are the developers building for then? For the rich and upper middle class who have money and can easily get financing to buy more houses and invest in properties? For foreign buyers? Speculators? While property consultants anticipate a 15% to 20% drop in transactions this year, property prices are expected to remain firm.
The government has taken some efforts to cool down the property market by tightening financing guidelines and making more affordable houses available through the My First Home Programme.
Bank Negara Malaysia’s guidelines on responsible financing, for example, states that banks must assess loan applications based on net disposable income and not gross income.
The aim is to deter speculative buying and keep household debt manageable. Banks were previously — and even today — accused of engaging in predatory lending to encourage house buyers to borrow beyond their means.
But such efforts and incentives for developers to build cheaper houses have not had an immediate impact on buyers looking for affordable houses below RM250,000, especially in the Klang Valley and major cities. The average price of a residential property in Kuala Lumpur was about RM485,000 last year, which is roughly nine times the average urban household annual income of RM54,000.
So, it wasn’t a surprise when it was reported on June 18 that the Finance Ministry, which is still concerned about soaring house prices, had sought the help of the National House Buyers Association (HBA) to find a solution to the predicament faced by the majority of potential house buyers. I am glad that the government is concerned.
The association has proposed 10 measures that it thinks will help to bring prices down. It had, in the past, warned the government that if action is not taken, it could result in the young becoming a “homeless” generation. Even former finance minister Tun Daim Zainuddin had said the the prices of residential properties in Malaysia are too high and “are going up like crazy”.
HBA wants the government to take the lead in developing affordable homes by making land available and not leave it to the property developers “who are profit maximising entities”. The suggestions include disallowing those who buy homes in affordable housing projects (in the RM100,000 to RM300,000 range) from selling their properties.
Effectively, that means the buyers can only transfer the houses to their next of kin. They can dispose of the houses in 10 years, but if they want to do so earlier, they have to sell it to the government.
Another important step is to weed out speculators by imposing higher stamp duty and real property gains tax (RPGT) as well as tighter financing limits, notably for the purchase of third and subsequent properties. The idea is not to discourage investment but to punish the speculators when they make their exit.
There have been suggestions that the government impose RPGT of up to 70% for those who sell their properties in the first year or two, compared with the present 10% rate.
A high RPGT is an effective tool to curb speculation, but it will be opposed by many developers and house buyers/investors, who believe the market is not experiencing a bubble. Their dictum is “let the market dictate”, but try telling that to the many who cannot afford to buy a decent house.
Azam Aris is deputy editor-in-chief at The Edge
The article appeared in The Edge Malaysia Weekly 25, June 2012.