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Post date: Sep 14, 2010 2:21:34 PM
KUALA LUMPUR, Sept 7 — Red FM radio DJ Terry Ong has been on the lookout for a condominium but is reeling from shock as prices appear to be spiralling out of control.
To illustrate his frustration, the DJ quoted prices at the Menara Duta complex in the Segambut area which he says has gone from RM250,000 for a renovated unit at the end of last year to RM330,000 now for a standard unit — a jump of 32 per cent in less than a year.
“It’s unaffordable,” he said of current property prices.
Account manager Christopher Chew, 31, has also been hunting for a property in the past six months but has still not been able to find a suitable home to fit his RM300,000 budget.
Among developments he has looked at is the Cova Suites, a condominium development in the up-and-coming neighbourhood of Kota Damansara where a 1,300 sq ft unit is typically going for about RM450,000.
“Developers are more bold in coming up with prices,” he said.
Many middle-class home hunters like Chew and Ong are becoming frustrated by prices that are far outpacing income growth. Figures provided by National Property Information Centre (Napic) show that average values of residentail properties in Malaysia rose a whopping 16 per cent, to RM212,815 in the first half of this year from RM183,807 in same period last year.
For Kuala Lumpur, the increase has been even more dramatic, rising an eye-watering 34 per cent to RM485,435 in the first half of the year from RM362,569 last year — 9 times the average urban household income of RM54,000. Housing and local government minister Datuk Chor Chee Heung said that the government is building some 76,000 low cost homes nationwide costing about RM42,000 each over the next three years, but it is unable to tell private developers how much to build to boost supply of middle-class housing in the market.
“Those that cannot afford it will just have to move to houses further away from the city where it is cheaper,” said Chor.
But some middle class workers find the prospect of being banished to the “fringes” unappealing.
One married Malay manager who currently rents a townhouse in Damansara Challis in Petaling Jaya but is looking to buy his own home, says moving to outlying areas meant living in more mono-racial neighbourhoods.
“Puchong and Shah Alam where it is cheaper are mainly populated by one race,” he noted. “I don’t want to move to the fringes but I want my kids to grow up in a mixed-race environment and the location makes a difference.”
The manager expressed surprise that prices for Damansara Challis — a leasehold development near high tension wires — have escalated by as much as 30 per cent above its 2007 launch price to RM850,000, given that an estimated half of the units are still vacant.
Real Estate and Housing Developers Association (Rehda) president Datuk Michael Yam said that the issue of rising property prices was partly due to an imbalance of supply and demand as more migrants move to land scarce Kuala Lumpur.
“Even if 50,000 new housing units are needed in KL that is still a huge number to build,” he said at a recent Rehda media briefing.
One developer, however, privately expressed concern that the market had become too speculative and the dramatic increase in housing prices may become unsustainable.
“I am all for sustainable price growth but the current market is too speculative,” one developer told The Malaysian Insider. “Most of the units are taken up by employees of the developer hoping to sell for a profit when the development is completed.” There are signs that the government is concerned that a real estate bubble is forming as investors pour money into property in the hope that prices will keep spiralling upwards.
The Edge business weekly had reported a fornight ago that the government is exploring the possibility of increasing mortgage caps to 80 per cent of loan-to-value ratio in a bid to keep the market from overheating. This comes as Singapore introduced a series of measures a week ago to reign in investors and speculators, such as a 70 per cent mortgage cap for investors with more than one property and launching 36,000 public housing units this year and next.
Such a move, however, may only serve to hurt first-time homebuyers who will have to struggle to come up with the down payment whereas richer investors are unlikely to face such difficulties.
Edward Seah, who works as an engineer and already owns one condominium which has doubled in value in the past six years, said that a 80 per cent mortgage cap will only cause more properties to flow to rich investors.
“The rich will get richer,” he said.
Seah said that while he would like to upgrade from his present condominium, he will not buy another house given current valuations.
“Are such high prices warranted?” he questioned. “I refuse to feed into the current property frenzy.”
* Figures for average residential property prices in Malaysia and Kuala Lumpur that were earlier reported reflected all property types and have now been corrected to reflect only residential properties.
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