PETALING JAYA: Housing and Local Government Minister Datuk Seri Chor Chee Heung said the housing needs of the middle-income group, which formed more than 40% of the community, must be addressed and hoped that the 1Malaysia People’s Housing Scheme (Prima) announced last year would progress speedily.

Low cost housing is capped at RM42,000, while affordable housing cost between RM85,000 and RM300,000.

Chor said the Government had been successful in providing low cost housing, but there was a need to look into the grouses of the middle-income group.

Chor said this to reporters after attending a roundtable discussion entitled “Housing Affordability: Issues and Challenges”, jointly organised by the Real Estate Housing Developers Association (Rehda) and the Eastern Regional Organisation for Planning and Human Settlement yesterday.

“The Ministry will consider the views and suggestions by the task force to be formed and we will put forward views and perspectives to the Federal Government.

“Affordable housing has become an important topic, with the greatest need being in urban centres like Kuala Lumpur and Penang and to a certain degree in Johor Baru due to urban migration.

“The Prima scheme is a laudable project…(but) it is moving sluggishly. We hope to see Prima making speedy progress. At the same time, we also hope the developers will play their role,” he said.

He said it might be more efficient to streamline the different agencies which provided housing. Chor said it was not possible to compare Malaysia’s housing situation with Singapore because the government there was able to step in quickly to provide both low and middle-cost housing units.

Earlier, at the discussion, Rehda president Datuk Michael Yam listed out the challenges faced by developers when providing social housing including the high cost of land. “Planning requirements need to be reviewed because we are beginning to see a proliferation of small serviced apartments into the market. Developers are resorting to building small units in order to increase the number of units to make the project viable,” Yam said.

He called on the Government to free government and state land for affordable housing and to exempt developers from having to fork out capital for utilities infrastructure like reservoir and sub-stations.

“In developed countries, the government build all these and the developers pay a contribution. When developers have to fork out capital expenditure for the infrastructure, invariably the consumer will have to pay for it. This results in an increase in housing cost,” said Yam.

Secretary-general of the House Buyers Association Chang Kim Loong called on the Government to bring back the real property gains tax in full force to curb speculation.

Effective since Jan 1, this year, the gains from property held for less than two years were subjected to a 10% tax. For properties held between two and five years, a 2% was imposed while those who kept it for more than five years are exempted from tax.

Under the previous ruling, a Malaysian individual who sells his property within the first two years of purchase is taxed 30% of the gains. The rates slide to 20% (third year), 15% (fourth year) and 5% (fifth year). He is not taxed on the sixth and subsequent year.

Source: The Star

ALL the OCPDs in Penang have been instructed to form special teams to patrol residential areas where there are houses that will be left vacant when the occupants balik kampung for Hari Raya Aidilfitri.

State deputy police chief Senior Asst Comm Datuk Abdul Rahim Jaafar said that the police wanted to stop rampant house break-ins during the festive season and this move was to enable people to travel with peace of mind.

“Those travelling out of town are urged to contact their nearest police station so that patrolling can be carried out in their neighbourhood,” he said.

He was speaking to reporters after the Ops Selamat Campaign in conjunction with the coming Hari Raya Aidilfitri celebrations at the Juru Toll Plaza yesterday.

SAC Abdul Rahim said people could fill up a form to tell the police when they would be away.

The form can be downloaded from the Royal Malaysian Police website.

He also said there were fewer road accidents in the state be-tween January and July this year compared to the same period last year.

“There were 37,158 cases in 2011 during the same period and only 21,984 cases this year.

“As such, there is a difference of 15,174 cases,” he added.

SAC Abdul Rahim said there were only 220 cases involving fatalities between January and July this year compared to 392 cases last year.

He said police would monitor three ‘black spots’ or accident-prone areas in the state — Jalan Baru in Prai, Jalan Chain Ferry and the Penang Bridge.

He said Ops Selamat, a joint initiative of various agencies such as the police, Road Transport Depart- ment and Civil Defence Department, would end on Aug 26.

“All the agencies will work together to ensure that the public feel safe,” he added.

Source: The Star

THE government will initiate measures to address various issues gripping the property sector, including curbing rampant speculative activities in the market.

Housing and Local Government Minister Datuk Seri Chor Chee Heung said he would present to the cabinet findings of an industry meeting which could be used to come up with innovative ways to build affordable homes.

“The government has done fairly well in addressing the housing issues of the lower income. However, 40 per cent of the medium-income society still need accommodation.

“My ministry will use some of the findings to improve the sector,” Chor told reporters here after opening a roundtable discussion on “Housing Affordability – Issues and Challenges”.

The government will put forward recommendations, which will be based on proposals made by Real Estate and Housing Developers Association Malaysia (Rehda) such as on how to curb speculative property prices, financing, abandoned projects and sluggish developments.

Metro Kajang Holdings Bhd group managing director Datuk Eddy Chen Lok Loi said for example, a house built in Perlis cost RM250,000 but the same house using the very same materials but built in KLCC would cost RM1 million.

“This is caused by land cost due to two different locations. Nevertheless, there are some of the issues which Rehda will look into to address this such as materials prices. Working groups and a task force have been set up,” said Chen.

Meanwhile, National House Buyers Association secretary general Chang Kim Loong said all parties, including the government and developers, need to launch proactive measures to stop steep price increases in the property market due to false demand and excessive speculation fuelled by easy mortgages and low real property gain tax.

“There is a huge mismatch between what the average household income can afford to buy compared to what is available in the market. A homeless generation will emerge and create various social problems,” said Chang.

Chang said the average rakyat in a major urban area was struggling to buy his dream home where the average household with income of RM5,962 in 2009 would not be able to qualify for a 90 per cent loan over a 30-year period.

Assuming the average household income rises 15 per cent this year, the household may still not qualify for a 90 per cent loan in far areas such as Kajang, let alone in hot areas such as Kuala Lumpur.

He added that the government must also fine-tune the Bumiputera quota which has not made any headways.

“Don’t get me wrong, we have no qualms over the discount for the first buy. But when you buy properties for the fourth and the fifth time and get up to 15 per cent discount … that is wrong,” said Chang.

Source: Business Times

Jambul Heights, a low density residential development by Aurora Properties Sdn. Bhd. This condominium is strategically located within the established township of Bukit Jambul, Penang.

Comprises 62 condo units with built-up area from 1,221 sq.ft. onwards. Spacious layout with 3 bedrooms and 3 bathrooms, and comes with 2 car parks.

Project Name : Jambul Heights
Location : Bukit Jambul, Penang
Property Type : Apartment/Condominium
Built-up Area : 1,221 sq.ft. onwards
Total Units: 62
Land Tenure : Freehold
Indicative Price : RM702,000 onwards
Developer : Aurora Properties Sdn. Bhd.
Contact No: 04-228 3539

Location Map:

LATELY, there have been many ongoing discussions on the topic of high property prices. It made me ponder on the various causes that might have contributed to the situation, including the question of whether developers are making too much.

As I took a sip of tea, many thoughts came to mind which I found interesting and worth sharing before we dwell further into the real factors of rising property prices.

Based on annual reports (see chart) of three major property developers in Malaysia, namely SP Setia, UEM Land Holdings and Mah Sing Group, they are generating an average of 18% profit margin from their projects, and at the same time incurring a staff cost of about 7% of their total revenue.

These companies are major developers in mass residential properties which have high sales turnover, and therefore a good reflection of the average developers’ profit margin in the residential market.

These findings may contrast with people’s perception of the profitability of the property development industry.

Though it may sound like a fantasy, assuming I could convince these three property developers to give back their entire profit to their customers, it would mean an average of 18% discount on property prices for the year in question.

This would seem like a fantastic bonanza for the buyers of the properties in question. But would a 18% discount really make these properties affordable? I would imagine that people will still find these properties expensive.

Let’s take an example of a terrace house that costs RM700,000 in Petaling Jaya. It would be priced at RM574,000 after the 18% discount.

If a home buyer is able to secure a 90% loan with a maximum repayment period of 30 years, the monthly loan instalment for RM700,000 and RM574,000 would be RM3,081 and RM2,526 respectively (based on a BLR-2.4% loan package with current BLR at 6.6% per annum).

From the above example, while the discount may seem substantial at absolute price, it is not significant in terms of monthly loan instalment for home buyers.

The debt commitment level for the latter is still considered high and out of reach for most people especially those who have just started their career.

Now, let’s take a hypothetical scenario that the property developers decide to make their staff work for free that year.

It would mean another 7% discount to customers after deducting staff cost. Even with this total discount of 25%, property prices in many areas would still be considered unaffordable to many.

Anyhow, back to reality, it is impossible for any commercial enterprise to work for free or give up its profit if it was to run a sustainable business, as well as to satisfy its shareholders’ expectations.

For the property development industry which has a product life cycle of four to six years (starting from land acquisition to handover of keys to customers), it is a challenge to further compress the profit margin after taking into account the risk and inflationary factors involved in such a long product life cycle.

Let us look at other industries as a comparison and review their profit margins.

For the banking industry, the three largest local banks that were selected are Maybank, CIMB and Public Bank. Likewise, the three major players from the mobile telecommunication services were Axiata, Maxisand Digi.

The results showed that the average profit margin for the banking industry is 35%, while the mobile telecommunication industry is enjoying an average profit margin of 26%. So, back to my question “are developers in Malaysia really making too much?”

Compared with the average profit margin of the banking and telecommunication industries, the profit margins of property development companies are significantly lower and definitely not on par in terms of the actual profit before tax figures.

Putting aside the profit margin for property development which is already relatively low compared with the other two industries, what are the other factors that are causing high property prices?

Many other underlying factors could be looked into in relation to the escalating property prices, instead of merely contemplating the issue as a market trend or as a result of developers’ profits.

The Government, property developers, home buyers, as well as NGOs (non-government organisations) will need to work together to identify the root causes of inadequate supply of affordable homes in Malaysia.

Let’s ponder this issue over the next few weeks and I welcome any suggestions and feedback to shed some light on it as I dwell further into this crucial topic in my next article.

● FIABCI Asia-Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

Source: The Star