1 - the malaysian property dilemma 11-10-2012
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The Malaysian Property Dilemma
Presented by Dr. Ernest Y Y Cheong
Malaysian Annual Property (MAPIS) 2012, 11th October 2012, Singgahsana Hotel, Petaling Jaya, Selangor
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ERNEST CHEONG PTL CHARTERED SURVEYORSReasons for buying and owning Property
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Why do people buy and own property?
It is a place to call home and perhaps to raise a family.
Others are more fortunate to have spare cash and see properties somewhat differently
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They buy for the steady source of additional income that comes through rental or leasing.
They buy for investment to realise capital gains
They speculate on properties that quickly appreciate in value, over a short period of time.
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Location, Location, Location!
Why do Real Estate Agents chant "Location, Location, Location"?
What do Real Estate Agents really mean?
Are there other important factors to consider when buying and selling property?
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Property prices will keep rising
There is a perception that when you buy from developers, whether a home, office or shop, when you sell the property in the re-sale (secondary) market, you will always be able to sell at a higher price and make a profit.
Yes or No?
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Property prices will keep rising
There is a perception among Malaysians that property prices will continue to rise thus putting pressure on younger Malaysians to rush to buy their dream homes now before it is too late when they cannot afford to buy.
Facts or Fantasies?
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Bukit Beruntung, SelangorYear Property Type Land Area Sale Price Price/Sq. Ft %
RM RM
9/1993 2 Storey Terrace 1,600 sq ft 100,000 63 100
7/2000 2 Storey Terrace 1,400 sq ft 85,900 61 97
11/2005 2 Storey Terrace 2,100 sq ft 27,500 13 21
12/2006 2 Storey Terrace 2,100 sq ft 72,000 34 54
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Wilayah Complex, Jalan Dang Wangi Kuala Lumpur
Year Property Type Land Area Sale Price Price/Sq. Ft % RM RM
2/1981 Shop-Lot 280 sq ft 163,800 585 100
9/1989 Shop-Lot 351 sq ft 125,000 355 61
10/2002 Shop-Lot 146 sq ft 41,000 281 48
3/2006 Shop-Lot 387 sq ft 120,000 309 53
10/2010 Shop-Lot 193 sq ft 70,000 361 62
4/2011 Shop-Lot 140 sq ft 57,150 408 70
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Jalan Hujan Emas 1, Overseas Union Garden, K. L Year Property Type Land Area Sale Price Price/Sq. Ft %
RM RM
5/1999 2 Storey Terrace 1,600 sq ft 250,000 156 100
9/2002 2 Storey Terrace 1,600 sq ft 260,000 162 103
11/2005 2 Storey Terrace 1,600 sq ft 310,000 193 124
11/2006 2 Storey Terrace 1,600 sq ft 280,000 175 112
9/2011 2 Storey Terrace 1,600 sq ft 380,000 237 151
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Jalan Desa Mesra, Taman Desa, Kuala LumpurYear Property Type Land Area Sale Price Price/Sq. Ft %
RM RM
12/1991 2 Storey Terrace 1,872 sq ft 185,000 98 100
9/2004 2 Storey Terrace 5,424 sq ft 650,000 119 121
5/2006 2 Storey Terrace 5,263 sq ft 900,000 171 174
12/2010 2 Storey Terrace 2,156 sq ft 840,000 389 396
7/2011 2 Storey Terrace 2,259 sq ft 580,000 256 261
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Property prices will keep rising
It is FANTASY that property prices will continue to increase and will never fall. Like stocks and shares, gold and other commodities, property prices CAN RISE and CAN FALL.
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ERNEST CHEONG PTL CHARTERED SURVEYORSWhat can you afford to buy?
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Malaysians are broadly divided into 3 Income Groups:
High Income: Take home pay RM14,000 per month and above
Middle Income: Take home pay RM8,000
per month
Low Income: Take home pay RM3,000 per month.
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Lower Middle Income FamiliesRM3,000 - RM8,000 per month incomes
Upper Middle Income Families
RM8,000 – RM14,000 per month Incomes
High, Middle and Low IncomeFor the purposes of this Study, we will focus only on the High, Middle and Low Income Malaysian families.
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Affordability TestsWe shall follow 3 Malaysian families
High Income: Take home pay RM14,000 per month and above
Middle Income: Take home pay RM8,000
per month
Low Income: Take home pay RM3,000 per month.
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Scenario No 1 - High Income Family
RM RMFamily Income (2012) 14,000
ExpenditureEPF 1,540Income Tax 2,200Grocery 800House Rent (Live in own house) 0Car Loan 2,500 Car Maintenance & Petrol 800 Food (Dine-out) 600 Children’s Education & Related Expenses 800 Children Pocket Money 800 Others 500 Emergencies 500 11,040
---------Surplus available to pay Housing Loan 2,960
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Scenario No 2 - Middle Income Family
RM RMFamily Income (2012) 8,000
ExpenditureEPF 880Income Tax 700Grocery 500House Rent (Live in own house) 0Car Loan 1,500 Car Maintenance & Petrol 700 Food (Dine-out) 400 Children’s Education & Related Expenses 500 Children Pocket Money 500 Others 300 Emergencies 300 6,280
---------Surplus available to pay Housing Loan 1,720
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Scenario No 3 - Low Income Family
RM RMFamily Income (2012) 3,000
ExpenditureEPF 180Income Tax 0Grocery 300House Rent (Live in own house) 0Motorcycle Loan 400 Motorcycle Maintenance & Petrol 300 Food (Dine-out) 100 Children’s Education & Related Expenses 300 Children Pocket Money 300 Others 300 Emergencies 300 2,480
---------Surplus available to pay Housing Loan 520
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ERNEST CHEONG PTL CHARTERED SURVEYORSAffordability Test
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Affordability TestSurplus income to pay Housing Loans
RMHigh Income Family 2,960Middle Income Family 1,720Low Income Family 520
I conclude that the High Income Family, Middle Income Family and Low Income Family can only afford to buy the property types with the respective affordable Housing Loans as shown in the next slide
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Affordability Test
Monthly Affordable Affordable Affordable MonthlyFamily Income Property Price Housing Loan InstalmentRM RM RM RM
2 Storey14,000 Terrace House 550,000 495,000 2,960 (30 yrs)
8,000 Apartment 320,000 288,000 1,720 (30 yrs)
3,000 Low/Medium 95,000 85,500 520 (30 yrs)Cost Flat
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Affordability Test
I conclude that based on Malaysian families’ financial ability and affordability, the prices of 2 terrace houses in Taman Desa, Bangsar Baru, Damansara Heights and Taman Tun Dr. Ismail and condominiums in Menara Binjai and Hartamas in Kuala Lumpur, are beyond the RM550,000 price range that Malaysian families can afford to pay.
I find this conclusion to be a very depressing and discouraging scenario, as shown in the two tables below:-
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Prices of Properties Malaysian Families can afford to pay
Property Price Housing Loan RM RM
RM14,000 monthly Income 550,000 495,000 RM8,000 monthly Income 320,000 288,000 RM3,000 monthly Income 95,000 85,500
Prices of Properties in Kuala LumpurLocation Property Type Sale Price Sale Date
RMTaman Desa 2 Storey Terrace 910,000 7/2011Bangsar Baru 2 Storey Terrace 1,180,000 1/2011Taman Tun Dr. Ismail 2 Storey Terrace 1,020,000 2/2011Damansara Heights 2 Storey Terrace 1,160,000 9/2011Menara Binjai Condominium 780,000 9/2011Hartamas Regency Condominium 1,600,000 10/2011
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Premised on the above information and analysis of the comparative figures between actual prices of properties in Kuala Lumpur and the ceiling price of RM550,000 that Malaysian families with monthly incomes of RM14,000 and below can afford to pay, can we still claim that “Our property prices are still affordable” is a true representation of the actual situation and reality facing Malaysian families today? This is
“The Malaysian Property Dilemma”
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Thank You
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ERNEST CHEONG PTL CHARTERED SURVEYORSThank you
Presentation by
Dr. Ernest Y Y CheongErnest Cheong PTL Chartered Surveyors
No. 37-2, Jalan Desa, Taman Desa
58100 Kuala Lumpur, Malaysia
Tel: +6 03 7980 4512
Fax: +6 03 7980 4519
Email: [email protected]
Website: www.ecptl.com
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ECPTL 2005