Business

Saturday August 1, 2009

To boost or not to boost property


I read P. Gunasegaram’s article with much interest. Property financing in Malaysia is catered for the speculative market.

I have even seen financing at 105%, where the property is 100% financed with an additional 5% for MRTA. Is this possible? Well, where there’s a will, there is a way.

I have worked in the Philippines for five years and the country does not face speculation in property prices. Why? Because banks do not finance end user buyers, but developers do.

The terms are usually 10% downpayment, followed by 50% payable within 2-3 years, and then remaining 40% within 3-5 years.

Another reason is that foreigners are NOT allowed to buy landed properties, which brings me to my next point.

In Malaysia, foreigners can buy landed properties and so, we have this group with high purchasing power exerting their influence in the property market.

Also, Malaysian developers thrive in the “sell first, build later” concept, which is contentious if compared to some developed countries.

Developers today, can sit and count their profits even before the bulldozer does a single clearing on the land. If the land is in a prime area ... fine and well, but what happens if it’s in the outskirts? Simple – developers wait and see if there is good response and only then decide to proceed.

With the current easing in rules, if I were a developer, this is exactly what I would do, which partly explains the hundreds of abandoned projects. Sadly, most often they involve middle and low-cost houses.

The Government is all for the free market for the property sector. Even the real property gains tax has been abolished.

When I was a kid, my father who is a government servant (along with my mum), told me that since mum had bought a house, he can’t buy one as the government only allowed one spouse to buy a house (with government loan).

Today, what has happened to this rule? Gone with the wind. So, if anyone thinks our property prices will actually reflect the real economy, think again.

If anyone thinks people buy houses to stay in them, also, think again.

Raymond Roy Tiruchelvam,
Kepong, KL

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