Saturday August 18, 2012

Chang: Yam’s action plans can lift burden of the middle-income group

HOUSING Buyers Associations secretary-general Chang Kim Loong has heaped praises on Rehda president Datuk Seri Michael Yam for suggesting various action plans during the roundtable discussion Housing Affordability: Issues and Challenges.

He says several of the action plans are innovative and well-thought out and must be studied in order to alleviate the burden of the middle-income group.

Chang surveyed the property prices of several locations in Selangor in 2004, 2009 and 2012 and concluded that prices in Kota Damansara and Puchong have crept up over the years to the point where these properties have become unaffordable for many.

Chang: ‘In 2012, the average monthly household income in Selangor is no longer enough to buy selected properties even in Kajang.’

“Average monthly household income in Selangor in 2009 is only adequate to buy selected properties in Kajang in 2009. In 2012, the average monthly household income in Selangor is no longer enough to buy selected properties even in Kajang, he says (see chart).

He says the situation is dire for singles. “Single people who wish to buy their own properties find it difficult due to their limited income. Assuming the average household income in Selangor is RM6,856 a month (based on official statistics in 2009 and assuming at 15% increase to 2012), average single income is assumed to be halved, that is, RM3,428.

“Single income earners cannot afford to buy lower-end condominiums in Puchong or Kota Damansara and can only afford lower-end condominiums in Kajang in 2012,” he says.

Chang also highlights the difference between being able to buy a property and being able to afford the monthly mortgage repayments.

“In theory, a monthly household income of RM7,000 can afford a house worth RM500,000 and take a mortgage of RM450,000 at 90% margin of financing with a repayment of RM2,307 a month. However, in reality, such a household may not be able to afford such a house if one were to look at the net income after the various deductions.”

He says buying a house and buying a suitable house are two different things. A suitable house constitutes a property where the owner does not have to fork out a high cost for maintenance, toll charges and transportation costs.

“The issue is not just being able to buy a property, but being able to maintain that property without causing too much hardship on the owner,” he says.

He says property prices have risen rapidly in recent years due to excessive speculation fueled by easy credit.

“There is a need for a return of the real property gains tax (RPGT) and not the present system,” he says.

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.

This, says Chang, will not deter speculators.

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

To beat speculation, Chang suggests making the stamp duty a flat rate for the third and subsequent property.

Utilities also pump up house prices. He says the Government used to provide water and electricity. The privatisation of these services turned these agencies into profit-oriented companies.

“These are companies which do business without capital outlay but developers are now compelled to provide land for sub-stations and reservoirs.”

He says developers, like any other businesses, are profit-oriented and when developers have to make provisions for such infrastructure, previously provided by the Government, house buyers will lose out because the cost of these outlay is passed on to them.

“These costs are lumbered on to the price of the house,” he says.

Chang says while he understands the Government’s wish to help bumiputras own real estate, the bumiputra discount should not continue for the third and subsequent property. Neither should this discount be for the purchase of commercial properties. He says buying a house is the basic need of every household, irrespective of race and status. Buying a commercial property is for investment, not a need and having to give discounts for commercial properties will result in the overall rise in property prices as somebody has to bear the cost of that discount.

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Saturday August 18, 2012

Chang: Yam’s action plans can lift burden of the middle-income group