Are We Having A ‘Fire-Sale’?

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Press Statement 10 September 2019

With the anti-government protest going on in Hong Kong, Malaysian developers are making a beeline to attract Hong Kong investors to buy properties here. This may ease the overhang in the local property market but it is not going to solve housing problems faced by our people.

Penang, Selangor, and Johor have set the highest minimum property prices for foreigners to acquire properties. For Selangor and Johor the prices are from RM2 million upwards for residential unit.

Foreigners are not permitted to buy in Penang landed houses valued less than RM3 million and high-rise units that are less than RM1 million. They can only buy landed property valued at a minimum of RM1 million and high-rise units at RM500,000 in Seberang Perai.

From the introduction of Malaysia My Second Home (MM2H) policy in 2002 till 2018, there have been 42,271 approved participants from 130 countries. The currency equivalence chart below shows why our property market can be considered a ‘fire sale’ to foreigners:

Currency equivalent as on 19 August 2019
Hong Kong dollar US dollar Singapore dollar
RM3 million 5,638,197 718,787 995,405
RM1 million 1,879,399 239,596 331,802
RM500,000 939,699 119,798 165,901

What is the property a Hong Kongese can buy with HK$6 million (RM3.2 million)? According to Demographia (2019), Hong Kong is the least affordable housing market in the world. In 2016, a 292 sq ft studio apartment (called ‘nano-flats’) was sold for HK$6 million. In 2018, a 178 sq ft micro-home cost HK$3.5 million (RM1.8 million).

For those with US dollars or Singapore dollars to spare, our RM3 million is equivalent to US$718,787 or S$995,405 respectively. With RM3 million (HK$5.6 million), a Hong Kongese is able to buy an almost 2,000 sq ft (built-up size) luxurious bungalow in Tanjung Bungah and that is almost 11 times the size of Hong Kong’s 178 sq ft micro-home.

It is little wonder that Singaporeans came to Penang on a shopping spree for pre-war houses around 2008 when George Town was declared a UNESCO World Heritage area. As a result the prices of houses in the inner city of George Town soared beyond the affordability of most locals to rent or buy.

Encouraging foreigners to acquire properties here have undesired impacts such as causing property prices to skyrocket because of demand, aggravating the current shortage of land, and causing an increase in the cost of living.

Will Penang become another Hong Kong where the poor will eventually be forced into slums or micro-flats when property prices become too expensive for an ordinary wage earner or senior citizens?

Instead of pandering to developers wanting to build luxurious houses and condominiums that few locals can afford, the government should focus on the development of Rent-to-Own flats, low-cost and ‘affordable’ housing for the poor. Could the current property overhang be caused by developers’ over optimism about the housing market without looking at the economic reality and the inability of potential house buyers to obtain a bank loan?

The government should revamp the entire housing policy that is not benefitting the lower income group and enables developers to profiteer in providing low-cost housing. Often a low-cost flat supposedly tagged at RM72,500 is sold at a much higher price, sometimes more than RM120,000.

The cost of renovation and car park not requested by the buyer is factored into the price. The buyer is given the choice either to accept the package or lose the offer. The developers are building low-cost and ‘affordable’ homes just to fulfil the government regulations and attempt to circumvent them whenever possible to milk the B40s and those who are in dire need of roofs over their heads.

We urge the government to put in place a housing policy that would enable the B40 to have accommodation without a financial burden. The Malaysia My Second Home policy should be scrapped. Also, the authorities must ensure that low cost and medium cost house are of liveable quality and are sold at the price fixed by the government.

Mohideen Abdul Kader
President, Consumers Association of Penang

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