The challenge of owning a house in urban areas! Housing prices still manageable?

The challenge of owning a house in urban areas

MAKING A POINT By JAGDEV SINGH SIDHU

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AFFORDABLE housing is a subject matter which a great many homebuyers are talking about. Often, friends will comment how crazy the housing market has become.

Those who own one house, which is their primary residence, might feel the pinch when it's time to upgrade. Those who own more are probably enjoying the growth in equity.

For those who do not own a home and just starting their careers or a family, it's a nightmare for them. When salaries have not kept pace with the appreciation in home prices, the dream of owning a home becomes more distant by the day.

Knowing that is a growing problem, the Government on Tuesday launched My First Home Scheme, a programme that will enable people earning less than RM3,000 a month to get 100% financing from banks to buy houses costing between RM100,000 and RM220,000 to be repaid over a period of 30 years.

The monthly repayment sum should not exceed a third of their gross salaries but can go up to 50% if a bank allows for such a percentage.

The premise of the scheme is great but the way home prices are going, one will find it hard to find a home between that price range in the major urban centres of Malaysia.

It should be possible to find homes priced in that range in the rural and smaller towns in the country, but not in the major urban centres of the country.

The plight of the young or those with a salary of up to RM3,000 a month over housing needs will exacerbate as urban migration rises.

In 2009, according to Unicef, 71% of the population in Malaysia was urbanised but those flocking to the large and expensive cities will rise even further as the economy develops, more so as services widen its gap with manufacturing as the engine of growth.

The other issue is the rising cost of living.

Let's say a person working in Kuala Lumpur earning just under RM3,000 a month wants to buy a house costing RM220,000. If he or she is lucky to find such a house and is charged 4% interest over a period of 30 years, the person will have to pay around RM1,050 a month in house repayments.

Knowing that houses costing that much would be a long way out, a person would most probably need to own his or her own vehicle and factor the cost of vehicle ownership, utilities and the ever-rising cost of food.
He or she will do well to balance his ledger at the end of every month.

The best solution, as I have said before, is for the federal and state governments to actually build homes costing that much in the major urban centres for the public to buy because I don't think there is a private sector developer in town who will be willing to sell homes at that price.

Deputy news editor Jagdev Singh Sidhu wonders if it's even possible for a higher middle income family to afford a second house in Kuala Lumpur

PM: Housing prices still manageable

By FINTAN NG fintan@thestar.com.my

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KUALA LUMPUR: The rise in residential property prices is still manageable and measures such as the My First Home Scheme will allow those in the lower-income brackets to own homes.

Prime Minister Datuk Seri Najib Tun Razak said at a press briefing yesterday, following the annual meeting with Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz, that the rise in house prices was being monitored.

“We're watching the increase in property prices closely which we think is still manageable,” he said, adding that the My First Home Scheme, which was launched on Tuesday for those earning less than RM3,000 a month, was a people-friendly measure to enable the lower income groups to own houses.

Those who qualify for the scheme can obtain 100% financing to buy their first home with a repayment period of 30 years for houses costing between RM100,000 and RM220,000.

Datuk Seri Najib Tun Razak and Tan Sri Dr Zeti Akhtar Aziz at the press briefing.

Najib added that the Government was also looking into the supply side of housing to see if measures had to be taken to build more residential properties around the RM200,000 level.

According to data released by the Valuation and Property Services Department, the national house price index rose 6.2% year-on-year in the third quarter of 2010 after rising 6.2% in the second quarter and 5.7% in the first quarter.

Najib said any new issues of Islamic bank licences and foreign banks looking to increase their shareholding in local banks would be looked at on “merit” and on a “case-by-case” basis.

He said last week during a visit to Australia that the Government was open to allowing Australia & New Zealand Banking Group Ltd (ANZ) raise its stake in AMMB Holdings Bhd, which owns AmBank (M) Bhd.
Currently the limit for foreign shareholding in local commercial banks is 30%. ANZ has a 26.59% stake in AMMB, making the Australian bank the single largest shareholder.

Najib said the foreign shareholding limit for banks here would be reviewed individually and there would not be any changes to the Banking and Financial Institutions Act 1989 because this was an “administrative issue”.
So far, there has been no proposal by ANZ to raise the bank's stake in AMMB and other foreign banks have also not applied.

Meanwhile, Najib said the economy was expected to grow by 5% to 6% this year but would face challenges due to slower global growth, which would affect external demand.

He said the challenges were from higher crude oil prices, inflation and the sovereign debt crisis in the euro-zone.


“We'll monitor these developments closely and take the necessary steps,” Najib said.
He added that several interim measures would have to be taken to support private consumption and investment should energy prices continue to rise to a “critical point”.

However, Najib said the Government was committed to long-term subsidy rationalisation, although on a gradual basis, with savings from the lower subsidy to go to those in the lower-income brackets.

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