While there is a great deal of concern by Malaysians about the significant increase in food prices in recent months, there is an even greater concern: the rise in house prices.
This is especially so in George Town, Petaling Jaya, Shah Alam and Kuala Lumpur.
In the last three years, there have been spectacular rises in prices of landed properties. In one suburb in the north of Kuala Lumpur, new residential property prices for link houses surpassed RM1 million.
There is truth in the National House Buyers Association's statement that the astronomical increase in house prices (old and new) in Penang, Petaling Jaya and Kuala Lumpur prevents an entire generation of young adults from buying houses.
The reasons for the rapid increase in house prices include easy availability of bank loans with low interest rates, easy payment schemes and low real property gains tax of five per cent for gains on sale of properties.
In some cases, developers' staff book properties and these change hands for a fee.
Many developers raise property prices with the excuse that the cost of labour and materials rises rapidly.
Developers contribute to the rise in house prices.
While one cannot deny that labour and material costs will rise, the extent of the rise is much lower than the rise in house prices.
The developers' prices are not justified.
Developers argue that they have holding costs and other risks associated with the business, but look at their annual profits from the sale of properties.
It is obvious that many big developers show healthy profits as, more often than not, the launches in cities are sold out within days.
The authorities need to look into this aspect of house prices in relation to the cost of labour and materials.
With the anticipated introduction of the goods and services tax, the price of properties will be higher, as developers will transfer this cost to buyers. Genuine buyers will bear the spiralling cost.
Another aspect is speculation on property prices.
Developers recently were clamouring for the government to reduce or exempt house buyers from the real property gains tax, which used to range between zero and 30 per cent, depending on the number of years of ownership, as well as a reduction in stamp duties.
The developers' argument was that because of the overhang of properties, they were unable to make sales and suffered losses.
The government then reduced the real property gains tax to five per cent for gains on properties sold within five years of purchase and zero per cent for those sold thereafter.
In the process, it gave away revenue it ought to have collected. Now look at the effects of that decision.
While I do not deny that there are pockets of unsold properties, many developers and speculators make big profits.
It is genuine house buyers who are locked out of the process.
Banks, too, contribute to this phenomenon and Bank Negara should deal with this before the bubble bursts.
The government should review the Real Property Gains Tax Act and even the Stamp Act (like in Singapore and Hong Kong) to deal with speculators.
Many speculators buy and sell properties in a short period of time and the government should consider instituting legislation to stop this.
The previous real property gains tax of 30 per cent should be brought back to tax all profits made from the sale or transfer of ownership of properties within three years.
This will discourage speculators, many of whom do not have the capacity to even put in a 20 to 30 per cent down payment on the purchase price.
Bank Negara should tighten the availability of credit, especially for those buying a second or third house. Perhaps, stamp duty should also be imposed on those who sell their properties within two years of purchase.
Prevention is better than cure. While there may not appear to be a bubble in sight, as claimed by industry players, it may be too late when it bursts and the authorities are left to clean up the mess.
Prices of properties have to be monitored and checked in relation to financial measures, such as the level of loan versus buyers' profiles and number of properties bought or sold.
First-time home owners are the hardest hit and our children will find it hard to own a house if the government does not act now. - By R.C.C., Kuala Lumpur (New Straits Times)
House prices: Bubble may burst soon