Govt may double minimum price of houses foreigners can buy

RM1mil floor price?

The Government is considering raising the minimum floor prices of houses foreigners are allowed to buy to RM1mil from the current RM500,000 in an effort to control the rise in property prices, sources said.

They said such a decision was “in the pipeline” and the implementation would be made by the economic planning unit (EPU) under the Prime Minister's Department currently headed by Minister Tan Sri Nor Mohamed Yakcop.

“From what I understand, these revised guidelines have been discussed at the ministerial level and should this be enforced, it will mean that foreigners will only be allowed to buy properties priced above RM1mil. For now, the base price is set at RM500,000 for foreigners. This base price is a bit low looking at present circumstances,” a government source who requested anonymity said.

“The current trend in the property market indicates that prices are still continuing to climb despite measures by Bank Negara to curb property prices from spiralling out of control. We need to act before it goes further out of hand,” the Putrajaya source added.

Another source said the revised guidelines would also consider a slightly lower base price threshold of RM800,000 for residential properties in selected economic corridors such as Johor's Iskandar Malaysia to ensure the development and success of these corridor hotspots.


“This base price will also be subject to reviews by the Government from time to time depending on the inflationary situation of the economy and to keep overall inflation in check,” the source said.

Deputy Finance Minister Datuk Donald Lim had recently told the press that the Government would take “strict measures” to avoid a US subprime mortgage financial crisis after average house prices jumped almost 7% in the fourth quarter of last year despite measures announced by Bank Negara to rein in property prices.

“The Government is worried about property prices causing a bubble and we don't want banks to overlend to the property sector,” Lim said.

Industry sources surveyed by StarBiz said foreigners that tend to buy properties in Malaysia were those from South Korea, Japan, China and Singapore.

“This move will give an advantage to locals, especially those in the middle-income category as locals will not need to compete with foreigners. I am not surprised by this move, but our agency has so far seen mostly people from China and Singapore buying properties above RM1mil anyway,” a KL-based licensed real estate negotiator who did not want to be named said.

“However, we may see fewer transactions from the Koreans and Japanese. Westerners such as those from the United States and Europe won't usually buy. They prefer to rent instead,” the real estate negotiator added.

Meanwhile, the implementation of the higher floor price is expected to have a minimal impact on the property market in Malaysia as official statistics show that only 2.4% (worth RM1.45bil) of transactions conducted in the residential sector last year were worth RM1mil and more.

The Finance Ministry's Valuation and Property Services Department Property Market Report 2011 released last week showed there were 269,789 residential property transactions worth RM61.83bil transacted last year, the highest recorded in the last five years.

“Both volume and value recorded double-digit growth of 18.9% and 22.1% respectively. The All House Price Index surged to 156.9 points in the fourth quarter (Q4) of 2011 against 147.2 points registered in Q4 2010,” the report said.

The report said that landed housing was on a “general upward trend” in Malaysia and also attributed the rise in property prices to the Sungai Buloh-Kajang My Rapid Transit project.

“Across the board, terraced houses in KL recorded increases of 8%-13%. Increased prices of landed houses on Penang island were apparent. The highest transacted price of two- and three-storey detached (houses) were at RM2.05mil and RM5.15mil respectively,” the report said. - By Daniel Khoo (The Star)

20 comments

April 10, 2012 at 3:36 PMChristine

1 million is too little. They should raise up to 2 million (according to the demand places, for example: kl and penang). This will helps the local to get their own house and get the porverty leverl better for future. Property price been raising too much higher compare to past few years, it almost exponential curve that normal people salary couldnt afford to buy a >RM300K house but the price of property easily get to above RM300k because of investor. Looks like government start to do something about it, but better be effective to helps the community....so that we could elect the like government to help us.

 
April 10, 2012 at 5:26 PMObserver

This Minister has been making speculative statements on property before this

Inflation and demand to lift property prices 10%-20% this year
http://www.apartment-penang.com/2011/04/inflation-and-demand-to-lift-property.html

Now either he just woke up or because of the coming election

 
April 10, 2012 at 5:40 PMPrasad

It would be too easy for foreigners to default on the loan, which buyers will do if the market turns south.
I rather they raise the down payment level to 50% or more

Banks are not going to absorb the loss, they will ask BN to raise the BLR so they can pawn off the loss to other house loans, then proceed to ask gov. for bail out. Then there goes our KWSP.

 
April 11, 2012 at 12:01 AMtwyeow88

property is single largest asset of many people in m'sia. high property price = more wealth. also, we plan to be developed nation by 2020. so, foreign participations are still needed. any measures at this stage maybe too early in my opinion. yes, it has gone up a lot but it's still relatively low as compared to our salary. the only reason i see why people cannot afford is b'cos of over spending. look at the crowd at Matta fair, shopping sale, restaurants, etc. buying property in a way is force savings. higher property price = more savings

we are short of land but not building. probably should restrict foreigners from buying landed properties and not condo. or build affordable homes cater for lower income group.

 
April 11, 2012 at 12:24 PMHo

twyeow88 , I think you are speaking from your stand point that you can afford a good property. I also can afford a LMC (maybe even 2 LMC), but when I earn more as I age I will not be able to upgrade to buy a condo.

Do you have any facts about Penang's earning power?

If property price goes up, sooner or later the property market will become stagnant. If most of our money is dump into our property, who is going to spend to stimulate the economy? If Penangites don't spend much, who is going to open a 'Old Town', a 'Starbucks', a 'MPH', sell Iphones...?

I already witness peoples money got suck into their property and cars whereas they have little money to buy items that have better quality.

People can't even shorten their loan because they are paying a high price to stay in a condo or apartment.

 
April 11, 2012 at 12:25 PMHo

Referring to the article, I think it is a good start by the goverment. Don't worry as investors local or foreign will still have ways to purchase properties here. For example, they can buy the property below RM1mil through local investors.

 
April 11, 2012 at 2:19 PMtwyeow88

i agree we want better quality of life besides car and house. but do it later after buying 1st or 2nd property. focus on savings the 1st 10 yrs to buy property, make sure every dollars count eg. don't add vege when eat chicken rice. penang people like to say "eat lah, eat lah, how much can you eat". the fact is one can really spend a lot on eating if there is no control. pick up a part time job, skills, learn something new eg. investments, etc. 1 dollar coffee is equally good. 100 dollars phone also can ring. it's only 1st 10 yrs of hardwork. probably pay off the apartment by end of 10 yrs. no need to earn a lot to achieve that.

we still need foreign participation to bring us to the next level. eg. new investment to create jobs, higher value jobs, newcomers/rich people to spend money, buy our products, buy condo, new restaurants, create more activities, and so on...to be a more vibrant city, to be a higher income nation. so that we are proud of m'sia. sometimes, we can't help when it happens at the expense of certain groups who cannot catch up. which is why there are still poor people in developed nations. we cannot stay at where we are while others are progressing eg. Myanmar, Indonesia. if not one day we cannot even afford to import their rice.

 
April 12, 2012 at 8:25 AMObserver

twyeow88

Your arguments seem to be very selfish and unreasonable. Yes, we need foreign participation and FDI such as setting the MNC plants in Penang which are contributing plenty of job opportunities and economics activities but not allowing the foreigners to compete with locals and helping developers to push up the house prices.

Yes, we need to be a developed nations, a developed nation does not mean the house prices have to be way above the affordability compared to the average income bracket of the majority. We can be a developed nation where quality houses are very much affordable, thus providing quality living and life style to all.

The population will be richer if the house prices are being controlled, eg the house price was RM 200K few years ago and now is RM 400K for the same house. If most can afford RM 400K now, he should be richer by owning 2 houses instead of 1 now with the same amount of wealth.

The foreign money pouring into the property market is very small compared to the overall national property market value but the harm done is very huge coupled with the uncontrolled government measures and easy, flexible credit lending, and allowing the developer to use DIBS at the same time pushing up the price. Now every new household or genuine new buyer especially fresh graduate or new couples have to struggle with the high cost. The situation is just like robbing their wealth by forcing them to be paying extra RM 200K with higher monthly installation. The additional monthly installation could be spent for better quality life.

Do you still think that we are richer as a nation ?

Probably very true for the speculators and investors who earn this sort living out of the majority !!

 
April 12, 2012 at 10:26 AMtwyeow88

yes, we are richer by saving 200k more to pay for the house. otherwise, this 200k will most likely end up in shopping, holiday eventually. and this 200k can be our retirement savings if we choose to downgrade when we retire.

also in reality, which developed cities or countries where the house price is still cheap, tokyo, HK, S'pore, London, New York? outskirt 1-2 hrs away maybe. even govt housing in S'pore is around 500k. it's the price of development that we have to be ready to accept. coz by demand & supply due to scarcity of resources (land). it's not something we can control. otherwise, why you think there are so many financial educations out there to tell us to plan early?

 
April 12, 2012 at 8:32 PMObserver

twyeoh88

It should be the otherway round, we are actually richer having 2 houses with the same cost, alternatively the same RM 200K will enrich us by investing somewhere else, or as a capital for new business or use it for our children education.

If we are always richer when everything is up by unjustifiable and uncontrolled inflation, then our government can simply use this strategy to create inflation by 10 times, every thing is raised up by 10 times including our minimum salary. That way we will be a high income nation within months and our property prices will on par if not higher than most of the developed cities or countries.

 
April 12, 2012 at 10:57 PMcondomana

Hi Observer,

Hahaha....wish you luck with twyeow88, he somehow cannot comprehend such basic economic concept...:)

 
April 12, 2012 at 11:46 PMjeremy tan

I am sorry guys but i have to agree with twyeoh88.

Instead of giving you a long explanation as to why i share the same point of views with twyeoh88, i will break it down to a few points:

1) All the central banks in the world are printing money. Inflation is inevitable. With or without FDI, asset prices will go up. If gold is trading at USD1600 plus per ounce, you can't expect properties not to follow suit. Look at oil at over USD100/barrel.

2) income per capita and power purchasing parity. If you have heard of it. You would know that the real issue lies in our wages. If we shunt away FDI, we are no different from Myanmar whom has been fighting for democracy and a free market for years and finally got it this year. Just imagine, without FDIs nobody will be investing, when nobody invests, jobs won't be created, not to mention the demand for our RM will be at its lowest, there will be no growth. There is no purchasing power and just like Myanmar they might be self sufficient in natural resources but the purchasing power is not there and they get paid peanuts. How about USD50/month?


The real problem lies in the gap and disparity between incomes.
3 ) Stop importing cheap labor in "huge" amounts for instances. How do you expect us to achieve a high income nation when we have no talent to offer but just cheap labor?
In fact most of the smart Malaysians has already migrated overseas and they are being replaced by a growing population of foreigners from Bangladeshi, Indonesia, etc...if Mr.Indon or Mr.Bangla can do your job for RM800, why would the employer pay you RM2000?
Stop the corruption and the leakages in our economy, that way we can achieve a high income nation. All the money saved can be spent on empowering the people.

Seriously, don't be so naive and start blaming it on FDIs. Blame it on money printing, the central banks and our pathetic wage system because of foreign cheap labor. Corruption as well.

Government destroys savings.It has been happening since a very long time ago. Perhaps after they got rid of the barter system and started trading the economy with fiat currencies.


In times like this, the only way to protect yourself is to buy assets.

If you want everything to be cheap and the same as it was a 10 years ago, you might as well migrate to a communist country where everything is being nationalized. We live in a democratic and a capitalist country.

 
April 13, 2012 at 9:48 AMtwyeow88

guys,

it's not a choice of having 2 houses at 200k each. it's already a fact the inflation has driven prices up to 400k each, as a result of people (demand as a result of too much money in circulation) and not govt. you are right, we are seeing inflation driving prices up by 10 times, obviously not in 3 months but in 30 yrs. therefore, it's perfectly common to see house prices double in 10 to 15 yrs or even quicker. for us, the only way out is to counter inflation. and Jeremy Tan has pointed a very good solution - "buy assets" especially hard assets eg. gold, property, etc.

 
April 13, 2012 at 9:29 PMObserver

You got your points, but not to create panic demand from among the new couples, youngster or new buyers that they must buy property and pay for the 1st 10 years although property price is now at its somewhere highest point of the property cycle.

I observe that many bloggers are mostly speculators trying to create panic demand giving the impression that if you don't buy now you will never be able to buy as our price is much lower than Hong Kong & Singaporea etc.

May I ask what is the land space available for new high rise building in Hong Kong & Singapore as compared to the potential land for high rise building in Penang island ? Is the ratio 1 : 10 or less ?
There is a mainland for Penang as compared to Hong kong & Singapore but the speculators won't do this comparison but the comaprison always tilted to one side.

Take for example the US property market before the subplime crisis, people expectation was that it was still cheap in 2006/2007, see what happen now, the price may not reached its bottom yet until now after so many years of down trend.

The situation in Malaysia is favaurable for speculation because the government has never serious about taking measures yet. I do not think it is healthly with this sort of manupulation by so many parties in the property market so much so, it is like a monopoly market.

 
April 13, 2012 at 10:14 PMjeremy tan

Hi Observer,

US property market is worth buying into now. It is so darn cheap.

Anyways, the reason why they went bust is because they screw up big time.

For starters, the banks didn't care how much they were lending to the owners even though they don't earn enough to repay the loan.
As long you have an asset that appreciates, you are allowed to borrow money that you couldn't afford and spend it on everything else.

In Asia we don't practice this. We do a background check and if you don't qualify for the loan you will be rejected. Even though if you own 10 properties, the banks will only loan you based on your net income. Regardless of your assets.

Too much hot money flowing around, money printing and that has to flow into assets. Governments can raise interest rates to curb speculation and inflation but they can't do that now because all governments are printing lots of money and they are in debt as well : )

If i were to put things into perspective, i would say that properties are not getting expensive but money is getting cheaper. For every dollar they print it dilutes your purchasing power.

The problem lies in our wages. Disparity and gap in income.

Governments are destroying your savings, The only way to protect yourself is to buy an asset.

There is an article on business times today that talks about it:
http://www.btimes.com.my/Current_News/BTIMES/articles/rup120d/Article/index_html

KUALA LUMPUR: For Malaysia to achieve its objective of becoming a high-income economy, it needs to create more "modern" jobs and modernise its labour markets, says the World Bank.

Modern jobs are higher productivity jobs that command higher wages.

According to Frederico Gil Sander, the World Bank's senior country economist for Malaysia, modern jobs need not be in futuristic sectors but they involve more complex, non-routine tasks and require more and more diverse types of skills.

"They can be found in all sectors in the economy, but increasingly will be service-based, such as the police force," he said.

Communications, problem-solving, and proficiency in modern information technology are the higher and more diverse skills needed in modern jobs.

The World Bank, which released its Malaysia Economic Monitor: Modern Jobs yesterday, said modern firms in a high-income economy derive their competitiveness not from low wages but the productivity of their workers and are willing to pay for talent accordingly.

Nurturing, attracting, and retaining skills are needed for the creation of modern high-productivity jobs.

Measures to increase competition in the economy will encourage firms to modernise.

In line with this, the World Bank supports Malaysia's New Economic Model recommendation that the education system needs to be reviewed and the "rote-learning approach" shifted to an approach that stimulates "creative and critical thinking".

Malaysia can also benefit from complementing its talent base by bringing scarce skills from abroad.

"In the interim period, Malaysia can attract high skilled foreign workers until it gets its structural changes in place," Sander said.

Meanwhile, Economic Planning Unit director-general Datuk Dr Rahamat Bivi Yusoff said the minimum wage policy will be announced next month.

The government is also studying the possibility of having unemployment insurance scheme next year to pave the way for better social safety net for the workers.

P.S this will never be achieved for the mere reason we have a double standard economy that champions a single race and we import cheap foreign labor

 
April 14, 2012 at 12:50 AMtwyeow88

most of the land use for sizeable condo projects seems to be around 5 acres i think. with some space for carpark, facilities. city center condo will not have space like those in KLCC. HK & s'pore looks more or less the same. only psf price and size different and no of units built. somehow i don't like to stay in mainland.

i also think US is a good buy. i attended Marco Robinson seminar. cleveland price around USD60-90k, rental USD800-1k net/mth, Sec 8 tenant, rental paid by US govt. i was tempted but thought of checking with those have bought b4. anyone bought b4 maybe can share?

 
April 14, 2012 at 2:01 AMcondomana

Hi jeremy,

I would normally try to avoid going into details, but because of a caffeine overdose tonight, I guess I have a few minutes to spare, and hopefully I would slowly type myself to sleep...:)

Your comment "1) All the central banks in the world are printing money. Inflation is inevitable. With or without FDI, asset prices will go up. If gold is trading at USD1600 plus per ounce, you can't expect properties not to follow suit. Look at oil at over USD100/barrel" --> Not true in local context. If you draw a graph comparing Msia property price vs gold price and try to derive an equation to correlate both set of data against time, you will fail...:) You can't. There's no correlation. Also to highlight, we should be clear about 2 main types of FDI. FDI to property & stocks (usually hot money) and FDI to productive sectors (investments in businesses which are typically very long term).

Your comment "2) income per capita and power purchasing parity. If you have heard of it. You would know that the real issue lies in our wages. If we shunt away FDI, we are no different from Myanmar......" --> We are not shunting away FDI, we are trying to pick good FDI and slow down bad FDI (Spore has introduced various measures in this regard, and they were not seen as shunting away FDI).

I agree with you the gov might not have done a good job (in fact they have done a lousy job) in raising people's income. I also agree with you properties should be part of your portfolio if you have a high net worth.

But what has happened in past couple of years signaled somewhat the start of an irrational exuberance. Banks were approving housing loans for people who are not qualified. Banks were calling their most favored customers to offer them RM100k collateral-free personal loans through their credit cards limits. With easy credit, amateurish property investors are being coaxed by unscrupulous agents into flipping properties for that meagre "potential" RM20k profit. BNM had to set things straight to avoid a full blown irrational exuberance. You can allow gold/oil price to fluctuate big time but you can't let that happen to properties because mortgage is a big part of our bank loans. It creates serious chain effects when mortgage assets go under water. Hong Kong has already done a very big mistake by not arresting property price increase earlier, and they can't do meaningful correction now because the banks would collapse and people would jump off buildings.

In short, for properties, we should not allow total free market, preventive measures is important as corrective would be too painful.

 
April 14, 2012 at 3:31 PMtwyeow88

cannot be so conservative, restrictive and selective in today's world lah. our banks already smaller than a lot of banks in asia, s'pore. if so selective in lending, then how to survive. also, how are we going to tell foreigners to bring in money and set up factories but cannot buy this and that properties.

 
April 14, 2012 at 9:50 PMObserver

Hi twyeow88

I think you should be realistic a bit, the property price now is really unrealistics and irrational. We do not talk about other factors yet such as per capital income, advantages as a financial and tourism hub, standard of living etc in comparison with Hong Kong & Singapore. You have not touched on the land space available for new highrise in Hong Kong & Singapore comparing with Penang Island but you only mentioned about land use of about 5 acres for a condo project. So how many more pieces of 5 acre-land available in Hong Kong, Singapore & Penang Island for that comparison ?

For that matter, let's take a view of the buildings and land use in Hong Kong in 2006
http://www.youtube.com/watch?v=JkytaWZr5_M&feature=related

Minus the hills & mountains, practically every inch of Hong Kong Land is filled with Highrise that are so close to each other and which are much much taller in average height than Penang Island. If the comparison is in the ratio of 1 : 30, then Penang properties is cheaper if the price is less than 1/30 of the property price in Hong Kong for the same standard of condo.

I find that Condomana is more realistics in his comments everywhere in this apartment-penang blog including the comments above.

The latest 2 postings below are very relistic and describing the true scenario but no one will comment on that because this articles do not sync with the speculators.

http://www.apartment-penang.com/2012/04/stopping-foreign-property-purchases.html
We are not saying foreigner can't buy totally but only allow to those high end properties that almost all the local cud not afford to buy eg > 1.5 or 2 mil type of price. Hence will not jeopardise the local at all

Even this article http://www.apartment-penang.com/2012/04/protecting-local-house-buyers.html

says the curret property price is unrealistic and measures should be implemented immediately by the government

 
April 15, 2012 at 3:39 AMjeremy tan

Hi Condomana,

I was merely referring to a money printing environment.

Whether the money flows into stocks, commodities or properties, eventually everything will be inflated.

The correlation of all those mentioned above falls into an asset class.

You don't have to draw graphs to prove that correlation.

In times like these, the only way to protect yourself is to buy assets.

You have to understand that all central banks practices monetary expansion.

 

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