Looking to buy property? Wonder if you should buy a condo or a house? Want to learn about the different specs of property such as built-up sizes and GFA?
Well, you've come to the right blog post, because I'm going to explain it all to you. Actually, I'm not. Because, you see, it's all too complicated, and even if you learned all of it, it wouldn't really do you any good. Not in Malaysia, at least.
The real estate scene in Malaysia is currently in an absurd state which I like to call the "property death spiral". Property, including condos, terraced houses, and detached houses, are all at an unreasonably high price within the KL and Selangor area. How do I define unreasonable? Unaffordable by the average Malaysian, that's how.
We all know that prices have been going up while income has not increased, and the government is starting to impose taxes and reduce subsidies. The question then, is if the economy is bad and the government has no money, why is property unaffordable? Shouldn't the prices be dropping if no one can afford them?
Well, let's consider who are the people buying property, especially new developments, in Klang Valley. First, the very small percentage of extremely rich and well connected people. These guys are buying up more property than you could shake a stick at. In fact, collectively, they probably own a quarter of all the new developments that we as common folks can only ejaculate at.
Then there are foreign investors, who buy up most of the remaining 3 quarters. Why would they buy property in Malaysia? To make money, of course! You think a million ringgit is expensive for a house? Let's take a look at how much houses cost in Shanghai, Taiwan, or Hong Kong nowadays.
Taiwan: Condo, 2131 square feet, 3 bedrooms, 2 baths, 13 million RM.
Shanghai: Condo, 1421 square feet, 2 bedrooms, 2 baths, 15 million RM.
Hong Kong: Condo, 2158 square feet, 3 bedrooms, 2 baths, 40 million RM (that's roughly RM20k per square foot!!).
These aren't even luxurious places I'm talking about. They're just average apartments.
So you see, Malaysia is still cheap to the folks living in these areas, and since Malaysia is not yet a fully developed country, there is still chance that prices will rise, and hence, to them, it's still a viable investment.
So we have these rich locals and foreign investors pushing the prices up on our property. And that's what the government wants. You see, it's more important for the government to gather foreign investments than it is for them to ensure the citizens have adequate opportunities to buy houses, because it makes them much more money that way.
Once these rich folks who only buy property for investment and not live in have bought the property, they then look for opportunities to sell them to...you guessed it! To other rich locals and foreign investors. Obviously they want to make money, so they sell it for more than they bought it to others who want to invest and are willing to wait longer than they are. So the prices keep going up, and keep exchanging hands between the same people.
Yes. The Property Death Spiral.
5 years ago, a 3000 square feet built-up terraced house in Puchong cost around RM350k. Just 5 years from then, the same thing now costs a million RM. That's roughly TRIPLE the cost. Have our income gone up TRIPLE in the last 5 years. If yours has, please let me know.
Without focusing on foreign investments, though, the government is unable to generate enough revenue for the country to grow at an ideal pace. So basically, we're being sacrificed in return for money.
Does that even make sense? The growth of the country should be for its people. If to facilitate that growth means making daily living worse for the people, is there even meaning to the growth? To put it in another way, why do we want to grow as a country at all if it doesn't mean better living for the people?
If the government uses all the profit generated from these investments to create benefits for the people, it would make sense. Instead, though, they build useless palaces and envision public transportation that's poorly designed, poorly executed, and is never going to make it in time to help the majority of the people.
I think that there is another master plan. In fact, it's inevitable that they'd have to have an alternate plan to "fix" things, because there is no way that KL will be able to prosper the way things are going.
Stay tuned to my next blog post when I talk about what I think the future plan for Malaysia's capital is going to be. Until then, take care and be kind to others.
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