Let’s control the property price.
Why can’t the government just control the property price?
It has been a few occasions when people commented that Malaysia should control the property price better. If the one commenting is my good friend, I will explain. In fact after I have given them 5 or 6 examples from all the countries they know and show them some news articles in google, they realised they needed to read a little more to know the it’s easy to say but it’s very hard to do when it comes to controlling property prices.
If they are not my good friends, I just smile because I do think they have no idea at all about what’s happening all around the world. Let’s start with a few very famous countries whose news we read nearly every day. I mean I read about their property news everyday. I had to as I have to write in kopiandproperty.com
Controlling property price all around the world
Controlling property price has NOT happened in the most advanced economy in the world (Starts with an A) or the upcoming largest economy in the world (starts with a C) and definitely not that country whose lady Prime Minister is loved by many (Starts with N), not in that country which Malaysians love to migrate to and stay in suburbs which are 50km away from the city centre (starts with an A too) and last but not least, the property price could not be controlled even in a country where over 80% of all homes built were actually controlled by the government. Today, we have the news about this country, Singapore.
Article in theedgemarkets.com Private property values climbed 5% from the previous quarter, according to Urban Redevelopment Authority flash estimates released on Monday (Jan 3). That’s the highest quarterly growth since the second quarter of 2010 when prices jumped 5.3%. For 2021, prices increased by 10.6%, also the highest since 2010.
Singapore’s central bank last month warned that household debt was higher than pre-Covid-19 pandemic levels, driven by property loans.
Christine Sun, the senior vice-president of research and analytics at OrangeTee & Tie said, “Prices may stabilise and rise at a much slower pace in the next few quarters. But values are not likely to fall because developers have bought the land parcels at quite high prices.” Please do refer to the full article here: Article in theedgemarkets.com
Property price rises because of emotion, that’s why…
If we love a particular popular and mature neighbourhood and wanted to buy into that area and has been waiting for a few years, if there is an available unit but it’s RM50,000 above the market price and therefore the asking price is RM1.05 million instead of market price RM1 million, do we buy or do we wait further? Chances are, we will buy. When this transaction happes, the property price has just risen by 5%…
Why did we buy if it’s RM50,000 higher than the last transacted? Well, we are worried someone else would buy it first. Well, in financial terms, based on a loan, the actual monthly mortgage repayment for this extra RM50,000 is only roughly RM200. For someone who could actually afford that RM1 million home, the person would just pay this extra RM200 without much of an issue. This is why the decision was taken.
All these are just emotional decision which is then supported by logical reasoning. It’s just an extra RM50,000. I will stay here for a long time anyway. So, this RM50,000 divided into 20 years is only just RM2,500 per year. Monthly repayment is just RM200 per month anyway. If some of us still believe we are fully rational people, do read this book to understand better yeah. Predictably Irrational by Dan Ariely. (Fantastic and easy to read)
At best… government can control the starting price
Yeap, that’s the only thing which can be controlled. It’s being done currently. Property developers need to apply for approval in terms of the pricing for their project. Once this new unit is sold, the new owner can sell at any price they like as long as the seller is willing to pay. In other words, the control stops once the unit is no longer new and is now categorised as under secondary property market.
Happy understanding and start aiming versus just waiting for price control to happen. I would not say never but it has yet to happen in all the usual countries.
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