Much has been said about the high cost of buying a property in Malaysia. The question is whether this is happening in Malaysia only or is it a global trend?
Let’s draw a comparison with a few neighbouring countries.
In Jakarta, a fresh graduate earns about 3.5 million rupiah (RM1,000) and a 1,000 sq ft middle class apartment will cost around 2.5 billion rupiah (RM700,000). A fresh graduate in Ho Chi Minh City earns about 5 million dong (RM900) and a 1,000 sq ft apartment price is around RM600,000.
In Kuala Lumpur, fresh graduates earn about RM2,500 while a 1,000 sq ft apartment costs around RM500,000.
If young Malaysians are complaining that the property price is high, they are indeed not wrong if they were to compare it during the baby boomers era when the salary of fresh graduates was RM1,000 and said property price was RM35,000. But looking at the peers from the two comparisons, we are in a better state!
So what went wrong and what do we expect to happen?
Do we expect land price, construction or labour costs to go down?
Unfortunately, the only thing that can go down is demand. Despite low demand in the current property market, prices have not been dropping much.
This is because prices have hit rock-bottom as land, construction material and labour costs can’t go any lower. For the record, construction cost is lower in Kuala Lumpur than Jakarta and Ho Chi Minh City.
Let’s make another comparison.
A fresh graduate in Singapore earns about SGD3,500 (RM10,720). A 1,000 sq ft Housing and Development Board (HDB) flat costs around SGD350,000 (RM840,000).
You may argue that it’s not an apple to apple comparison but between a private apartment and public housing. True, a 1,000 sq ft apartment will cost about SGD1,500,000 (RM3,600,000).
But the difference is there are options. And this option is indeed the solution to unaffordable property.
Housing is a basic need, just like food, water and electricity. By trading housing like a commodity without options, prices will continue to escalate and the rich will get richer.
It is not wrong for developers to provide luxury accommodation as there is demand. But just like some people like to eat at fancy restaurants, there must be options for people to also eat at food courts. And the solution for the property unaffordability is pretty clear, i.e. public housing.
As the land belongs to the government, there shouldn’t be any cost charge to the people. The cost of construction materials and labour can be reduced as it is supposed to be no-frills housing and the specifications shall be basic.
Now that we know how to solve the issue, the next question is who will solve it?
While we already know the answer to that question, what we don’t know is when will it happen or will it ever happen?
One thing for sure is if it doesn’t happen, private property prices will continue to escalate due to inflation.