4.3 The high price of private sector housing
House price definition may differ by different personnel such as developer, contractor, dealer, and buyer (Lee, 2009). According to Lee (2009) defined house price as value to be paid for the transaction of buying a residential property which more to buyer’s perspective.
In recent years, rapid economic development has resulted in an increasing demand for residential housing among urban areas in Malaysia. Reviewing the housing prices in Malaysia, the prices have appreciated dramatically whether in major cities or smaller towns and depending on specific location. Over the past ten years, the residential property market in Malaysia has experienced a significant price expansion throughout Malaysia (Ong, 2013). Most people wonder about whether high annual increase in house prices is really more in line with the increase in annual revenue in the general population. In fact, many people who worry that they cannot cope with such high real estate prices. So far, even with the higher housing prices, but the real factors behind the rise of these illogical remains open to question. Based on economic theory, house price movements exist in regional demographic and regional economies, such as population, GDP, Real Property Gain Tax, housing finance, inflation and construction costs. According to Mulok (2012) Prices are generally high due not only to big demand but also the high cost of materials for housing construction in the state. The cost of building materials such as cement, bricks and iron has increased significantly over the past 10 years.
4.3.2 housing prices in sabah
In recent years, there is an increase of house price radically in Sabah that affect to house buyer. House price is the value to be paid for the dealing of buying a residential property. House price rises continuously respecting few factors and had impacting house buyer in decision to buy their house. Vibrant house price is directly influencing the level of homeownership in Sabah. To avoid more and more housing buyer in Sabah losing opportunity to own an affordable house, it is important to foresee the issue in deep with particular research. Also, this could highlight the key to help policy maker for providing solution on controlling the rising rate of house price and strengthening or stabilizing the market with healthy demand-supply chain.
According to Malaysian House Price Index released by Valuation and Property Services Department, (refer Table xx) In Q3 2013, the price of the ‘average house’ for All Houses in Sabah is RM 410,010, which ranked third highest in Malaysia. The highest price was recorded in Kuala Lumpur (RM631,960) followed by Selangor (RM411,841) and Sabah (RM410,010). The two lowest price were noted in Perlis (RM129,977) and Kedah (RM150,879).
The price of the ‘average house’ for All Houses in the country registered RM274,351. The price had increased steadily from the previous four quarters; RM244,454 (Q3 2012), RM251,731 (Q4 2012), RM256,199 (Q1 2013) and RM265,737 (Q2 2013). In Q4 2013, the price of the ‘average house’ for All Houses in Malaysia declined slightly to RM272,168 recording a marginal drop of 0.8%. Kuala Lumpur continued to record the highest All House Price at RM636,008. Selangor ranked second at RM411,111, followed by Sabah, Sarawak and Pulau Pinang at RM409,754, RM332,539 and RM323,836 respectively. The remaining states recorded prices lower than the national average of RM272,168. The lowest All House Price was recorded in Perlis at RM131,264.
The research conducted by Mulok (2012) shows that prices of medium-cost single-storey link-houses in new projects in most urban areas in Sabah were about 20% higher in 2012 compared to 2011. As a result, houses built by private developers are beyond the reach of the middle- and low-income population. Due to low profit margins, private developers are not keen to develop low-cost houses unless they are subsidised substantially by the state government ‘ and even when subsidies exist, some developers compromise on quality in order to maintain or increase their profits.
Thus, the solution for most of the population is the provision of affordable houses ‘ that is, low- and medium-cost houses developed by government agencies. This is a major source of pressure for these agencies.
Table 3: All House Price by State
Source : The Malaysian House Price Index NAPIC, Valuation and
Property Services, Ministry of Finance Malaysia
As referred to table (1,2,3,4) below, it showed the average price for terraced house (table), high-rise unit (table), semi-detached house (table ) and detached house (table). In Q4 2013 average terraced house price in Sabah is RM 356,632, for semi-detached house is RM 303,206, for detached house is RM 602,217 and for detached house is RM 412,278.
Terraced House Price by State
High-Rise Unit Price by State
Semi-Detached House Price by State
Detached House Price by State
4.3.1 Housing Price Determinants
Shortage of labour
The availability of foreign labour is very limited and the housing industry often has to compete with other segments of the construction industry, especially when infrastructure and civil projects are running in full force, as has been the case in projects under the Economic Transformation Programme. Inconsistent or inadequate supply of labour is detrimental to the housing industry because specific construction and delivery timelines are part and parcel of Sale and Purchase Agreements (S&Ps). Developers therefore run the risk of paying liquidated damages due to delays in handing over vacant possession. (cegamas)
Malaysia construction sector is facing shortage of skilled labour force and foreign labour source in market. This is due to large variety of demand against supply and attitude of Malaysia’s young generation nowadays show that they are not interesting in construction work (Hamzah et al., 2012). Semiskilled and skilled foreign workers with local languages spoken are easier being absorbed to work with other employer, who providing higher pay (Aziz, 2001; Bakar, 2002). Malaysian developers and contractors need foreign worker for plenty of general construction working with even less pay than local workers (Kassim, 2005). Hence, wages and benefits had been improved for winning labour force during shortage, coincident with high rate of development (Sambasivan & Yau, 2007 ; Narayanan & Lai, 2005). However, foreign labours are employed under temporary work passes which entitled to short renewable period and with condition to re-entry. (http://ijret.org/Volumes/V02/I10/IJRET_110210039.pdf )
Real Property Gain Tax
According to Ong (2013), the effect of the real property gains tax (RPGT) on housing satisfaction is also taken into consideration that will contribute to housing price in the market. The RPGT was suspended in 2007, but the Government’s reimposition of the RPGT in the 2010 budget has caught some by surprise. According to Phun (2010), the RPGT effective from 1 January 2010 means that any gain arising from property disposal within 5 years will be subject to the payment of 5% tax. According to a previous study, Tan (2011) states that the impact of the reimposition of 5% real property gains tax (RPGT) on housing satisfaction is not significant. Therefore, buyers will not take into consideration the 5% RPGT when they want to sell their property within 5 years. It is logical to believe that the 5% RPGT will contribute to lower housing satisfaction among Malaysian homeowners. (http://www.globalbizresearch.com/images/files/73848_JEIEJB_%20Tze%20San%20Ong.pdf)
High material cost
Material price is undeniably the highest financial load in any construction industry (Ibrahim et al., 2012) . Associated with rise of material production and processing price, developer nothing more should afford the rise of material price and forced them raising the selling price of their finished unit. According to SHAREDA (2013), property prices in Sabah are set to increase by 5 per cent this year due to rising costs of building materials. Also, the Sabah Hardware Trading Association has announced an increase of 15% in building material supplies cost due to the increase in electricity tariff and fuel price (SHAREDA, 2013)
The Demand and Supply
Rising of house price is toughly reflecting fluctuation between demand and supply trend. The supply growth of residential property in Klang Valley had drop to 1.5% in 2011 (Lee, 2009). This shows poorest performer as compare back to ten years time. This slowdown reflects an unbalance in housing market where the supply is always lagging behind population growth and the need of housing, hence house price would continue to rise. Furthermore, house price index for the year 2011 in Klang Valley had doubled as compared back to 2001. Back to mid 1990’s, presented demand to supply ratio for residential property was high. There is always a gap between housing demand-supply with significant widening effect (John, 1999). According to statistical date from JPPH (2012), the National House Price Index rose 6.1% from 8.9% growth last year during first quarter 2012 as compared to the same period 2011 with average house price RM 219,000. District like Kuala Lumpur, Ampang, Klang are recorded as group of biggest increment, 46%, 97% and 65% respectively. In constraint of housing supply, the responsiveness of expanding housing stock or supply may decreases, since in common context, the price rates is being adjusted high for more wages rather than expanding the industry to build more house for balancing the demand rates (Dan, 2010). These situation often occurred to the countries with higher population rates, and these becomes practical reason for broker and housing agent to create market volatility and price fluctuation (Johansson, 2010). Mamta (2012) studied the trend in New York City; revealed rising house price is strongly connected with job growth, migrant and immigrant growth, and supply and demand rates. House price is far more complicated which due with dynamic market, and critical demand and supply ratio fluctuation. Demand on house depends on flexible buying ability (Stephen, 2010). Key area like Klang Valley had accepting strong urban migration volume which also subject to population growth and housing supply pressure (Thean, 2012). Housing supply tends to be less responsive to urban migration and remains still uncertain with high climb of demand. This is determinant factor of house prices growth in most countries since the inflow strengthening tough reason of supplying developers, owned house reseller, buy and sell agent rise the house price along with inexhaustible demand (Dan, 2010).
Housing Quality and Appearance
Salleh and Shiadri (2008) found that the neighbourhood condition also an dominant factors affecting the levels of housing satisfaction in Malaysia housing sector during research in Penang and Terengganu. Oh (2000) expressed that space and house price in Malaysia is achieving high satisfaction, however size of kitchen and toilet, availability of public facilities are below satisfaction.
Ong, T. S. (2013). Factors Affecting the Price of Housing in Malaysia. Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB), 414-429.
Ibrahim, M., Faizah, A., & Norazriyati, W. (2012).Exploiting town planning factors in land development: Case stude of urban housing in Kuala Limpur, Malaysia. Journal of Facilities Management , 307-317.
Lee, C. L. (2009). Hosuing price volatiliy and its determinants. International Journal of Housing Markets and Analysis 2(3) , 293-308.