Home sweet home, again.

Let us speak up on this issue, about home ownership.

The first important aspect in the housing industry is the proportion in the supply of the unit for leasing and for ownership.

Owner occupiers would normally buy houses in a location which serves them in relation to their work place. These buyers however include a different class or in a different strata of the society. A common standard in the classification of the type of buyers is income levels, a lower-income level (RM900 to RM1, 200), a middle-income level (RM1, 200 to RM3, 900) and a high income group (RM4, 000 and RM25, 000).

Our own national average of income in the Kuala Lumpur was estimated to be at RM3, 500 or RM3, 700 per month, thus from this statistic the majority of home buyers are the middle-income group.

Now let us speak about the supply side for both in the leasing and the seller markets. The sellers market has registered an uprising in price due to many reasons, which I am going to explain them later. In other word the leasing market too is at the rising trend as well, as investments in the purchase of houses require return which equates to the capital value. The higher the capital value, the higher will be the rental value, although the investment return is tagged at 5% per annum.

Now we see that home prices for both leasing and seller markets at the rising trend, beyond the mean of the average earners of the middle-income group. This situation would give an opportunity to a speculator in the real estate industry to buy the housing units that are available in the market for leasing purposes.

The number one reason for home price has increased tremendously over the last three or four years was easy lending. Several government policies have caused home prices to increase. For example, the Second Malaysia Home program although a policy which is to assist developers sell houses when there was an oversupply, the policy creates demand from overseas buyers. A new taxation for conversion of land use by local council is another factor that has pushed the price of houses in Selangor higher than the price before its introduction. Some of the guidelines by the local authority too are in favor of developers, for instance where the population in the development area comprises majority Malay with a quota of 70:30, i.e. 70% for non Bumiputera and 30% for Bumiputera. Both local and federal governments have overwhelming budgets to spend in the city area on the infrastructure project which has beautified the cityscape, and consequently has pushed the price of houses higher. Although the government’s spending was large in the city area, the local government’s overall taxation in the collection for rates and assessments is low, thus causing homebuyers the extra fund for managing the environment such as guardhouse and security.

Another reason which is very common is the easiest sale of a home in a high-rise or of strata buildings that equates to its return or a guaranteed income. Many favor a guaranteed income home scheme which could be for a misleading term, however thus far many of the projects with guaranteed income were successfully sold out. During a low season rental value may drop thus causing a lower rental income for the investor.

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