High Malaysia Properties Price Causing Inflation Indirectly

According to the statistic released by The Board of Valuers, Appraisers and Estate Agents Malaysia, property price index in Malaysia in the second quarter still rose 7.5%, and quarter to quarter is rose for 1.07%. The average price of Malaysia properties are raise from the first quarter RM206,513 to RM208,725. From the statistic, we can know that the inflation is still standing high and is of uptrend.

malaysia properties
malaysia properties

For the performance of respective states, apart from Perlis, all the other states or regions have achieved an annual growth performance. Terengganu and Sabah are having the largest percentage increase, which is 15.5%, and 15.1% respectively. Other states that recorded double-digit growth are including Selangor and Kelantan. However, for quarterly comparison, only 6 states are achieved growth of property prices, these states are Terengganu, Kuala Lumpur, Selangor, Penang, Sabah, Kedah and Sarawak.

It is noteworthy that the average housing price in Kuala Lumpur is still top among other states, with the price of RM442,864 and is trailing by Sabah and Selangor. The average housing price in Sabah has risen to RM341,222. Meanwhile, the price gap between Kuala Lumpur and Sabah has been narrowed down from first quarter of RM112,474 to RM101,642.

This means that the special phenomenon of Sabah’s properties still having no improvement. As the housing prices continue to rise and the local residents still suffer from the dilemma of low-income, this has even worsen their living standards.

The Average Income of Malaysians is Unable to Cope with High Housing Prices

Now, we may do a simple calculation on average housing price in Malaysia by using the available statistic. If anyone wish to buy house at this moment, they will have to come out with at least RM20,873 of down payment, together with other expenses including legal fees, stamp duty, loan processing fees, and etc. Which mean a consumer must have at least RM30,000 in hand in order from the consumer to buy a house. This still not include the money for renovation, furniture, appliances and other expenses.

For the remaining RM190,000, a consumer will need to get the housing loan from bank. Thus, assuming the interest rate is 5% for the repayment period of 30 years(base lending rate or BLR is currently at 6.3%), which means a consumer will need to pay for RM1,000 for the monthly installment. This may seems not a big amount for most of the people especially those who are having income of more than RM3,000, it hardly become any burden for them.

However, the thing that we want to clarify here is that, according to the data released by World Bank, Malaysia’s per capita income is only $7,900 (approximately RM24,700), and if we divide it to become monthly income, it will be only RM2,058. For such level of income, the people simply cannot afford to pay for expensive housing prices.

Though some people may against the so-called per capita income is includes elderly and children who are having no productivity at all, so this calculation is not accurate at all. Well, if we calculate the total labour forces in Malaysia of 1,274,000 in July 2011, by multiplied the per capita income by 2, then it will be about RM4,000 per person. But this is still low compare to the ratio of housing price with the personal income of other developing countries.

We may do some simple calculation on the monthly expenses as oppose to a person monthly disposable income. A typical Malaysian will have to pay for:

– Housing loans: RM1,000
– Car loans, gasoline, maintenance, parking, etc: RM1,200
– Food expenses: RM1,000

And the remaining money is actually less than RM1,000. If a person didn’t saving up the money, any unexpected event happen may easily used up all their remaining money.

In view of this, even though Malaysia’s housing prices and other prices are still keep at an acceptable level, but with the continued rising of the price, no doubt will make the spending power of Malaysia people continues to drop, which may result in the decline of the country’s overall standard of living.

Malaysia Property Price Indexes in 2nd Quarter 2011

Per Annum Comparison(%)
Per Quarter Comparison(%)
Average Price(RM)
Kuala Lumpur


Negeri Sembilan

3 Factors For Singaporeans Invest in Malaysia Properties

Recently, there are more and more Singaporeans flocking to invest in the property market in Malaysia. Most experts believe that there will be even more Singaporeans come to buy Malaysia properties for the coming days. Even there have certain restrictions implemented in the country for foreigners to own property in the country, but compared to the past, the restriction have been relaxed a lot. The relaxation of the restriction is the major factor that makes a lot of Singaporeans come to Malaysia for buying properties.

malaysia real estates
malaysia real estates

For this trend, many real estate consultancy firms in Malaysia think that it is actually a good sign for Singaporeans to enter into Malaysia real estate market. This is because Malaysia needs more foreign investment to invest in local fixed assets, and the Singaporeans have always been the major foreign buyers for Malaysia real estate. By consolidated different views from all parties, we can conclude that there are 3 major factors causing Singaporeans to buy in local property.

Factor 1: More Affordable

The first factor is because the property price in Malaysia is still cheap. People are able to buy a 1000 square feet apartment for RM500,000 in Kuala Lumpur, or double story semi-detached terrace house with 3,000 square feet in Johor Bahru. While back in Singapore, with RM500,000 (approximately $210,000 Singapore dollars) you can’t even get a 700 square feet of HDB(Housing & Development Board) house.

By having the same price, Singaporeans only afford to buy HDB house with limited space, but they can own a double story semi-detached house in Johor Bahru. If phasing out the living standard and income issues, the gap between the two different property prices is evident.

Although the Malaysian government stipulated that foreigners can only buy properties that are priced at RM500,000 or above, and there is even more stringent regulations on foreign home ownership in Johor, the state doesn’t allow foreigners to buy in the single story terrace houses and second-hand double story terrace houses. But this did not affect Singapore’s determination to invest in Malaysia real estate, mainly because the regulations is not as stringent as compare to last time and also buying a property with RM500,000 is still relatively cheap for most of them.

In addition, even though currently the Ringgit is continue to appreciate, but in comparison, the Singapore dollar is appreciated even more. As a result, the value of Singapore dollars is carry more weight and this make the investment of Malaysia real estate become more affordable for them.

According to the data revealed by Singapore HDB, the average HDB housing price been raised for more than 25% from S$285,000 to S$390,000 from the first quarter of 2008 till now. However, at the same time, the average wages in Singapore is increased by only 4%. This means that are lesser Singaporeans who are afford to buy a house in their home land. As a result, even if the overall property prices are pushing higher by Singaporeans for 10-15%, they are still worth for Singaporeans to buy.

According to a survey conducted by Singapore’s real estate website PropertyGuru.com, 79% of respondents believe that all sectors of Singapore’s real estate are overpriced, while 75% of respondents believe that HDB prices are too high. Both are higher compare to the first quarter of this year, which are 75% and 68% respectively. The situation is causing an ordinary Singaporean facing difficulty to rely on their income to buy a house. Therefore, more and more Singaporeans are crossing the causeway to Malaysia to buy houses. Some Singaporeans even choose to live in Johor Bahru, and travel back and forth to Singapore to work.

Factor 2: Geographical Proximity

The relationship between the government of Malaysia and Singapore are increasingly become better, and this is the second factor that more Singaporeans are willing to buy properties in Malaysia, especially in Johor Bahru. Johor Bahru is favourable because there is a mega Iskandar Development project taking place in the region. Furthermore, the issue on Malaysian railway bureau (KTM) with Singapore land authority been resolved, and the two railroad services will be extended to each other’s territory. All these happen to be favourable factors for the property market.

Due to the high prices of Singapore property, many of the buyers are now turn to source properties from other countries. Malaysia is their first choice, and the strategic location of Iskandar Development Area is the key to attract Singaporeans making their investment. The local government seems to well promote the Iskandar Development Area as the area been successfully change the impression in the eyes of Singaporeans.

Also, the Singapore MRT to Woodlands station for the terminal of the new subway Thomson Line, will be completed in 2018. Singapore Immigration Customs is located in Woodlands, which will be able to reduce the round trip time in Singapore and Johor Bahru, this is helping to improve the number of immigrants. By that time, it will be easier for both residents to enter into these two countries. And will cause more Singaporeans to consider of buying properties in Johor Bahru.

Factor 3: Similar Culture

There are similarity in culture for both Malaysia and Singapore. Compared with other countries, Malaysia is geographically close to Singapore. And more importantly, the cultural practices between the two countries are very similar. Singapore ever belongs to Malaysia and despite the long separation the two has always maintained close ties.

The historical factors and family relationship is also encourages Singaporeans to invest in Malaysia real estate. Among them are those who been working in Singapore for many years and already be the permanent residence in Singapore; while some of them still having older generation who are still living in Malaysia. For example, many Singaporeans who choose to buy property in Penang are actually originated from Penang. Since Penang is the state that they are most familiar with, therefore they are returning to there to buy property.

In future, regardless of any policy introduced in Malaysia, the government must always take Singapore into consideration. This is because Singaporeans are making direct investment into Malaysia real estate market and can give a big boost for Malaysia economic growth.

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Building Low Cost Houses For Penang Citizens

Penang Low Cost Houses

Penang State Government setting up the Penang Housing Bureau with the purpose of constructing civilian housing so as to benefit the people of Penang.

penang properties
penang properties

Chief Minister of Penang, Lim Guan Eng, said he understood after Penang become an international city, it will lead to local housing prices soaring, so this may cause the lower class people do not have the ability to purchase houses. Therefore Penang State Government is implementing precaution step by setting up the first State Housing Bureau in Malaysia.

Penang Housing Act

During the meeting held in November 2010, the chairman of housing committee, Wong Hon Wai, was presented the Penang Housing Act of 2010. The new Housing Bureau will have the right to sign up contract, make acquisition, holding all kinds of liquid and long term assets. And this Act is going to take effect after proceeding for the Third Reading.

After the set up of Penang Housing Bureau, the chief minister of Penang will be the chairman, and its members will comprise of Penang Housing Committee chairman, state secretary, state counsel, state financial secretary, three federal government members that appointed by the minister and not more than 10 members that are appointed by the Penang state government.

Under the new Act, the Penang Housing Bureau will has management, law enforcement, effectiveness, implementation and compliance. Meanwhile, under this decree, the council may propose policies and provide advice to the state government, including the expedition, revitalization and promotion of housing development.

Ensure of Housing Quality on Penang Low Cost Houses

According to the proposed Act, after the establishment of Penang Housing Bureau and the implementation of state government regulations or instructions relating to housing development, they will need to adopt advise and implement standard guidelines to ensure the quality of housing.

The authority is also posses the development and implementation of public housing allocation policies. Besides, they will also manage and bear the operation and maintenance cost within the scope of the housing infrastructure. Without breaching the Housing Development Act that stipulated in 1966 as well as other rules and regulations, they will help the developers or public agencies to manage the delayed housing development projects.

Under this Act the state government has also appointed a candidate who has management experience in this field to be CEO of the Council. Meanwhile, the council will also set up a fund, including accepting any donations to the Housing Bureau, or make use of the donation as an investment. In addition, any homebuyers or tenants having any complaints toward the Housing Bureau, they can voice their appeal to the state government.

Meanwhile, in the context of the Act, the Housing Bureau may establish procedures and regulations related to housing development, especially public housing.

Property Market Break Record of RM100 Billion

Malaysia’s real estate market in 2010 exceeded the total turnover value of RM 100 billion, a record high of RM107.4 billion, which is a historical record for Malaysia property market to break the RM 100 billion level. Meanwhile, the total volume of real estate in 2010 also make a new record with total of 376,583 transactions being deal.

malaysia property market
malaysia property market

Nevertheless, even though the government expects the real estate market will continue to achieve growth performance, but the transaction value is expected not be able to maintain the 11% growth as last year. But being stimulated by economic restructuring program of incentives to attract more foreign investment and foreigners to invest in properties in Malaysia, coupled with rising inflation, the government estimated this year residential property prices will rise another 10-20%.

The Real Estate Assessment and Services Administration departments (JPPH) that under the Ministry of Finance today announced the “2010 Real Estate Market Report” (Property Market Report 2010) shows that Malaysia property market performance in 2010, in line with China’s strong economic growth performance in last year’s (7.2% growth).

The total trading value in 2010 real estate market grew by 11.4%, exceeded RM 100 billion which make a record high of RM107.4 billion, making RM 81.02 billion more than 2009. Meanwhile, the total volume of real estate also rose 32.6% which have 376,583 deals in the trading volume compare to 338,089 in 2009.

Billion mark for the first time

Overall, Malaysia’s real estate market recorded in the first quarter of 2010 were 16.2% and 18.1% respectively. This real estate market growth momentum continued in the second half. However, the rate of increase is slowing in the third and fourth quarters, which achieved 8.5% and 4.8% growth respectively.

According to director of real estate appraisal and services administration, Abdullah Thalith Md. Thani, said at a press conference that the real estate market in 2010 is on it’s peak now. This is a historical moment for Malaysia real estate market.

He pointed out that after facing the U.S. subprime financial crisis in 2008 and 2009, Malaysia’s real estate market is currently rebound significantly. Although there are a lot of adverse policies implemented in 2010 and caused a downturn and pessimism sentiment on real estate market, however, the total real estate market transactions and deals still record a strong growth.

The housing industry continued to dominate the market

Overall, the residential property still dominate the real estate market. The total transaction volume is 60.2% (226,874) and total transaction value is 47.1% (RM 50.6 billion). For year-on-year comparison, the total volume and transaction value of residential property in 2010 is recorded as 7.2% and 21% respectively.

For the prices of the housing industry, the housing price index in 2010 rose by 8.9 points to reach the level of 140.7 points. While the average price of residential property rose from RM 184,574 in the 4th quarter of 2009 to RM 199,636 in 4th quarter of 2010. The highest residential property price in Malaysia is Kuala Lumpur with the average price of RM 430,163, followed by Selangor (RM 301,443) and Sabah (RM 253,391).

For 2011 outlook, Abdullah Thalith said that although this year’s real estate market will continue to achieve expected growth performance, but the expected trading value of the real estate market will not be able to maintain at 11% that achieved in last year.

In his view, the prospect of property market is largely depends on the fundamental elements. Due to the current economic fundamentals are very good, so he was quite optimistic about the real estate market outlook this year. In any case, he admitted that the trend of international oil prices will have impact on the real estate market in certain aspect. “If crude oil prices continue to rise, almost all of the areas will be affected, the real estate market is no exception.”

Government taking necessary steps to prevent property bubble

On the other hand, Malaysia Deputy Minister of Finance, Donald Lim, said in a press conference that the real estate market is going to slowing down slightly, mainly because the government has adopted necessary steps to prevent emergence of property bubble.

“For the total loans that released by the banks, 26% of them are housing loans, which amounted to RM 240 billion, which make it rather important for us to take necessary steps to prevent the property bubble.”

He claimed that the Bank Negara (National Bank) is limited the housing loans to maximum of 70% only for people who are buying their third property. this resctriction is necessary to control the property speculation. He said that although if compare to regional countries, Malaysia’s housing prices are not high, but the government to will take all necessary steps to ensure that all Malaysian are able to have their own house.

In this regard, he reiterated Prime Minister Najib Razak on the promotion of “My first homes plan” which is designed to help those who has income of below RM 3,000, with the age of 35 year or below to have the ability to buy their own homes. Besides, the government also work together with the developers to build about 100,000 low cost houses that price between RM 100,000 to RM 200,000 so that people can afford to buy.

Nevertheless, he still expects real estate prices will rise this year for about 10% – 20%. This is mainly from the gains of mid to high price property. He noted that Malaysia’s economic restructuring plan been successfully attracted foreign investments to Malaysia, thus boosting real estate prices. In addition, the economic restructuring plan can create employment opportunities which will also expected to support the property market prices.

He said that inflation in 2010 is at 2.2%, and for the first four months of 2011 the inflation rate is amounted to 2.4%. He estimated that inflation will be higher this year, mainly from food prices and pressure on the rise of property prices. However, he believed that the policies promoted by the government are enough to quell inflation.

Real Estate Mortgage Hints for Homebuyers

Homebuyers may only make one or two real estate purchases in their lifetime. Even so, it is very important for them know about real estate mortgages for homebuyers before starting the process. Homebuyers may often be surprised because it is so easy to make assumptions that are not necessarily true.

Credit Rating influences Interest Rates

Homebuyers should know their credit rating in advance. They should see the range of interest rates lenders are offering when they are ready to buy real estate. If the homebuyers do not think a lender offered a low enough interest rate, they should check with other lenders.

real estate mortgage
real estate mortgage

If homebuyers do not have a good credit rating, they should not let a lender take advantage of that fact by charging an excessive interest rate. The homebuyers may even want to work on improving their credit rating before purchasing real estate. They may check into getting a FHA or HUD home mortgage loan.

Fixed Interest Rates –

Homebuyers should know about what APR (annual percentage rate) their lender will offer on their real estate loan. The fixed interest rate is the easiest to figure because this interest rate never changes during the entire time the homebuyer has the real estate loan. Calculators found on some websites can easily amortize (show a payment plan for) a fixed interest rate loan. The homebuyers can see how much principle and interest they pay with each loan payment.

Variable Interest Rates –

If the homebuyers want a variable interest rate, they should make sure there is a limit on how high the lender can raise the interest rate throughout the span of the real estate loan. The homebuyer should figure what the total payment on the real estate loan might be if the interest rate goes up to its highest amount. Would they be able to afford the amount of the mortgage payments at that interest rate?

Interest-only Loans –

This is what BRIAN D. MONTGOMERY, Assistant Secretary for Housing – Federal Housing Commissioner, HUD had to say on April 5, 2006 about homebuyers turning to interest-only mortgage loans to finance their homes:

“Without a viable FHA alternative, many homebuyers turned to high-cost financing and nontraditional loan products to afford their first homes. While low initial monthly payments seemed like a good thing, the reset rates on some interest-only loans are substantial and many families are unable to keep pace when the payments increase. In addition, prepayment penalties make refinancing cost-prohibitive.”

Some words that experienced loan recipients do not especially like are high reset rates, interest-only loans, prepayment penalties and balloon payments.

Cautions before Figuring Interest

Homebuyers should be aware that there are always costs involved in the buying and selling of real estate other than just the price of the real estate. The lender will add these costs to the homebuyers’ loan and this increases the total amount of the real estate loan. Therefore, the homebuyers should figure the interest rate on this total amount rather than just the original asking price of the real estate.

Closing Fees –

First time homebuyers often do not know that there are these other costs involved in the purchase of real estate. The lender is not trying to trick the homebuyer; this is a common practice. If however, the homebuyers think that the lender is overcharging them, they should not hesitate to shop around. Some of these costs may be a survey fee, an appraisal fee, a fee to pull a credit report, an application fee, a document preparation fee, a flood certification fee, a fee for title insurance, inspection fees. Sometimes these fees can add up to thousands of dollars and the buyer usually does not know exactly what they are going to be until the closing day. The homebuyers can ask the lender for an estimate of these costs (Good Faith Estimate). The buyer and the seller can make agreements between themselves as to whether the buyer or the seller pays some of these fees. All interested parties should discuss these decisions before the closing day.

Points –

Also known as “discount points’, are used by lenders to get upfront money on the real estate loan transaction. One point equals 1% of the mortgage loan. One point on a $150000 real estate loan would be $1500. The homebuyer should know before closing day if “discount points” are associated with the real estate loan. The benefit to the buyer is supposed to be that the buyer will receive a better interest rate from the lender if the buyer and/or the seller pay these “discount points” up front.

The lender may have said that the mortgage payment would be $500 per month for the life of the loan because the loan has a fixed interest rate. In a few weeks, a mortgage payment book may come in the mail. The payments are $650 per month. The mortgage company also sends a letter. It states that the mortgage company will be seeking homeowners insurance on the mortgaged home. This insurance will probably be higher than insurance the homeowner can obtain. Either way the mortgage company will oversee the payment of the insurance and the property taxes. The mortgage company will hold the money in something called an escrow account until the payments are due.

Some mortgage companies prefer to have these escrow accounts. The homeowner should obtain their own homeowners insurance and notify the mortgage company what insurance company they have chosen. The mortgage company should then pay the insurance company the homeowner has chosen to insure their home. This is not an increase in the mortgage. It is only a different way of paying for insurance and taxes.

Websites to Check

Check the website for the United States Department of Housing and Urban Development (HUD) for more information on borrowing money for home mortgages. The Federal Deposit Insurance Corporation (FDIC) can answer questions about where to get your free yearly credit report, how to improve your credit, and more questions about money. Bankrate.com has great calculators for figuring mortgage payments and amortization schedules.