RECENT reports of the Government considering doubling the minimum price of houses that foreigners can buy to RM1mil is positive for it is a step in the right direction. But you probably need something more drastic than that.
It’s a strange thing, property. As much as it can keep the economy going and get prosperity levels up and up, it can send them all crashing down at other times. As much as property developers and banks contribute to societal well-being, they can just as well destroy it.
It’s a basic human necessity when you call it shelter and every society aspires for a minimum standard of comfort. But it is more than shelter – it’s a lifestyle, it’s luxury, and it caters to the rich, the poor, the middle class and the working class.
It’s a workplace, it’s a production facility, it’s a place to go for entertainment, to shop, to stay for short periods of time and it’s big business. So, when do you allow foreigners to own a property or not own one?
That’s not an easy question to answer for you have to think about prices, crowding out, demand and supply, dreaded bubbles and the like.
The trick may be to allow foreign purchases in some areas and not in others.
If property is purely for commercial purposes when it is used for offices, factories, shopping complexes, hotels and so on, by all means let those be open to foreign purchases, not to encourage speculation, but to facilitate business.
But if it is for residential purposes, it is best to keep the foreigners out for two reasons – one, our currency is probably still undervalued which will enable them to buy residential property cheaply from their point of view, driving up the prices of residential property to all Malaysians.
Two, this along with schemes such as 5/95, which allows payment of 5% of the property price and nothing more for two years, simply encourages speculation in property, encouraging a boom-bust scenario in property which we can ill afford.
One will do well to remember the United States’ sub-prime crisis when, incredibly, purchasers could get loans of more than the value of the house. And then incredibly too, many such mortgages were pooled together and given investment grade rating.
That basically enabled loan originators to simply pass on their loans to others in the United States and throughout the world who were blissfully unaware of the risks they were really taking because they believed the rating agencies who did not know their work.
When the crash came, as it inevitably does under such circumstances, the US economy shuddered to a halt and threatened to go under and take the whole world economy along with it. It took a lot of printing of money to stop that, something only the US could do because other countries lent it money in US dollars!
But, coming back to Malaysia, the notion that allowing foreigners to buy high-end properties will not affect other properties is false. When Malaysians are squeezed out from that sector by rising prices, they will move down the line and therefore house prices will be affected all the way down.
Ask Singaporeans – they know that well. Because there is such a lot of foreign demand for houses from foreigners, most Singaporeans are stuck to their Housing Development Board flats with no chance of moving higher up in more ways than one.
In fact, there is a school of thought that this allowed the opposition to make inroads in the last Singapore elections following which Mentor Minister Lee Kuan Yew left the Cabinet and his son, the Prime Minister, made an apology to the Singaporean public.
There is only so much land and therefore so many houses that can be built. Houses should be reserved for those who stay in this country – residents. Period. That way, developers can meet genuine demand from those who want to stay here, not those who want to buy property to make a quick buck.
Developers are the wrong people to ask whether foreign buying of houses should be permitted. They will say yes, because they want greater demand for their products. But ask them how they are doing now when they marketed their high-end products in areas in and around Mont Kiara and the twin towers of KL, first to foreigners and only then to locals.
Some of them are finding out that it is better to cater to genuine demand – people who want to stay there rather than those who speculate on house prices. If speculators outnumber those who want to stay there, then you are going to have a problem and a property bubble that will burst.
Even if you don’t allow the foreigners in, this can happen. So why let them in the first place when you deprive residents from decent places to stay.
Yes, property prices appreciate in the longer term but let them appreciate in terms of local conditions, according to local income levels. Then, the vast majority of Malaysians who don’t have a house can still afford to purchase them at a reasonable price.
The lack of lights in many high-end condominiums as dusk settles on Kuala Lumpur should be a stark, dark reminder to the Government that speculative foreign purchases of residential property do nothing for Malaysia, raise property prices for Malaysia and create eerie places.
Independent consultant and writer P Gunasegaram continues to hope that the authorities will see the light of day sooner rather than later.
By The Star
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