EFFECTS OF THE MARKET ACTIVITIES ON THE PRICE OF HOUSES

First Progression As recently, there has been an activity in the market price in Malaysia after the Budget 2014 being laid out by our Prime Minister, Datuk Seri Najib Tun Razak at the end of 2013. The market price is increasing ever since based on the new budget. This increase in market price gives impact on the house prices in Malaysia as retailers keep on hiking the prices of properties ever since. The prices have risen substantially over the years.

Even so, there has been a noticeable decline in home transactions as Malaysias property market is expected to slow down further with more stringent guidelines. There are findings by Rahim & Co Chartered Surveyors on the anticipated impact of a higher rate of real property gains tax. In the first few months, there has been an overall 12.6 per cent decline in residential transactions in Malaysia. Huge drops are seen in Kuala Lumpur by 47.5 per cent as data collected from the Ministry of Finances Valuation & Property Services Department. Based on this statement, we can see that the market slows down. There is a knee-jerk reaction before turning to a standstill.

Based on these findings, Rahim & Co has forseen the effect to be experienced most in the residential and Soho (small office/home office), Sovo (small office versatile office) and shop-offices segments. So the question that has been going on around is whether this trend will continue or will it change?

Another source is that the average price growth rate in Kuala Lumpur was 10% to 15% for the past five years. It is noted that the property market was on a downward trend.

This is caused from the prices that are brought down by many vacant units in the Kuala Lumpur City Centre area. It is also suggested that activities that are speculative could have been better curbed if additional stamp duties were levied on third properties and above as what has been done by Singapore and Hong Kong. This would complement the current 70 per cent loan-to-value ratio on outstanding mortgages on third properties as stated in STPropertys website.

Whether home prices will go down or not remains to be seen. In Kuala Lumpur and Selangor, prices have risen by double-digits from 2008 to 2012, partly because of easy credit and low interest rates. A report stated that, not surprisingly, the transaction numbers for residential properties priced below RM250, 000 (S$97,800) have fallen by a fifth in the first half owing to shrinking supply. For homes priced above RM250, 000, there was a 9.2 per cent increase.

For all we know, prices will go up and it will go down eventually. Its up to the efficiency of the government to play a proactive role in maintaining the stability of our nations economy. Viewing the progression helps us to guide our choices in the future expenditure.