The Steering Committee of the Penang Forum welcomes and supports the recent announcement by the Penang State Government to introduce new measures to cool the escalation of house prices in recent years.
The unsustainable rise in house prices in Malaysia, and many parts of the world, is due to many factors, some beyond the control of the local, state and even federal government. A large part of it is due to the quantitative easing and loose monetary policies of advanced countries that have kept interest rates low.
In an environment of low or even negative real interest rates, many turn to property investment to beat inflation. Unfortunately then, housing is seen less as a means of consumption (a place for people to live) and more an asset class for investing and speculating. Just note the high percentage of unoccupied units in high-end residences. This is the basic reason for the huge increase in house prices.
Government at different levels – federal, state and local – have different powers and instruments at their disposal to control house price increase and each must play its respective part. The Federal government and Bank Negara have rightly introduced, though belatedly, measures to curb house price increases through lower loan to value ratio and incremental real estate property gain tax.
It is good that the Penang State Government is introducing fiscal measures, in this case a levy on property transactions to curb speculative buying. The policy to impose a moratorium on sale of affordable, medium and low housing for limited period (five years for the former and 10 years for the latter) is also a right step. As stated earlier, we encourage housing as a means of consumption, not a means for speculation. The latter hurts the ordinary people and benefits only a minority.
We call on the local council to also play its part to introduce measures such as incremental development property tax (higher development charges for high end housing and lower charges for affordable and low end housing), and stricter planning and approval conditions to discourage the over-supply of high end housing and encourage the supply of affordable and low end housing.
Penang Forum steering committee
14 December 2013