06 Apr Unaffordability of homes is universal
6 April 2015
By Sam Tan
I began writing this piece just at the close of Chinese New Year, as I heard the last of the Chinese New Year fireworks. The dust has settled quite quickly from the season of festivities and rituals that make us all feel very Malaysian and as the countless lou sangs fade off for the year, we find ourselves back to the grind. The reality for me is this — my time is not really my own anymore.
My wife had resorted to calling my secretary to make appointments. But most of us find that time, like money, has wings and they sure do fly. We spend most of our waking hours working, because we all have to earn our keep. That done, we still met with the pressures daily to earn more. The glum forecast, the GST worries, the daily demands — kids, petrol, groceries, the fear of not having enough. It feels like things are constantly getting more expensive, for everybody.
I had just came back from one of the Rehda Youth green tours that gave me the opportunity to explore the Tokyo property scene. Japan has one of the world’s highest property prices, after the UK, Hong Kong and Singapore and it is here that we observe an interesting phenomenon in terms of property prices.
Studies show that in Japan, because of the high prices, properties are not considered good investments. Unlike other countries where properties have capital value, in Japan, property owners often expect to sell at a lower price 10 to 15 years later. This is in view of the shrinking population, stagnant economy. On top of that is also the finding that there are less new-home buyers because of the unaffordable. So the young people continue to stay with their parents. Quite contentedly.
The situation in Japan is an interesting one. A study done by Jiro Yoshida, a real-esstate economist based in Penn State University showed a culture that is reflective of a typical housing boom. There are, he found, nearly four times more architects per capita in Japan than there are in the US. And twice as many construction workers.
According to a study by Normura research, houses in Japan are not so much a capital or saving good, but rather a consumer good. Because of the depreciating value of houses, Japanese set aside funds for rebuilding, and we see, despite the quality of the buildings, home owners demolishing and rebuilding. Homes in Japan have a life span of about 30 years. There is a lot of old demand for new homes.
The unaffordability of homes is universal. The recent March for Homes protest in London saw thousands of people in a mass demonstration demanding more affordable and secure housing. Reports show that there are more than 300,000 people on the council waiting list for homes and house prices now average at about 16 times a Londoner’s average salary.
I remember back when I worked in London, many of my colleagues have had to set up homes in the outskirts because those are the only areas they were able to afford. Some of them live about one to two hours away — in rail time (the time it takes to get from station to station).
I see young couples struggling to pull their money together to get married, to buy a car, and later that first house. Generations have to chip in to help the young ones with their first home —even the grandparents. Many resort to just living with their parents.
In the first quarter of 2014, Malaysian’s nationwide house prices rose by 8% from the same period last year. So you get the picture. Reasons of the increase are aplenty. They include the growing population, rate of inflation and supply and cost of skilled labourers.
As developers, and corporate entities, we do see a responsibility that is beyond the commercial aspect. The lack of affordable housing is a problem we need to contemplate, and often because we play a part in our social communities, and economy. While we think about the issue in social terms, there are also the economic terms.
We are also responsible for keeping our businesses sustainable — we have our duties to our employees, suppliers, buyers, and of course the whole eco-system. But it is a capital-intensive business, and pricing needs to correspond to this. So I, as a developer, see myself in the same boat as the young couples starting out who lament: “Everything used to be cheaper.”
So how? That is the constant conversation amongst ourselves. And the how must come without the compromise on quality because we too have a duty to our buyers. We look into areas where land is still affordable — we build suburbs, townships outside townships, we spread out and the result is a series of sporadic developments.
As we play our part in building the city, we are met by the others in the eco-system who have their own roles to play. As we zone-out, if you like, our public transport system will need to keep up.
As the MRT and additional LRT lines spring up in the Klang Valley, we see a pattern not unlike the cities that have taken path before us: Singapore, Hong Kong, London.
We are shaping up. And while we have a long way to go (it took London decades and they are still working on it) I am encouraged because I do see that we as a nation are meeting one another in building our cities. Cities cannot be built any other way. We are all in this together.