Regulating house prices NOT as easy as critics think

An article with the heading, “JPPH proposes Housing Price and Cost Control Committee” was published in edgeprop.my recently.

In the article were two statements from Valuation and Property Service Department (JPPH) that stood out.

“JPPH does not play a role in controlling the price of any property including residential property but plays a role in providing important property market indicators so that the market remains secure.

“House prices are usually determined by the interaction of demand and supply except for low-cost houses in the primary market in which the ceiling price has already been fixed by the state authority.”

In brief, JPPH says that it does not control house prices. This was in response to an article in local Malay daily Sinar Harian, in which it was purportedly said that only JPPH could control property prices.

However, JPPH outlined the following key components which it said would affect the cost of housing.

The items were as follows:

• Land

• Premium payments

• Development charges

• Infrastructure provisions

• Contribution to utility providers

• Building materials

• Bridging finance and end-financing

• Insurance

• Labour

• Professional fees

• Developer’s profit margins

• Marketing techniques or gimmicks

• Cost of marketing and advertising

• Developer deposit

• Compliance with planning approval requirements

Beyond identifying these items, JPPH also suggested that the Housing and Local Government Ministry’s National Housing Department monitor the minimum and maximum selling price of houses.

In the new Application for Advertisement and Sales Permits outlined by the Housing Development Licensing Division of the National Housing Department, there are two items related to housing prices that are to be included in the application:

• List of selling prices for all housing units by type of house.

• Minimum and maximum selling price for each type of residence.

Frankly, it is not possible to control prices, not even by governments that build over 80% of all homes in a particular country, for example Singapore.

Controlling house prices is not even possible in advanced property markets where the government has a lot of updated information, for example in Australia and Britain.

So let’s stop thinking Malaysia is so special or powerful.

However, if we were to monitor each of the items suggested by JPPH closely, we may be able to identify some which are contributing the most to the cost of properties and we can then seek ways to reduce it.

More importantly, the “affordability” factor will control the homes being built.

Just take a look at the number of unsold units in the market today and you will notice that most of these are due to the price of the units. So people power, perhaps?

This article first appeared in kopiandproperty.com

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.