Economic Sense of a Humble Abode


Category: My Life
Published Date Written by Jason Loo
FYI, this is a continuation of my Economic Sense series of ramblings on what's the reality out there on rising prices of goods and basic services.


Prices of property all around KL has been rising tremendously over the past few years, most notably the ones where public infratsructure is built around e.g. LRTs and upcoming MRT.

2 years ago while I was house hunting with my wife, we were interested in the Putra Heights area. The prices of houses there were more affordable and had
the right built-up for a small to medium family. However, we didn't end up buying there. Now, when I look through the ads and classifieds, the prices of properties around those areas rose more than 30%, some as much as 50% increase. This was all in anticipation of the extension of LRT line to PH as well as upcoming exclusive projects surrounding the area.

This is very evident around all areas surrounding KL. I am sure soon the surrounding outer outskirts will be impacted. Examples are Selayang and Rawang which has seen some upcoming properties priced at the higher range.

There were also recent articles highlighting the likely increase of property prices by 15 - 30% . Among some of the reasons for the increase include
1. Rising costs of land acquisitions
2. Conditions imposed by authorities

From NST, "The outlook was based on Rehda Institute's Property Industry Survey of 135 Rehda members. According to the survey, 58 per cent of the respondents indicated they have increased their launch prices by an average of 11 per cent, ranging from five per cent to 40 per cent, in H2 2010. For H1 2011, Yam expects terraces and semi-dees to be "the most popular" among buyers followed by condominiums and apartments.

"Properties priced between RM100,000 and RM500,000 are the most sellable. Overall, market sentiment is positive, new launches are anticipated to rise in H1 2011 and
prices would go up as costs are predicted to increase," he added."

This is all in line with the plan by the government to create a HIGH income society. This will result in higher salary, high goods price, high property price, zero
subsidy, high productivity, high efficiency and high standard of living leading to higher living cost, higher socio-economic impact, higher income disparity (rich gets richer, poor gets poorer), higher suffering, higher distaste of the city life and finally mass migration of citizens to other countries (that's worse case scenario but it's happening already).

So, looking at the chart below


Currency to currency comparison without conversion as of ???, the majority of items in KL is priced higher than other countries including
1. Chicken
2. Bread
3. Petrol
4. Broadband
5. iPhone 4
6. Big Mac Meal
7. Honda Civic

Some of the prices are influenced by government-related policies and some by cost of raw materials. Furthermore, with the increase of service tax from 5% to 6%, this will definitely be felt by consumers.What is evident is how can our inflation rate reported to be lowest among the region when prices of goods have increased at least 20% - 40% higher.

Somehow, it doesn't make sense. So, in my next article, stay tuned as I will be exploring the intricacies of the CPI, its calculation and whether the cost of living is on par with inflation rate as reported.