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Economic Sense of a Humble Abode

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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.

houseprice

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

Inflation

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.

SEAInflationRates
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.

Economic Sense of Justified & Repercussions

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Category: My Life
Published Date Written by Jason Loo
riseecon01

How is our tax money being spent ? Besides the usual infrastructure upgrades and aspiring new buildings, govt systems has been steadily web-bified. This provides a convenient channel for citizens to perform the required transactions online. They merely need to go to the govt building to collect the necessary documents. One example is the recent announcement of online application for replacement of MyKad (Malaysia identify card). The effort to put the applications online must be lauded and promoted.

riseecon03

However, the thing to be aware of is the over-reliance on technology to perform the necessary tasks or activities. Imagine a day when systems are hit and does not work for a long period of time. What will the people do then ... and this goes for both sides of the coin, the users and the operations side of the applications. The impact might be that operations does not know how to proceed without the technology to guide them ..

Moving away from the subject of govt systems for a while, one common example is the use of clutches in manual transmission vechiles vs auto transmission vehicles. Majority of the preferred vehicles now all come with automatic transmission gears, oftentimes making the only time when a person uses a manual transmission is in driving school. Even that may not be true if the "Auto" only driving license is introduced (refer to here . .http://paultan.org/2010/11/02/automatic-transmission-only-driving-license-in-the-works/).

riseecon04

Ok, so what I am saying is that I do hope that a backup plan is in place for manual operations, in any case where technology is involved to reduce workload and physical customer interfacing. I believe in any case, facing a customer head-on is the best approach towards resolving any conflict or pressing issues. The use of technology widens this gap, although providing the necessary convenience.

Anyway, back to the subject at hand, what things justifies the increase in prices in goods and basic services >> well, for my haircut session, the barber's services included a  massage, the use of sterilized razor, towel to clean up the loose hairs on the face and neck. More importantly, the environment was clean and cozy (yes, i fell asleep a few times and no .. i still had hair when i woke up).

But what about other services / goods / food prices ... there has been an evident steady increase across all categories of expenses from properties, raw materials, food etc .. all this has contributed to the inflation of our country (although it has been stated that our 'reported' inflation is among the lowest in the region). Besides the point of price increases, i have always wondered if our salaries increments reflect the actual inflation rate.

A recent article highlighted the plight of our low to middle-income citizens who are finding it harder and harder to survive in the constant increase of everything ..from property prices to tid-bits (http://www.themalaysianinsider.com/malaysia/article/malaysians-struggle-to-cope-as-food-prices-soar/). Has the phrase "the poor becomes poorer and rich become richer" becoming more and more a reality now ? Find out in the next installment of Economic Sense :)

P.S. Latest update courtest of MSN Malaysia and Malaysian Insider news ...

The purchasing power of KL residents is 33.8% of New Yorkers; 42% compared to
London, 33.7% to Sydney, 32.6% to Los Angeles, and 31.6% to Zurich.
KL workers need to labour 22 minutes for a bread loaf. In comparison, Los
Angeles counterparts take 18 minutes. In Sydney, it's 16 minutes. In Tokyo, 15
minutes. In Zurich, 12 minutes.

Broadband comparison summary:

Kuala Lumpur - 5Mbps broadband package - RM149
London - 10Mbps broadband
package - GBP13.50
Melbourne - 5-8Mbps broadband package - AUD40
New York
- 7Mbps broadband package - USD41.95

In KL, a Honda Civic is priced at RM115,000 - 20 times an auditor's average
monthly earnings.
In Melbourne & London, the price is respectively AUD25,000 and GBP19,000
- 3 times an auditor's average monthly earnings in those places.

Source :

http://news.malaysia.msn.com/regional/article.aspx?cp-documentid=4785148


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