Maslow’s Hierarchy of Needs is a theory in psychology, developed by Abraham Maslow in his 1943 A Theory of Human Motivation. (Maslow, 1943) This theory was accurately expressed realities of personal experiences. The basic needs for human survival are dividing with two types. There are primary and secondary needs. Primary needs are beverage, food and shelter. On other hand, secondary needs are energy and health or sanitation.
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A basis requirement for human survival is shelter. Everyone needs a roof for their own. Certain people choosing rent a house or buying a house. Their main purpose is protect self will not let the wind, rain or other injured it. Some people renting a house just for the temporary view, facing financial issues, no need worry about debt and enjoy with tax relief for rent. In this century, shelter came in the form of a house and is the most important sector of economy market. These have laid a policy and ensure that all Malaysia citizens, specifically the low-income group have shelter and adequate facilities.
No matter what happen, we should buy a home for our security. It is because Pride of Ownership means you can paint whatever colour on your wall, just follow your own taste to renovation and decorate. The most important reasons why we need buy a home because home ownerships. It can give yourself and your family has a feel of security and stability. At the same period, it is making investment in your future.
Malaysia is in the heart of South East Asia. The country is a federation of 13 states and 2 federal territories. Penang is a state in Malaysia; it is located on the North-West of Coast Peninsular Malaysia (refer to Appendix 1). Penang is divided into two sections: Penang Island and Prai. From Figure 1 and Figure 2 shown that Penang Island (Pulau Pinang in Malay) and Province Wellesley (also known Seberang Perai in Malay). (Eliot and Bickersteth ,2002 and The Penang Tourism Action Council 2005)
I notice that happening seriously in the Penang is price of housing property become more expensive than previously. I had lived in Malaysia more than 20 years and that prices of property in the Penang Island are keeping rise, because limited availability land for developing. By Lim, a banker who’s worked at department Credit Suisse, Standard Chartered Bank and the Asian Development Bank said that property in Penang, housing price increased 40 % compare with the year from 1999 to 2008. (Siew May, Lim, 2010)
In fact, in the year 2010 normal price of Penang State type of terrace house is RM700, 000 to RM1.2 million but in years 2008 cost just RM445, 000 to RM520, 000. In addition, year of 2008 George Town area housing condominiums it cost as RM250 per square feet however during the year 2010 is RM350 to RM500. (Siew May, Lim, 2010) It is prove that price of housing it will keep raising in the future.
In Malaysia, developers keep supplying houses and launching too costly. It will affect the housing market facing the issues of imbalance in supply and demand and home become high-price for buyer in Malaysia it will affect citizen ability to afford from owing the home. In 2000 year, housing units launching in Penang were 355,436 but only 288,969 has an owner, it was show that oversupply of 20%. (Sue-Chern, 2010) In 10th Malaysia Plan (2010), as at April , there are having 107 projects within 38600 unit of house but just have 25300 units bought from speculative. Obviously, housing market in Penang it will face the issue of oversupply and under demand.
Penang State Government shows that statistics of Housing during the year 2004 to 2008, for type of Terrace house in year 2004 house price index is 124.1 and year of 2008 is 150.8. However, type of flat house price index 124.5 in the year 2004 and 146.0 in the year 2008. Moreover, for single detached in year 2004 is shows that 94.7 but in year 2008 is 118.2.Last but not least, in year 2004 shows that 102.3 for semi-detached and in year 2008 is 106.1.Obviously, type of terrace, flat, single detached and semi-detached house price index is kept rising.(Penang State Government,2010)
According to Property Consultants The Edge, Bayan Lepas, Relau and Sungai Ara are hot areas in Penang because resident will enjoy huge benefit. (Siew May, Lim, 2010) For example, the second Penang Bridge are developing it will bring a lot convenience for resident. Convenience stands to resident just using around 10- 15 minutes across Prai will save a lot of time. Besides that, developers are launching the new plan and providing the quality of staying in the area. Therefore, above of the area become hotspot in Penang.
On the other hand, in Kuala Lumpur some area launched in the Klang Valley include Kota Damansara, Setia Alam, Ara Damansara, Mutiara Damansara and other area such as Kepong, Puchong and Cyber Jaya. The house price being sold in those areas increase faster than resident income. The economic in Malaysia will unstable and caused Malaysian they affordable buying home.
According to the Khor Boon Soo, executive director of KGV- Lambert Smith Hampton (Penang) said that, step in property market early session it will better than late. (Siew May, Lim, 2010) For instance, speculator who has experience will wait the moment until the price of house fall because speculator won’t buy the house as expensive price.
However, banks provide the source facilities cheap home financing has enabled Malaysian to own more expensive houses. Condition for buyer just requires 10% deposit before own their homes. Recently speculators own many properties on hand until house price higher just selling and earn excessive profit. (Sihdu.J.H, 2010)
In Fact, past two years, medium-cost condominium in Penang cost around RM220, 000 and RM250, 000 invited by developer to speculators around 50% of their schemes. Continuously, speculators sell the units to buyer with a higher price, and earn the profit between RM50, 000 and RM100, 000 from each sale. (David, 2010)
This paper aims to provide reason of speculation activities in Penang and determinate the ways to solve this issue with speculator slow down in housing market or ceasing effect Malaysia Finance.
STATEMENT OF PROBLEMS
This paper is study on how to monitor or control housing speculative by government of Malaysia. In Penang and Kuala Lumpur, developers keep developing and selling higher priced properties, this will lead to an imbalance in supply and demand in the housing market.
Tech-Hong (2010) found that the boom in the housing market in Penang and Kuala Lumpur is generally caused by an adjustment to mortgage liberalization from 1999 to 2004. In addition, “Speculator” purchases property with acquiring the lower financing with 10% LTV. Home financing is burden for long runs IR significantly affect family daily expenses. This is one of the reasons many owners refinancing their loan to get the lowest IR, leaving the opportunity and addition money to get another house for invest. When economics is downturn will due to a lot “Speculator “facing the issue of unable paying the loans. It will bring the bankrupt whose is the buyer.
From the Malaysia statistics bankruptcy in year 2009 shown that total credit card (CC) holders are 3.2 million. Unfortunately certain holders failed to repay their CC debts caused there were 405 CC holders announced bankrupt. (Sivanandam, 2010)
On average, the percentage of credit card holders declared bankrupt was only 0.04% out of the total number of principal credit card holders in the last five years, Deputy Finance Minister Datuk Donald Lim said.”
(New Straits Times, 2010)
According to Deputy Minister in the Prime Minister’s Department Datuk Liew Vui Keong noticed the Department of Insolvency Malaysia (MDL) from year 2005 until year 2010 May. The total bankruptcy cases were 80,348. Bankruptcy cases consist of 31950 cases of Malay and 26805 cases of Chinese. Moreover, 7661 cases involved are Indians and 13932 others cases. (Sivanandam, 2010)
Some of the bankruptcy cases regarded with varied types of loans. The top three highest numbers of cases were for hire purchase loans, personal loans and business loans. There were 19380 cases, 9646 cases and 8786 cases respectively. Type of loan that caused bankruptcy consists of 6022 cases for unable to settle housing loans and 4417 cases CC debts. The lowest number of bankruptcy cases were corporate loan were 4291 cases and 3726 stood as guarantors. (Sivanandam, 2010)
With this background this research study is to examine the ways will be able to prevent Speculator purchase a lot houses for invest in future between the moment also facing the issue unable settle housing loans caused the bankruptcy. On other hand, evaluate the effectiveness of the action by the government to protect first time home buyers.
RESEARCH OBJECTIVES
The main purpose of this study was indicating on how to monitor or control housing speculative by government of Malaysia. Besides that, this research analyzed and compared the housing and property market year 2004-2008. The aim of this study was to investigate
To examine Loan-to-Value Ratio (LTV) is possible to control or monitor housing speculative by government Malaysia.
To propose Base Lending Rate (BLR) this solution to control or monitor housing speculative by government Malaysia.
To analyze using the way of Real Property Gain Tax (RPGT) to control or monitor housing speculative by government Malaysia.
To propose using Increase Stamp Duty Fees to control or monitor housing speculative by government Malaysia.
1.3 SCOPE OF LIMITATION
The scope of study is limited of the examination of the ways to manage in housing speculation in Malaysia from the point of view finance and taxation. The study will also examine the LTV, RPGT, Stamp Duty Fees and BLR of the ways to manage risk in housing speculation in Malaysia. Therefore, I will limit my scope of study located in Malaysia.
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SIGNIFICANCE OF STUDY
This study aims to carry out the ways to manage reduce risk in housing speculation in Malaysia from the point of view finance and taxation. The significance of report is enable government and public understand the situation of speculation housing in Malaysia and propose solutions to slow down the housing speculative in Malaysia. It is to be believed that there are 4 ways to manage risk in housing speculation in Malaysia from the point of view. Besides, government also takes the action of effectiveness to protect first time home buyer.
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