The moment of truth: how do we avert a disaster?
DOCTOR’S ORDER: Study to find out what ails the Malaysian property market, says Dr Ernest
In my previous article (NST RED 3rd August 2012), I took readers of RED on a journey on board a Boeing 747 jumbo jet on a flight from Kuala Lumpur to London Heathrow airport. The plane was flying over the Indian ocean when the jet lost two of its four engines. The captain of the plane knew he could not continue to fly for long with only two engines working. He knew that at any time another of his remaining two working engines will stop and with only one engine working, his Boeing 747 jet will crash into the Indian Ocean with the loss of many lives.
What should the captain do to save the lives of his passengers? In my previous article (NST RED 3rd August 2012), I likened the troubled Malaysian property market to the stricken Boeing 747 et that had lost two of its four engines when flying over the Indian Ocean. Like the stricken jumbo jet losing vital engines, the troubled Malaysian property market had also lost vital engines. It had lost consumers and buyers who can no longer afford to buy properties at such high prices.
Like the captain of the stricken Boeing 747 jet, the Prime Minister of Malaysia as the captain of the troubled Malaysian property market knows that he has to take immediate action to avert a very real possibility that the Malaysian property market might be heading for a “crash landing”.
What can the PM do to prevent the Malaysian property market heading for a “crash landing”? I believe there is still time for the PM and Government of Malaysia to put in place, through federal government agencies, effective measures to safely land the troubled Malaysian property market. There is still time for a “controlled soft landing”.
What are the effective measures that the PM and the government of Malaysia can initiate to safely land the troubled Malaysian property market?
Step 1: Taking stock of the situation
Let us follow Ahmad bin Abdullah, an average Malaysian to a clinic to consult his doctor for treatment of unknown pains in his stomach.
Ahmad’s doctor asked Ahmad what he ate for dinner the previous day and then asked him to lie on the examination table. The doctor started pressing and probing Ahmad’s abdominal region whilst at the same time asking him if he felt pain. Ahmad’s doctor was not satisfied and ordered that laboratory and clinical tests be made vis-à-vis the internal organs in his abdominal region. Two weeks later, Ahmad’s doctor received the laboratory and clinical tests results and subsequently told him the causes for his stomach pain and prescribed appropriate treatment.
Like Ahmad’s doctor, the PM of Malaysia needs to examine his patient, the troubled Malaysian property market. If he is not satisfied with the answers he received, he may order that additional studies and tests be carried out on the property market.
Like Ahmad’s doctor, after he has received the results of the additional studies and tests he ordered earlier, the PM likely may arrive at the same conclusion as I did that the Malaysian property market is indeed in trouble and at the same time conclude as I did that the Malaysian property market’s problems are multiple and they include the stubbornly high property prices in the Klang Valley, Johore Bahru and Penang and young Malaysians buying properties at prices that they could not afford to pay and subsequently taking housing loans that they could not afford to service with their usual monthly salaries.
Step 2: Saving Malaysians drowning in housing loan debts
Now that he knows what caused the problems facing the Malaysian property market, how and what can the PM do to remove those causes and solve the problems?
Let us now follow our friend Ahmad to the Bangsar swimming pool in Kuala Lumpur. Ahmad took his children there to reward them for achieving good results in the end-of-year examinations. Ahmad’s children love to swim and they swim like fishes.
Not long after getting into the water, one of Ahmad’s children asked his father to bring him his flippers. Ahmad did so and went to the edge of the pool to give his son the flippers. Suddenly Ahmad slipped and fell into the pool. Though he could not swim, Ahmad tried to stay afloat while bobbing on the water and in the process swallowed many mouthfuls of pool water.
Fortunately for Ahmad, there was a lifeguard on duty. Immediately after he was alerted to the danger facing Ahmad, the lifeguard jumped into the pool and swam towards Ahmad. Soon other swimmers also jumped into the pool and joined in the efforts to save Ahmad. With the timely and collective efforts of the lifeguard and other swimmers, Ahmad was quickly pulled out of the water. He was by then only semi-conscious. The lifeguard applied first aid on Ahmad.
Several minutes later, Ahmad responded to the lifeguard’s efforts and with a loud gurgle coming from his throat, Ahmad vomited the pool water that he swallowed. Ahmad is safe.
Tens of thousands of Malaysian families are now either drowning in their housing loan debts or barely keeping their heads and their noses above water. They are now bobbing up and down in the water. Is there a lifeguard who will jump into the water to save them just like in the case of Ahmad when a lifeguard came to his rescue when he was drowning?
In my previous article (NST RED 27th July 2012), I showed that many high-income families and middle-income families really cannot afford to continue to pay their banks the monthly housing loan instalments as evidenced in the following charts:
See Table 1
In another previous article (NST RED 3rd August 2012), I showed that many high-income families and middle-income families had been paying one month and skipping two months and they realised they could no longer continue to live this way as evidenced in the following chart:
See Table 2
Step 3: Measures to rescue Malaysians drowning in housing loan debts
Before an entire generation of Malaysians between 25 and 40 years old are wiped out and made bankrupts, what can the PM and government of Malaysia do to save them? Why rescue only Malaysians between 25 and 40 years old?
Because they are the generation that is most at risk of being wiped out due to their heavy and unmanageable housing loan payments to the banks. Most Malaysians above 40 years old, with the exception of a few, would have bought their houses 10 years or more ago at much lower prices and consequently they have much lower and more manageable housing loan payments to the banks.
There are measures that the PM and government of Malaysia and all Malaysians working together can take to avoid a “crash landing” of the troubled Malaysian property market and more importantly save a generation of Malaysians aged 25–40 years.
Unpalatable measures: The measures that I intend to propose for the PM and government of Malaysia and all Malaysians including the banking and property development industries and the generation of Malaysians between 25 years and 40 years old to consider and implement may prove to be unpalatable and unacceptable.
Step 4: Take the bitter medicines
Like the proverbial “bitter medicine” prescribed for the patient, the property market in Malaysia is sick. The medicine the patient needs to recover from this sickness, of necessity will be “very bitter”. Malaysians, are we ready to take the “bitter medicines” to save our country and our people?
Do we have a choice or do we have a Hobson’s Choice?
The bitter medicine: In my next article, I will examine the “bitter medicines” that we Malaysians collectively may have to take to save our country and our people and the possible consequences if we refuse to take the “bitter medicines”.
Education, information, empowerment: Have you ever wondered aloud “How i wish I know the real market price of my property” or “How I wish I know how much to pay for the property I want to buy”?
You may want to visit http://www.ipropertydata.com and check them out for yourself.
This column is endorsed by the National House Buyers Association of Malaysia (HBA) to educate, inform and empower house buyers in Malaysia.