The bungalow dilemma

Professor Tan Sri Dato' Dzulkifli Abdul Razak
My View - The Sun Daily
July 19, 2016

A COLLEAGUE in jest was mentioning that the word "bungalow" (pronounced: bung-a-low) to fellow academics sounded more like "bung-a-look" because the price-tag attached to it is "bung-a-high". It is beyond the means of the academic fraternity despite spending so much time securing better qualifications and obtaining additional degrees. Sadly, only to find out that when it comes to securing a house, extra qualifications are virtually useless.

I have always reasoned that the academia is the wrong place to aspire owning a bungalow with a six-digit price tag, at least not in Malaysia. From casual observations of educators or academics-turned-politicians (some with the title "Professor" still intact), politics offer a better proposition, which explains why many academics behave more like politicians, at least like "pseudo-ones" in the hope of having the best of both worlds.

Maybe this outlook may need to be revised with the emergence of the "Pinhorn-gate" where a top politician was recently hauled up for purchasing a bungalow at below the market price. Can this be a reverse case of a politician mimicking the misery of a cash-strapped academic? Or could it be, as someone puts it, that the other houses along the same road are relatively "overpriced", which is possible for an island like Penang.

Going by the Khazanah Research Institute report, "Making Housing Affordable", released in August last year, this may well be the case. For example, the report highlighted: "Housing affordability is a function of both house prices and income. At the national level, median house prices were 4.4 times median annual household income in 2014. According to global standards, this signifies a 'seriously unaffordable' housing market. An 'affordable' market should have a 'median multiple' (median house prices as a multiple of median annual household income) of 3.0x."

It also noted that "house prices are also heavily dependent on location, and so some states in Malaysia have more affordable housing markets than others. Malacca for instance is 'affordable', with a median multiple of 3.0x whereas Kuala Lumpur (5.4x) and Penang (5.2x) are both 'severely unaffordable'". Some market experts listed Sarawak, Selangor and Kelantan in the same class for last year.

As of late, a news report quoted a consultant with the National House Buyers Association confirming that "there were signs that the Gen Y could no longer afford to live in big cities like Kuala Lumpur, Penang, Johor Baru and Sabah". Unless parents or even friends chipped in for the down payment as prices get inflated beyond their means like other places such as Hong Kong. But then not all parents are well-endowed enough to do so locally, let alone abroad as reported, hence creating a vicious cycle with wider socio-economic divides than already exists.

The reality, however, is that income among Malaysians are somewhat low, especially in the public sector. Although salaries in Malaysia are only second to its southern neighbours, the monthly take home pay is about RM3,000 (which on average was about the same for my first job in USM 35 years ago, not counting the declining value today); yet house prices have sky-rocketed to the "severely unaffordable" range. This is further reasserted in an analysis reportedly by Bank Negara as to why "owning" a house is untenable; not limited to the income growth not matching the house prices, but also due to intense competition for the limited supply of affordable houses from the older groups and those with stronger financial capacity (especially foreigners); so too the inability to garner a housing loan, among others.

Malaysian Employers Federation executive director Datuk Shamsuddin Bardan reiterated that houses are beyond the reach of most, in particular fresh graduates, who already have study-loan debts to start off with. From personal experience, even having worked for a decade or on a combined income of husband and wife, it is this difficult to secure a decent house in Penang.

Hence, moving forward, this will worsen for the coming generations. Ironically, as we claimed the developed economy status, more and more of them will remain "homeless" if the "severely unaffordable" bungalow becomes the new norm status symbol post-2020 Malaysia.

As noted by the Khazanah report: Gaps are beginning to appear in the system, exemplified by the growing concern of middle-income households who are neither eligible for social housing nor able to afford private sector-supplied houses. This looks like a fair warning, which until it is quickly resolved, the "bungalow" dilemma will morph into a "bung-a-lour" issue beyond the harmless question of "look". This can spell big trouble for the future.