Back to Bread and Butter

Should read this: Back to bread and butter

Saturday, 10 October 2015

By: ALAN TONG

 

JUST a few months back, a social media post on food price comparison between United Kingdom and Malaysia went viral and attracted plenty of attention.

This interesting post offered a peep into the average cost of living and purchasing power of Malaysians nowadays.

A Malaysian, Rysherz Rayn, posted on his Facebook that with about £5 (around RM33.50), he could purchase bananas, a box of grapes, 10 apples, an ice lettuce and five packets of his favourite chocolate in London. In Malaysia, the same items would add up to about RM44.

He went on to share that £5 is an hourly pay for a part-timer in UK. While in Malaysia, the average hourly pay for a part-timer is at about RM4. In other words, to afford the same items that a British buys with an hour pay, it may cost an average Malaysian 11 hours of work.

The post created a lot of discussions, some expressed shock and disappointment, others thought UK is too far away for comparison. To make it more relevant and familiar for Malaysians, I did a quick price check on Australian food.

Based on online information and personal experience, buying essential items such as a dozen eggs, 1kg of apples, a lettuce, and a loaf of sliced bread cost about A$9 (RM28) in Australia; on the other hand the same items come up to about RM20 in Malaysia.

In Australia, the minimum wage per hour is A$17.29 (RM53.50), while ours is only RM4.30 based on the minimum monthly wage of RM900.

Though this situation doesn’t paint the overall picture of the living standard in Malaysia, it does illustrate our average cost of living and purchasing power.

If we take a bigger picture, our issue of bread and butter relates closely to brick and mortar, which is the roof over our heads. When our wages are stretched in purchasing daily items compared to other countries, there is no surprise that our housing affordability level is also low.

According to the “Making Housing Affordable” report released by Khazanah Research Institute (KRI) in August, Malaysia’s median house prices were 4.4 times median annual household income in 2014. This signifies a “seriously unaffordable” housing market because an “affordable” market should have a “median multiple” (median house prices as a multiple of median annual household income) of 3.0 times based on global standards.

If we only take Kuala Lumpur into the computation, the median house prices is even higher at 5.4 times (based on annual median income of RM91,440, and the median for all house prices in Kuala Lumpur at RM490,000). Housing for Kuala Lumpur is categorised as “severely unaffordable”.

It is good that KRI reported the issue and highlighted that our country should gear towards improving the elasticity of housing supply and respond to the needs of all segments. However, other than supply, we should also look into the fundamental issue of our income level.

I remember when I first started working in 1961, my salary was RM628 and my first car was a Peugeot 404 which cost RM7,724. A single-storey house in Klang during that time was RM13,000. It cost me only one year of my salary to buy a car, and less than 2 years’ salary to afford a house.

Young graduate

However, a similar car today costs around RM100,000, and a landed house in Klang easily costs RM350,000. Looking at the salary of a young graduate which ranges from RM2,000 to RM3,000 nowadays, it takes 3 to 4 years of their salary to buy a similar Peugeot or equivalent car, and 10 to 15 years to purchase a house.

A recent news article pointed out that, only one out of two PR1MA housing loan applications are approved. It is ironic that even with affordable housing, the rakyat can’t afford a home.

The scenario and comparison above show the challenges of our young generation in securing a house today. It is unfortunate that when our car and house prices grow as a result of inflation and demand, our income doesn’t grow in tandem.

I also remembered in the 1970s, Malaysia and South Korea were started on the same level playing field in terms of gross domestic product (GDP).

According to data from International Monetary Fund (IMF), our estimated nominal GDP per capita in 1977 was US$1,084 (RM4,791), while South Korea was US$1,042 (RM4,605). During that time, when I travelled overseas with our strong currency, people in those countries looked up to me.

However, the IMF data shows the estimated GDP per capita in South Korea today is US$28,338 (RM125,256), while Malaysia is only US$10,654 (RM47,091). Other regional countries such as Taiwan and Singapore are also progressing at a fast pace, in which their estimated GDP per capita now are US$22,464 (RM99,293) and US$53,604 (RM236,935) respectively.

Back to the fundamental issue of our housing affordability, other than providing more affordable housing, the Government needs to move the rakyat up the value chain and increase the nation’s income level.

We know that the authority has been aspiring to do so under the 11th Economic Development Plan. One of them being to attain a per capita income of US$15,000 (RM66,000) by year 2020.

To expedite this, the Government and relevant authorities have to improve the competitiveness and productivity of the nation, so as to catch up with the other countries in the region.

When we talk about the affordability of our brick and mortar, the most fundamental way is to address the underlying problem of our bread and butter, i.e. our income. Until and unless our wages buy us more eggs and rice, it will be a challenge to afford a house.

Datuk Alan Tong has over 50 years of experience in property development. He was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please emailfeedback@fiabci-asiapacific.com.