Rental : Reason of Malaysia living cost went out of control

Posted On 09/02/2007

Filed under Food for thoughts

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Struggle to fix the financial issues for month, I though my accounts will turn black in the coming lunar Piggy year.🙂

Alas, the relief doesn’t come easy. When I check previous my year spending, I am in shock. It seems the inflation is biting my account book. It went into new level and make the Big Mac Index irrelevant.

First, the food price cost a lot compare to 2003, and the transportation cost is seems double compare to year 2000 level. Under a “thrifty” calculation, for 25 working days, I spend around RM350 on food eating hawker/stall foods, and RM200 petrol(~30km per day) every month. I am so damn lucky there never come across any TOL on the way to work.

If I take the public transport, it does save me around RM50 compare to driving, but the 15km route to the office require me to take 2 buses and 1 hours 30mins to reach the office. (sigh, perhaps I should risk my life to buy a motorbikes or bicycle to save the money). And during off working day, the traveling can easily cost me RM8 in petrol, RM3 in parking, RM20 in food. While stay at home can curb my spending to minimal RM10.

Going to shopping mall near my house is not a good idea either. The sundries cost will show you the pathetic 50 ringgit can hardly bring you home much items. Honestly, I can’t imagine how fast 5xmom ATM roll his eye when looking at the sundries balance sheet. Luckily, 5xmom 4 children is eating home made food , which help cut a huge spending from outside foods(perhaps) .

In short, a single “middle-class” white-colar worker living in any of Malaysia city is not living an easy life. Even a thrifty person need to spend around RM800 for the basic stuff. Buying a new shirt/shoes/etc can easily break the RM1000 marks. Do take note that cheap thing such as cheap leather shoes are not lasting, and you spend twice/thrive to buy a new pair in a short period. And I haven’t put in RM100-RM200 accommodation rental yet.

When the IRD sending the personal income tax form, the “increased” fucking RM8000 personal is nothing but a slap on you face. With a annual spending of RM12,000, a new graduate with salaries of RM1,500 is like rats living in a Church.

Why urban living cost went amok?
In the early 80’s , when did my first full time job after form 5, the pay is around RM450. Yet I manage to save RM80 from the pay, yes, believe it or not, it is 17% on saving! Although my salary turn many flops today, it seems the the inflation is catch up to crazy level, now my saving drop to pathetic 5% per month. And the saving is hardly enough for me to pay should I need cash for emergency, thus I must fork out MORE money for medical insurance, personal life insurance, which cause a huge deplete of the saving ratio.

IMHO, the biggest problem of the high living cost is cause by non-production sector : property rentals. Apparently, unlike First world country that STABILISE LIVING STANDARD by taxing heavily in RENT collection, suppressing increase tariff in sub-urban commercial property assessment, many under-development country like Malaysia are doing the opposite. The government just let too many corporate enter into property rental market without consider its dire effect over inflation.

Outdated property and rental taxation
Without a carrot and stick tax system in place, the properties owner just increase the rental in cumulative level(e.g. 10% per annum), which at the end, pass the cost to the renter, which will end up passing to consumer.

Indeed, the petrol price increase does play an important roles on inflation, but the property rental price increase has more long lasting effect on inflation. For example, in Petaling Jaya, it is common that a hawker stall in a shop need to pay around RM800 per month. A increase of 10% rental will make a place of rice increase the price more than 10%. Now a day, the hawker increase the price of food by RM0.30-RM0.50, and no longer follow the linear RM0.10 cent increase. Just think about this effect spread across different field, e.g. barber store, electrical stores, bakery, etc.

A commercial property owner can easily gain 15%-20% income from their investment from such non-production gain. In short, it is about rich getting richer which jeopardize the country on the way of achieving balance wealth society.

Apparently, the government is doing little to improve the country economy by curbing the rental industry.

Bloated non-Production rental industry will lead to economy collapse
When the non-production market start overtake the production(manufacturing, services, commercial) market, the country will face a big problem of “Diminishing Wealth generation”. This mean more and more people will involve themselves in rental market for easy life.

At the end, this will bloated the property market and eventually when the production FAIL to catch up the bloated rental increase, the country economy will collapse!

Achieve balance wealth society
Malaysia government should take the bloated rental industry seriously to avoid future economy meltdown. To “curtain” the inflation, a multi-tier taxation system should be implement to cool down the rental industry. For example, a property annual rental return should NOT exceed the property cost spread across 20 years. If the rental exceed the level, 30% tax should be charge on top of the rental gain which exceed RM3000. Should the gain exceed RM10,000, the remaining will be charged with 45% tax.

By doing so, this will curb the builder to enter into rental which bloat the rental price. In addition, should the builder run into trouble, the banks will have little problem on taking care of non-performing rental unit. In short, reform rental industry taxation should come with some benefit :

  • Curb the inflation cause by rental increase
  • Prevent the property market from bloating when the stock market overheat
  • Curtain property market meltdown impact
  • Discourage rich people gather wealth and bloated the property market
  • Discourage people to gain wealth through non-production rental industry
  • Discourage people/corporate from owning too many non-production property
  • Encourage people to invest money in entrepreneur than non-production industry

Pension people who live with rental collection
Honestly, when the inflation level is curb by control the rental industry, it actually give more safe guard to pension people who own rental properties. Compare to commercial building, the rental increase of residential properties rarely catch up the living cost increase.

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