HOUSING INVESTMENTS
By THEAN LEE CHENG
THERE was this tagline The American Dream is truly attainable! in a local newspaper advertisement marketing US properties.
The advertisement highlighted earning an annual rental income with a three-bedroom detached house of up to 20%, which in Malaysia, would be considered a bungalow.
The nice house and attractive proposition aside, is that American dream really attainable? And if it is, is it sustainable?
If it were, the US government would not need to pump nearly US$1 trillion into the economy and neither would US President Barrack Obama speak to CEOs to seek their help to ease unemployment which is running at more than 9%.
Malaysia's unemployment rate is 3.2%, which is technically considered as full employment. But this piece is not about the American economy, or the Malaysian economy.
It's about the pursuit of the American dream which Hollywood and savvy marketing have enticed us with over the years. That American dream constitues a nice house in a middle class neighbourhood, sons who drive to college, daughters who are trendily dressed in class.
They take annual holidays and are up to date with the latest trends and lifestyle. They go after the latest gadgets that technology has spawned. Sounds familiar? But that lifestyle has also incurred high household debts which in some cases has resulted in foreclosures in the United States.
The situation in United States today is due to choices made years ago. It did not begin with Lehman Brothers fall in 2008, it started way before because of materialism and consumerism.
The Americans have been so good at marketing and advertising, they have made consumerism and marketing into an art and the Americans bought into it.
They are selling that same dream to Asia and other parts of the world just as they have very successfully sold us the various gadgets that technology has spawn.
Out of a population of 28 million, Malaysia has a working class of 12.5 million, of which two million are foreign workers. Of the remaining 10.5 million, 1.5 million are in the public sector.
Only 5.5 million are formally employed in the private sector. The remaining 3.5 million are making a living as traders.
Of late, the authorities and the press have been talking about being in the middle income trap. The middle income group has a monthly salary of between RM2,000 and RM10,000.
Most of us belong to this group whose profile is a house, or several houses, in the Klang Valley and the major towns of Malaysia, with school going children in private or overseas schools and universities. It also includes young graduates who earn slightly less than RM2,000 but who within a short time, move from lower income bracket to the lower middle income group.
This middle income group comprises about half of the 12.5 million working population, who are in a way pursuing that American or Malaysian dream.
The resulting trend is that house buyers no longer seek to buy a house, but to buy a lifestyle.
And developers prefer to build lifestyle homes, because the margin is greater. Lifestyle housing also gives them the added edge of branding themselves.
If it is an apartment, the bigger the better. Buying a house is no longer enough, one has to buy a lifestyle house with designer fittings and sanitary ware.
Education for the children is a premium. Technologically advanced gadgets and branded attire completes the picture.
In short, technically we are geographically in a different location but the people and that American dream remains the same.
Some 30 to 40 years ago, the manufacturing sector was the mainstay of the American economy. It now accounts for 12% of US jobs. Today, services, creation and innovation accounts for a large chunk of it.
In Malaysia, manufacturing used to account for about 35% of gross domestic product (GDP). Manufacturers used to be the largest employers.
Today, contribution from that sector has dropped to 29% of GDP, giving employment to a third of the 5.5 million private sector salaried workers.
The service sector is expected to be the largest employer this year, constituting more than half of the total employment, followed by manufacturing.
For years, the problem in the United States was hidden by cheap debt. We have that today in Malaysia. Banks are pushing attractive mortgage terms. Another way to finance that lifestyle is to leach from the Employees' Provident Fund to finance home mortgages, children's overseas education and private investments in unit trust.
And so the baby boomers (those born in the the 1950s and 1960s) have to postpone their retirement because banks are now approving loans up to the age of 65 or 70.
Easy debt has become a millstone in latter years. Come 2011, house buyers who purchased properties with the 5/95 scheme and variations of it, will be getting the keys to their properties. They paid a downpayment of only 5% of their property price in the first quarter of 2009.
They will now have to cough out the other 95%. Americans are slowly relinquishing that American dream. We are aspiring towards it. Is the American or Malaysian dream sustainable? Food for thought.
Like other middle class wage earner, assistant news editor Thean Lee Cheng is herself a victim of the American dream.
1 comment:
Don't think the moon is brighter in America!
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