According to an article (New Straits Times, 29 September 2012, p4)
with the title of boost for first-time buyers, in 2013 Budget speech, Prime
Minister Datuk Seri Najib Razak said that the 1Malaysia People’s Housing Scheme
(PR1MA), Syarikat Perumahan Nasional Berhad and the National Housing Department
would be responsible for building both low- and medium-cost houses, which would
be sold at lower than the market value. The prime minister said it was the
government’s responsibility to ensure every citizen was given the opportunity
to own a house. Therefore, price ceiling and black market will occur in housing
market due to some reason.
Nowadays, Malaysia’s population growths are increasing and it is indirectly
affected supply and demand for housing. As the population is increasing, the
quantity demanded for housing is increase and this has cause the demand curve
shift to the right. However, housing market is known as elasticity of demand.
As income of buyers increase, the demand for house also will increase. Besides
that, when income of buyers decrease, buyers will try to seek for a house to
rent rather than to buy a new house due to they does not have ability to pay
for a house. Today, housing market value is extremely higher than a few years
ago. In this situation, rent ceiling will be imposed. Rent ceiling is a regulation
that makes it illegal to charge a price higher than a specified level. This
situation is due to government feels that equilibrium price is too high for the
poor people, government feels that poor people doesn’t have ability to buy a
house. Therefore, government impose price ceiling and set the price below the
equilibrium price which is also known as the market value to protect consumer
from high rent. Consumers are enjoying buys a house at a lower price, however,
producer is not willing to sell their house at a lower price because it will
reduce their profit. Therefore, it leads to an inefficient underproduction of
housing services which is also mean by lack of resources. It can be illustrate
that the marginal social benefit from housing services exceeds its marginal
social cost and a deadweight loss arises. Increasing of demand for house in
market will lead the demand curve shift to the right. As quantity demanded is
exceeds quantity supplied, shortage will occur in the market.
Nevertheless, a shortage of
housing will creates a black market. Black market is an illegal trading
arrangement in which buyers and sellers do business at a price higher than the
legally imposed price ceiling. Assume that if there is a shortage in Malaysia,
yet property owners does not willing to sell their house at the lowest price
and converted their apartment or buildings into office space or other use, or
inadequately maintained their buildings, black market will arise. In this
situation, some people are willing to take the risks involved in meeting
unsatisfied demands illegally. For instance, some buyers are willing to buy a
house with a price which is higher than the regular price due to sellers are
not willing to sell their house at lower price and there is less house choices
to choose in the market. As a result, we can say that a rent ceiling is unfair
because it does not generally benefit the poor, yet it leaves almost everyone
worse off. Furthermore, a rent ceiling decreases the quantity of housing and
the scare housing is allocated by first-come, first-served and discrimination.
For example, sellers are not willing to sell their house at the lowest rate and
this has makes the poor people don’t have ability to buy a house.
In addition, assume that some poor people do not
have ability to own a house; they decide to rent a house as well. Diagram
1 shows an assumption of supply-demand for rental units in Malaysia. The
equilibrium would be at point E, where rent per month is RM 2000 and 3 million
housing units are occupied. When there is a price ceiling which is RM 1300
imposed by government, the quantity of housing demanded will be 4 million units
whereas the quantity of housing supplied will be 2 million units. Therefore, it
will cause a shortage of 2 million housing rent as quantity demanded is exceeds
quantity supplied. However, rent controls have leads to black market in
Malaysia. In this situation, some tenant is willing to rent a house at a higher
price but some does not have ability to rent. Therefore, it does not benefit the
poor.
By the way, prime minister Datuk Seri Najib also
announced that the reduction of corporate tax of between one and seven per cent
is also a positive move for members and other construction companies. In this
situation, construction companies will get a benefit.
In my opinion, everyone is hurt by rent controls and
those who benefit from controls fight hard to preserve them. I hope that all
younger generation buyers have the opportunity to own a house with the
affordable price housing rate, yet the ideal price housing rate for all sellers
to sell their house. So, it will create a fair housing market for buyers and
sellers. As a result, there will be no black market occur and the poor people
may also has the opportunity to own a house.
1 comments:
Nice site! Enjoyed reading the microeconomics theories here..
I love the casual style of writing in this blog.. keep it up!
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