The much awaited 2013
budget was out at last, with the increasing of living cost, many was hoping to
see a financial aid within the budget and I was glad to know that the younger
generation was definitely taken into consideration for the budget for the year
2013. The article is the elaboration on the benefits that the younger
generation would gain through the budget planner regarding the property sector.
The changes and plans regarding taxes and others would have great effects on
various businesses and the domestic business of Malaysia especially in the
property sector. I agree on the article regarding the prediction on increase of
buying property of Malaysians in Malaysia and my opinions are based on
microeconomics theories.
Firstly, the government
has allocated RM1.9 billion to build 123,000 affordable housing unit nationwide
( iProperty 2012) , with this taking place, the increase of housing development
also indicates the increase of competition within the property field. As the
competition increases, the prices of the houses would experience a decrease as
theoretically when the competition increase, it creates an atmosphere where in
order to increase sales, competitors would try to attract customer by promoting
discount and giving a cheaper price to cope with the competition. And according
to the law of demand, as the price decrease, the quantity demanded would
increase, thus pushing the sale of property higher.
Secondly, the other
reason I agreed that the sales of property would increase is due to the fact in
this research, it shows that the opportunity cost is to rent a property instead
of buying. If people spend more on rental, they would have less money to
purchase a property ( Chan 2009). In this case, the prices of the rental remain
constant while the prices of the property might go down, thus, the opportunity
cost decreases and pushes the quantity demanded higher along the curve of a
production possibilities frontier graph.
Thirdly, the government
has taken measures by giving up to 50% of stamp duty exemption for first home
owners, this action has reduced the overall cost of purchasing a property for
younger generations whom are yet to purchase their first home. People who have
been on the fence on buying a property might get affected by this budget
planning as it would only last till 14 of December 2014 ( Malaysia Property
Review 2012 ). Not to mention that the prices of property have been constantly
increasing every single year , thus with the expected future price to be
higher, people would be more keen to purchase property now and thus shifting
the demand curve to the right as quantity demanded increased. Since the income as
well is expected to remain constant while pricing of goods would increase,
people are facing an opportunity cost of savings and purchasing property, but
as mentioned earlier, the income is constant but the cost of property would
increase thus it drives people to purchase property currently.
According to Malaysia
Property Review ( 2012 ), the real property gain tax will rise to 15% from the
original 10% but only effective to property purchases within 2 years, while
property that are purchased for 2 to 5 years would remain at 10% and lastly
property that have exited 5 years after purchase will be exempted from real
property gain tax. In my opinion, this actually discourages the sales of second
hand properties but in return encourage the sales of new properties. Although
it would affect the reselling of properties but in this article, they are
stating the prediction of increasing of buying properties in year 2013 not
selling. Thus to avoid the real property gain tax, people would hold on to
their property till later where no tax will be imposed after 5 years, this
decreases the number of second hand properties and in turn pushes people to
purchase newly develop property.
In addition to that,
the government too imposed a new tax under My First Home Scheme where the
income limit for personal loan was raised to RM 5000 compared to the previously
RM 3000 while joint loans under the scheme could apply for RM 10,000 limit. The
increase of loan given also meant that more people have the ability to purchase
property than before, this encouragse the sales of property as people now have
the capability to do so, which supports the theory of prediction of increase
sales in property.
Lastly, one of the
major factor that brings changes in demand
is the population in Malaysia. According to the official Department of
Statics, Malaysia (2012), the population in Malaysia has increased constantly
causing the quantity demanded for properties to increase every year. In other
words, the demand curve would shift to the right as the quantity demanded for
properties have increased. The incentive for joint loans mentioned above encourages couples to get settle down and
purchase their own property to form a family. More youngsters nowadays too have
gain independence in an earlier age adding to the number of people needed
property.
Nevertheless, the
research shows that the prediction of increase in sales of property in Malaysia
is supported by facts and theories of the microeconomics of Malaysia. The major
factor is the role of government regarding taxes imposed, financial loans and
development plans. The second factor is the population and competition increases
while other influence such as income and expected future prices of property
have encourage people to further invest in property. As conclusion, the
research shows that the increase of people buying property would be majority by
younger generation as the benefits are mainly more focus on them.
ARTICLE 2
With the new release of
the budget 2013, effects can be seen in various sectors such as property,
auto-mobile even cell phones now. In the food sector, one of the ingredients
that are affected is the price of sugar, according to the article, the government
has decided to reduce subsidy of sugar by 20 sen per kg. In the article, the
government claimed that the action was taken to further discourage people from
consuming too much sugar in order to decrease the number cases of obesity and
diabetics among Malaysians. Penang Consumers Protection Association president
Korisatan Karuppiah states it is necessary for the government to do so as it
could educate the public regarding over-consumption of sweet and oily food.(
Star 2012) But the major question is will the action of reducing subsidy for
sugar by 20sen per kg bring effects to the public ?
In my opinion, it would
only bring minor effects to the demand for sugar. Firstly, unlike other
products, sugar is not the final product that would reach consumers, other than
packet sugar used by most common household, the people whom are affected most
in the reduce of subsidy are the food traders and retailers. Immediately when
the announcement of the reduction of subsidy was released, the retail price of
sugar goes up from RM 2.30 to RM 2.50. Looking at the general household, the
average consumption of sugar is only 51 grams daily for an individual ( Bernama
2011 ) , with this number, the mere increase of 20 sen to the sugar would not
causes the quantity demanded for sugar to increase or decrease, in other words,
the percentage change in the quantity demanded is less than the percentage
change in the price thus, sugar has an inelastic demand. As general households do not buy sugar in
large quantity, most people would not mind to spend an extra 20 sen every month
for sugar. Many people aren’t affected.
But on the other hand,
there are the food traders and retailers that purchase sugar in large
quantities; they are the major sector who will get affected by the increase of
price. Large quantities of sugar would be needed in the confectionery sector,
beverage, sweets production and many more. Although there might be slight
increase in the price of these product it would only be a minor increase as
Deputy Domestic Trade, Cooperatives and Consumerism Minister Datuk Tan Lian Hoe
steped up and warned that those who took advantage of the increase of sugar
price to highly increase the price of related product will be penalized under
the Price Control and Anti Profiteering Act 2010 ( Laeng & Matthew 2012 ).
Moreover, the demand for the sugar related product have remained constant, as
the demand remain constant the supply too remains constant, thus, explaining
the reason why no sudden drop of demand for sugar will occur in this country. For
example, Sabah Confectionary and Bakery Association president Ng Seng Chek has
mentioned that the slight increase in sugar price would not affect the price of
the bread as sugar is not the primary ingredient in the production (Laeng &
Matthew 2012). This proved that the slight increase of price in sugar would not
bring major effect to sugar related products as well.
When the price of a
product increases, it benefits its substitute products as well, one of the most
common substitution product for sugar in the food industry is corn syrup. But
in Malaysia, most people are unfamiliar with this product, although corn syrup
is slightly cheaper than sugar; not to mention that corn syrup is harder to
obtain that sugar, people would still continue to use sugar as long as the
price remained at a considerable price. Looking back at the record of sugar
price, the sugar price have remained relatively low until recent years, the
health department wish to promote healthy living and have increased the price
of sugar, but the decrease or increase of price would not cause people to eat
more or less sugar due to the fact that sugar is a product that has no expiry
date. Not to forget sugar is also a controlled product, which in return limits
the action of people as people can’t purchase large quantity of sugar when the
price is low to store.
As sugar is a
controlled item, the competition sugar retailer could not exist as the price
are already set by the government , with the lack of competition; people have
no other price to compare to and thus limited options as well. The only
competition that could take place, is the final product related to sugar such
as confectionery and sweets, but even so the decrease of increase of demand in
those product would not directly affect the quantity demanded for sugar.
In conclusion, based on
the article that I have researched, I strongly disagree that the reduction of
subsidy towards sugar would cause people to consume less sugar and overall
decrease the percentage of obesity and diabetics. It is because sugar is a
staple product and the increase of price is relatively small which would not
major effect on the average income of Malaysians. Thus, the government action
regarding reducing subsidy for health purpose is invalid as it does not bring major
effects on the consumption of sugar in Malaysia unless the price was increase
drastically or others substitute that are much cheaper and easily obtained
introduced to the market, until then, the consumption and demand of sugar would
remain constant. Reduction of consumption of sugar should be through education
and health awareness and the general awareness of maintaining a good eating
habits and healthy lifestyle. Lastly, the savings on sugar subsidy could be
utilized to improved home ownership via Government subsidies for the deserving.
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