By Matt Liew

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Malaysian property prices jumped more than 30 percent in 2013. This is an alarming trend that needs to be stopped, as it’s only a matter of time before foreign money pours in, – primarily from China and the Middle East, – and locals are forced further and further away from the city center. However, this is not something new, as skyrocketing property prices in London have been forcing locals out of the city for years now.

Where did it all go wrong?

I’m fairly convinced that property developers are intentionally jacking up the prices of new developments. Hear me out:

It’s part of human nature – particularly in Asian culture – to feel good about getting a discount. There’s just a sense of satisfaction you get when you believe you just made some savings or got yourself a great deal. It feels better to have paid RM60 for something “worth” RM100 – effectively a 40% discount, – as opposed to outright paying RM60 for something.

Now that I’ve gotten that out of the way, allow me to introduce you to the fall of Ron Johnson, the former Apple Inc. Senior Vice President of Retail Operations who helped Steve Jobs realize his dream of Apple operating its own retail stores.

Source; livemint

Source; livemint

In mid-2011, American retail giants J.C. Penney announced that then-Apple SVP Ron Johnson would be joining them later in the year as CEO. This move came as quite a surprise, as Johnson is widely recognized as the brains behind Apple’s wildly successful brick-and-mortar stores.

Fast forward some 17 months later, Johnson was unceremoniously fired by J.C. Penney after incurring nearly US$1 billion in losses in 2012. What went wrong?

JCPenny. Source; Wikimedia

JCPenny. Source; Wikimedia

Johnson attempted to completely change the culture of J.C. Penney. The retailer was known for constantly offering discounts on virtually every item in store, be it in the form of coupons, vouchers, or constant “sales” events – but achieved that by marking up the sticker prices of their items far beyond their true value and offering “discounts”, bringing the item’s price back to its original value to make consumers feel good about the “savings” they made from their purchases.

This ties back to my earlier point, that it feels better to have paid RM60 for something “worth” RM100 – effectively a 40% discount, – as opposed to outright paying RM60 for something.

Johnson removed this element of “feel-good” for J.C. Penney’s customers during his tenure as CEO, and they flocked en masse to rival retailers like Macy’s – who still practice raising the sticker prices and offering “discounts” to bring the price back to its real value.

This nonsense is exactly what property developers are doing and have been doing in Malaysia – particularly Kuala Lumpur and its surrounding areas. Those ~10% developer’s rebates that they offer? It’s artificial price inflation, only for them to offer “discounts” or “rebates” to bring the price back to its true value.

The knock-on effect of this artificially inflated market is that property prices rise significantly faster than they should, pushing affordability in key areas far out of the reach of young working adults looking to purchase their first home, or young families looking for a bigger place to settle down in.

Property worth RM150k-200k some 15-20 years ago is now worth over RM1 million. Bear in mind that our salaries have more or less remained stagnant, and not increased in line with inflation – roughly 3 percent annually.

This nonsense has to stop before we, – the youth of today, – find ourselves living some 50km away from our jobs or the city center.


Matt Liew is the grumpy old man of The Level. Join him on The Mattninist every Monday and Friday for more grumblings, rantings, and bah-humbuggings about everything from car prices to how to eat a steak.

Ron Swanson got nothing on this.

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