House Price/ Mixed Reaction To House Ceiling Price Increase Under Scheme

Based on the article I have researched. I was assign to do economic analysis based on article that I have chosen. The article I have chosen is about Price ceiling. Let me give you the definition of price ceiling. Price ceiling a regulation that makes it illegal to charge a price higher than specified level. The topic of the article  “ Mixed reaction to house ceiling price increase under scheme “.

This is the article I found on The Star online website: http://thestar.com.my/news/story.asp?file=/2011/10/9/nation/9663570&sec=nation

Moreover, Price Ceiling is also known as price control. A government regulation that makes it illegal to charge a price higher than a specified level is called a price cap or knows as price ceiling. The effects of price ceiling on market crucially depend on whether the ceiling is imposed at a level that is below or above the equilibrium price. Price ceiling is set above the equilibrium price has no effect.

Price ceiling set above the equilibrium price has no effect. The reason is that the price ceiling does not hold back the market forces. The force of the law and market forces is not in conflict.  But when the price ceiling is applied to housing market it is called rent ceiling. If price is set above the equilibrium rent, it has no effect. It means the price ceiling does not exist in market. Meanwhile if the rent ceiling is below the equilibrium price, it has powerful effects. Many factors influence buying plans, and one of them is the price.

HOUSING MARKET

                                                              CEMENT MARKET

Since, the article is about the government to increased price ceiling. I’m going to brief about rent ceiling. Usually price ceiling is applied to housing market, it is called rent ceiling. (Parkin. M, 2012, page 128).

In my opinion, by increasing the housing price may not be applicable to people who earn less than RM3000 per month. One of the housing owner, Eric Tan said household who earn RM3000 could not afford RM400, 000 house.

Some middle class and lower class people could not even qualify the loan. Nowadays scenario, it may be difficult for young people to look for affordable housing area. Housing house price RM200 below is impossible to find nowadays.

Since the housing house has increase drastically. People have to “ Increased search activity “. Increased search activity mean time looking for someone whom to do business is called search activity The government increase the housing price, people have to find another alternatives such as looking for affordable housing price in the market. Nowadays market, people spend more time checking housing price before making decision to buy it. Unfortunately, when a price is regulated and there is a shortage, search activity increase. Rent-controlled housing market, frustrated would-be renters scan the newspaper, not only for housing advertisement but death notices. In this case, any news or information about housing or apartment, first come first serve basis. The lucky people who notice about this faster can buy the house.

Moreover, he opportunity cost of good value is equal not only to its price but also the time we spend to search the good one. So basically the housing is the equal the rent (a regulated price) and the time we willing to spend and other resource we spent for the restrain quantity available in the market. Search activity cost most of us. We spend more time to find it, looking for another resources such as phone call. We try to call people to look for the affordable house price and gasoline. We need to travel form A to B. We use a lot gasoline to look for places.  (Parkin. M, 2012, page 128).

In my opinion, the government should not increase the housing price because not everyone can afford to buy it. Do you think the rent ceiling fair? Since government increases the housing area, only people who can afford RM400K houses. Rent ceiling might not be inefficient. They don’t achieve a fairer allocation if government keep increase the housing price. Basically, if the government keep on increasing house price. This middle class people will be abandon. The government should allocate to every level of class people from rich to poor people. I notice 2 problems occur when I read this article. Firstly, a “ lottery problem “,  “ first come, first served “. (Parvin. M, 2012, page 130)

Lottery means you allocate housing to those who are lucky, no to those who are poor. Basically, poor people will be neglect because rich people only are the lucky ones in this category. The rich people will not be a problem because they can afford anything. Meanwhile the poor will be left behind without houses to stay. Second reason is “ First come, first served “.  This method been use to allocate houses in England after World War 2.  This method use to allocates housing to those who have the greatest foresight and who get their names on a list. Usually this method does not help the poor one. (Parvin. M, 2012, page 130).  The Government increase the housing price maybe because increase price cement. Government should control the cement price in the market. House developers have to increase the housing price because to cover the cost price. Last time 50KG of cement cost RM 16.50, now RM 17.50. The cement price increase by RM 1.00. Most of cement producers in Malaysia have increased their cement price. Only Sarawak company, CMS Cement confirmed it would keep prices at the current level. Not only cement, Sand and some other factor to make house is getting expensive.

In conclusion, the government should allocate housing to different level of class people accordingly. Government should be fair to different class of people regardless of race, religion belief and so on. Middle class people should be able to buy house but the house should be set in affordable price. Besides that, government should not increased housing price. By increasing housing price, it will only benefit the rich people. Middle class and low class people could not afford to buy. They cannot even apply for long-term housing. I strongly disagree with the statement “ Its not fair if the result isn’t fair “. The government should be fair to everyone.