By Khairul Khalid
The issue of affordable housing has taken centre stage in the property industry for the last five years. This led to the government’s cooling measures to clamp down on speculative activities that were blamed for skyrocketing prices. The measures have slowed down escalating prices, but have property prices become more affordable, especially to first-time buyers?
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According to most analysts, buying affordable homes is still a major problem, despite several tough measures taken by the government to cool escalating property prices in the last few years.
According to Thong Mun Wai, Head of Agribusiness, Real Estate and Construction at RAM Ratings agency, a piece of research by Khazanah Nasional called ‘State of Households Study’ found that house prices are not affordable at 5.1 times of the median annual household incomes.
Thong Mun Wai
“Affordability is a persistent issue. Nevertheless, the cooling measures implemented since November 2010 have managed to rein in the runaway prices, as underlined by the slower growth of the house price index to low single digits last year, compared to double digits between 2011 and 2013,” said Thong to KINIBIZ.
From the developers’ perspectives, the slump may just be seen as a temporary or cyclical one. Property companies are still launching new units, albeit not as aggressively. Takeup rates are slower. Some developers have been accused of shifting their focus to higher-end properties with bigger profit margins to make up for the shortfall in sales.
Nevertheless, many developers are capitalising on demand for affordable housing. Should there be more incentives to encourage more developers to produce affordable housing?
“Since the cooling of the property market in the last couple of years, we have observed large developers switching their focus to more “affordable” homes, to cater to demand from the middle-income group.
“In urban areas within the Klang Valley, for example, many developers have trained their sights on properties priced around RM500,000. On a separate note, the government should offer incentives to encourage the participation of private developers in affordable housing schemes,” said Thong.
So for property developers, the market slowdown entails shifting its priorities due to unfavourable market conditions. But from the house buyers’ perspective, how have their options been affected with the current uncertainties in the economic climate?
According to the National House Buyers Association of Malaysia (HBA), the biggest challenges facing the property market from the buyers’ perspective is that first-time house buyers, especially the younger generation and those from the lower and middle income segment which represents around 50% of the population of Malaysia, are not able to buy their own property.
It is also deeply concerned about the potential social effects of this unsolved problem.
“Just about 10 years ago, it was still possible for an executive earning around RM3,000 a month to buy a new apartment measuring about 1,000 sq ft in the vicinity of Old Klang Road for under RM200,000. Today a new apartment in the same area with the same build-up would cost at least RM400,000 while the salary of an executive is only around RM3,500 a month.
“As time goes by, this problem will get worse with more and more young people being unable to buy their first property and have to either continue renting or to stay with their extended families. Unless this problem is addressed, an entire ‘homeless generation’ will emerge and this can and will bring about many social problems,” said KL Chang, honorary secretary-general of the HBA, to KINIBIZ.
He said that the government’s cooling measures have been effective to a certain extent to deter speculation, but have not addressed the affordability issue effectively.
Chang explains that the measures announced by the government, such as of higher RPGT, lowering loan to value (LTV) ratio for the third mortgage, banning DIBS and higher minimum price for foreigners were not meant to lower property prices or make property prices more affordable, but rather to reduce the steep rise of property prices and to a certain extent to deter speculators and “bogus” house buyers.
“In order to make property prices more affordable, new property must be launched at affordable prices, say between RM150,000 to RM300,000. They must build the right product at the right place with the right pricing and the right numbers. In this regard, HBA expresses our deep disappointment with Perumahan Rakyat 1Malaysia (PR1MA), the government agency that has been entrusted for this noble mission,” said Chang.
PR1MA was initiated three years ago under the PR1MA Act 2012 to build more affordable housing across the country. The HBA secretary-general feels that PR1MA has strayed from its main objectives.
“Instead of focusing on its mission and objectives to build affordable properties, PR1MA is partnering with private housing developers to build ‘lifestyle properties’ and is even offering its units to ‘second-time house buyers’ who already own an existing property. Already, there is not enough PR1MA units for ‘first-time house buyers’ who have yet to buy their first property; offering PR1MA homes to ‘second-time house buyers’ defies all logic,” said Chang.
HBA suggested that the government should take a leading role in addressing the affordable housing conundrum more effectively. For example, the government should offer better incentives for private developers to lower their costs of building more affordable housing.
“The best vehicle to deliver affordable properties remains private housing developers. The government must give incentives to developers to build affordable properties and also lower the cost of doing business for housing developers,” said Chang.
For this to happen, various federal agencies including state government agencies must work together as land is always a state matter. The federal and state government should alienate suitable land to private housing developers at a lower cost on the condition that the majority of units to be built are affordable properties between the range of RM150,000 to RM300,000.
HBA has in the past suggested that there be a quick and transparent release of unsold “Bumiputra Quota Units” and that the cost of laying infrastructure for public utilities be borne by the respective utility companies. All this will go a long way in reducing the prices of properties,” said Chang.
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