Structural issues in the local housing market need to be addressed if the market is to advance into a more well balanced and sustainable one, property consultants concur.
A double-digit jump in the prices of houses of between 15% and 20% in the last two years and a spiralling cost of living has caused a widening gap between income level and price levels, and a resultant mismatch between disposable income and house purchase affordability. As a general rule of thumb, mortgage repayment should not exceed 28% of gross monthly income, but for many house buyers, they have no choice but to contend with much higher repayment amount leaving them with very little disposable income.
One of the obvious structural issues is the mismatch in the housing products being launched that comprise a higher percentage of higher priced housing products, even though the supply of affordable and medium-priced housing is still grossly inadequate to meet the high demand.
Chartered surveyor and registered valuer Dr Ernest Cheong says a holistic solution to ensure a more equitable and sustainable housing market for Malaysians is certainly in order.
“The only holistic approach to the provision (or lack of provision) of affordable housing in the form of low-cost and medium-cost houses is for the Federal and state governments to assume the role and responsibility to perform their rightful public duty and responsibility of providing for these housing units. They have at their disposal land reserves and the financial resources to implement the mammoth task of providing affordable housing to the millions of Malaysians who need these housing.
“The private sector developers, being profit-motivated, will not build low-cost and medium-cost houses and sell them at prices they consider to be unattractive or even below their costs,” Cheong says.
Agreeing with him, DTZ Nawawi Tie Leung executive director Brian Koh says the Government has to play a larger role not just in the low-cost but middle segment of the market that is ignored by private developers, and cites the case of Singapore where the city-state has its Housing Development Board building affordable housing projects that make up a high percentage of the total housing stock.
“Meanwhile, at the higher end segment of the market, although there is substantial investment demand, yields and rental demand are too low and insufficient. The property market can do with some tweaking in product offering by the developers to ensure more medium-range housing units are being built to meet the high demand,” Koh points out.
VPC Alliance Malaysia Sdn Bhd managing director James Wong says the main reason why developers are still launching more high-priced products and not enough of the affordable projects is because land prices in the Greater Klang Valley, Johor, and Penang have risen and it will not be feasible for developers to develop affordable housing.
To release more land for affordable housing, the various government institutions have to step in to release the land and do joint ventures with private developers to develop affordable housing, particularly in the Klang Valley, Penang and Johor.
The Government can also absorb some of the infrastructure costs from the private developers so that they can sell at lower prices. It will also help if affordable housing and housing for the low income group are built to be rented out as an alternative to buy.
He adds that speedier and more transparent planning guidelines and approvals of development projects which indicate the actual zoning, density and maximum height for each lot to be developed will also help matters for the lower income group. National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong says HBA has alerted the Government of the sprouting up of a “homeless generation” where the younger generation of Malaysians will not be able to afford their own homes. Also, for single parents and those from the lower income groups, buying a property is getting more and more difficult and may soon “be impossible”.
“We are glad that the Government has finally taken some action in Budget 2014 to address this issue such as increasing real property gains tax and to outlaw Developer Interest Bearing Scheme. Bank Negara has also imposed a loan to value ratio cap of 70% for the third mortgage to reduce speculation and these measures have cooled down the market,” Chang says.
Knight Frank Malaysia managing director Sarkunan Subramaniam calls on developers, bankers and other stakeholders to play more responsible roles to ensure the gap between supply and demand is manageable, and to be more socially responsible by building communities instead of just being profit-driven.
“In these challenging times, developers have to be more balanced in terms of their pricing strategies, by not overpricing their products and provide purchasers a chance to enjoy potential price appreciation when the products are completed,” he says.
