Housing Affordability, Part B
Who is in charge of fixing housing affordability - Putrajaya, Bank Negara Malaysia, or the private sector?
Last November, I reviewed a EdgeProp article on the performance of the Malaysian Residential Property Market 2000-2020, and asked the question above - Just who’s in charge of fixing the housing affordability problem?” https://lnkd.in/gmseNyp4
PEPS Malaysia has a write up by Sulaiman Saheh, a researcher that takes a Q&A approach to looking at the housing affordability issue. Unlike some researchers that I am not going to name, Sulaiman does indeed mention the elephant in the room regarding Malaysia's housing affordability issue - just across the Causeway lies perhaps the country that has the world's most successful social housing. In fact the country's public housing is so successful that 99 year leasehold HDB flats in a suburban neighborhood that is 30 minutes by car to CBD is valued at more than 2X per square foot than freehold luxury condos in the heart of KL! Yours truly has posted about this in the property blog 360 KLCC. See here: https://360kiranaresidence.com/klcc-property-news/home-truths1
Excerpts from Sulaiman Saheh's PEPS paper:
"Housing affordability has been a major issue in Malaysia especially over the last decade. The rate of increase in house prices that has been faster than the growth of income over the past 10 years had contributed to the persisting challenge. This problem persists even after the slowdown in property price growth in recent years ….
In Malaysia, the median-multiple ratio is estimated at 4.9 in 2020, where housing is deemed as seriously unaffordable.
However, it is interesting to note that despite prices are high and unaffordable in general (relative to household income), the prices and rents of Malaysian properties are very competitive compared to the Southeast Asian region. But as the property market is largely driven by domestic demand, the affordability issue is very real....
There are a number of affordable housing programmes for the B40 and M40 group like PR1MA, Rumah Mesra Rakyat, Program Perumahan Rakyat (PPR) to name a few examples, that are offered to the B40 and M40 group. The take up rates for those programmes vary where some have seen good sales, but there are also those that saw poor reception. The sales performance depends on whether they were built to the preference of the market in terms of its quality, sizes, layout, location; and its proximity to amenities, distance to workplace and the local population's specific demographics and disposable income levels.
One of the biggest challenges in the equation is the ability of those target purchasers in securing sufficient loan facility and being able to manage their actual cash flows and monthly repayments. There are PPR programmes, that cater for the B40 group that earns a household income of RM3,000 & below which is one of the major groups that have difficulty in buying a home, that have low take up rates due to the inability of these purchasers to secure sufficient and affordable loans......
A more permanent and integrated solution require efforts not only from the government themselves in the provision of affordable homes, but also by the banking and financial institution, and the stakeholders involved in the supply and demand function.
In a nutshell, the challenge of housing affordability can only be overcome through a more robust and enforced processes. It requires the involvement of all key stakeholders, from the government and local authorities, private developers and financiers, ... and consumers."
To be continued. In a later post yours truly will attempt to explain why even property prices in Red Dot Island have outstripped Malaysia's, there is no housing affordability issue over the Causeway.
Post Script & Disclaimer
In the early 1980s as a newly minted MBA, yours truly worked for the Housing Development Board, a statutory body in Red Dot Island as an Assistant Secretary in the Resettlements Department. Even then, the success of the HDB in solving the problem of social housing in Red Dot Island was well known. I remember the HDB maintained several “show flats” in old public housing estates at Commonwealth Close. I even stayed in one of the show flats -a two bedroom 800+SF flat - in my first week of employment at HDB to get a taste of what public housing was like.
