Property sector needs integrated database
Khazanah Research director: Info centre will act like a census
THE Malaysian property sector is in need of an integrated database with comprehensive, statistical information that can be accessible to both consumers and developers.
Such a database would supply information for consumers of housing products as well as developers to plan for a steady supply of units at the right location and at the right price, says Khazanah Research Institute research director Dr Suraya Ismail.
“That’s what tops our budget wishlist for this year,” she tells StarBizWeek.
“In a free market, information is power... and an integrated database is about having that information.”
Having such a database would benefit the country greatly, she adds.
“Housing is such a huge chunk of your savings. So if you are renting now, in 10 years time, if you wanted to purchase, you might want to know where that house would be and at how much.
“Currently we don’t have a proper national housing survey that looks into account what is the existing stock, vacancy rate, price range, last transacted price or transportation cost.”
Having information like this would allow developers to plan for a steady supply of housing for people, says Suraya.
“If a developer were to build in a particular district, say 300 units of houses worth RM1mil each, the local council there can say ‘no you can’t’, because following the national housing survey and integrated database, there’s no such demand there, as household income is just RM4,000”.
“So you can’t build there and the database can also be a strategic tool to monitor the incoming stock... To ensure that it is at the right price for people residing there. It (the database) is like a census. It would be accessible to consumers and developers, as well as be a strategic tool for legislation makers at the district level.”
Budget 2018 will be tabled in Parliament on Oct 27.
Suraya says Khazanah will be releasing a report on ideal housing standard levels that should be complied with in the country.
“The local property sector needs to have decent housing standards. We are working on determining which international standard works best for us and it’ll come out next year. We are trying to look at what people can tolerate in social housing.”
Tackling affordable housing woes
It’s no surprise that houses in Malaysia are generally unaffordable. According to Suraya, the signal of a well-functioning affordable home market is when the median price for the whole housing market is three times the gross annual household income.
“We have used this indicator quite thoroughly in our analyses. Of course, there are other indicators but most of them use finance.
“It’s not a good measure when you use finance as part of the indicators, because finance would mask house prices.”
According to Khazanah’s “Making Housing Affordable” report, overall house prices in Malaysia are 4.4 times the median income. Zeroing in on the states, the price of a house in Kuala Lumpur is 5.4 times the median income. In Penang, it is 5.2 times, Johor 4.2 times and Selangor 4.
These statistics are as at 2014. Simply put, house prices are “severely unaffordable for those staying in Kuala Lumpur, Terengganu, Penang and Sabah.
“Johor, at 4.2 times, is seriously unaffordable. Selangor and Negri Sembilan are moderately unaffordable and Melaka is affordable,” says Suraya.
“So Melaka seems to get it right in ensuring that the right products go into the market based on the household income there.”
She emphasises that the government should not interfere when it comes to provisions related to affordable homes.
“This is because we are always supporting an efficient supply market which are big developers. So why is it that we have government-assisted programmes that have gone all the way up to the top 20% in terms of household income?
“No other countries have done this and it’s not sustainable financially. The motive is correct – that is, to ensure home ownership for the middle 40% and the bottom 40%. But surely this cannot be done through a government scheme. We must give incentives for the private sector to penetrate or be part of this segment.”
Suraya says property developers are definitely capable of offering affordable homes.
“Prior to 2008, the private sector had launched a lot of residential units within the RM250,000 price range. But from 2008 onwards, they have instead been focusing too much on units priced over RM500,000. We need to revert to the pre-2008 period.”
She says Sime Darby Property had announced an affordable housing project earlier this year where the homes offered are priced between RM200,000 and RM250,000.
The development in question is the group’s Harmoni 1 project, which is located in the City of Elmina, Shah Alam and has a gross development value of RM155mil. The homes have built-ups of between 900 sq ft and 1,000 sq ft.
“These are units in the Klang Valley. So this (offering affordable homes) can be done and they can break even. What they’ve done is increased productivity on site and it takes less time for them to build.
“So all these cost savings – rather than being parked under their retained profits, they then pass some of it to consumers. Some of it, the company can absorb. So it shows that if you invest in higher productivity gains, you can have cheaper homes!”
Many developers are hesitant of offering affordable homes as it is a segment with low profit margins.
But Suraya believes that this should not be a deterrent for local developers to develop affordable homes.
“If they start using new technolo- gies, they can embark on affordable homes.
“But it is important to plough back your retained profits into capital deepening – ensuring that your research and development (R&D) is done and ensuring that there’s economies of scale. This is so that there are more units to spread the initial capital costs of R&D. Big developers can do this.”
Suraya admits it will be challenging for smaller developers to incorporate newer technology.
“One of the ways for smaller developers to be in this new ecosystem of new ways of producing houses is to ensure that they’re linked to the new supply chain.”
She says the Works Ministry and the Construction Industry Development Board (CIDB) are currently collaborating on a road map to ensure both big and small players can fasttrack their productivity.
“They (the ministry and CIDB) are coming up with standard building components whereby it’s like a Lego building, though the structural components are designed in the factory.
“What is needed is for all these
small players to assemble it on site. But that means we must have skilled workers. We cant have general workers anymore.
“We need skilled workers with the technical abilities to put things together, ensuring that it’s done properly. But the professionals must understand this technology as well. They must design houses that can take this kind of building construction.”
“But there must be an initiative to want to jump on this bandwagon,” she says.
Suraya believes that once there has been a revamp of the whole building system, developers will not be left behind.
Suraya says she is hopeful that more developers will start adopting incorporate industrialised building systems (IBS) into their developments.
“Some local developers have done it in Singapore and have made cost savings, but when they want to do it in Malaysia they say it can’t be done because the ecosystem is not there. They say the designers do not know how to design for IBS components.
IBS will be made mandatory within the next three years. It is a construction technique where components are manufactured in a controlled environment, transported, positioned and assembled into a structure with minimal additional site work.
It is said to guarantee the quality of the construction, reduce construction time, lessen reliance on unskilled workers, increase construction productivity, reduce wastage and increase sustainability, ensure a clean and safe construction site and encourage local workers’ involvement.
Suraya concurs that IBS is effective in bringing down costs and increasing efficiency.
“Khazanah has been having a lot of discussions with developers and builders. Most builders don’t mind adopting it but they want the eco-system to be up and running – namely the catalogue must be there; that the designers of the building must know how to design it.
“Many developers feel that IBS utilises complicated technology,” she says.
“But this is not true. If you look at mature construction industry economies, if your components are assembled in cement factories, all you have to do is buy the components and install it on site.”
Since 2008, the use of IBS was mandatory for government construction projects that exceeded RM10mil. The government had planned to extend it to private construction projects that took up 72% or 4,851 projects out of the entire construction project in Malaysia last year worth RM176.3bil.
According to reports, the proposal for IBS usage will be implemented through talks and private companies are given a three-year transition period.