Homes just aren’t that af­ford­able, says Bank Ne­gara

The Star Malaysia - StarBiz - - News -

KUALA LUMPUR: Bank Ne­gara has a re­sponse to those say­ing it needs to do more to spur home loans: houses sim­ply aren’t af­ford­able.

The cen­tral bank has cre­ated a web­site packed with data aimed at de­bunk­ing the “myth” that ac­cess to fi­nanc­ing was de­ter­ring home own­er­ship, show­ing that loan ap­provals for key cities are near 70% or higher. The cen­tral bank has re­sisted calls to loosen mort­gage lend­ing, in­stead say­ing the prop­erty in­dus­try should boost ef­forts to cut costs and ac­cel­er­ate sup­ply.

Ris­ing home prices have added to the griev­ances of Malaysians grap­pling with the cost of liv­ing since a goods and ser­vices tax started two years ago, and as the gov­ern­ment re­moves sub­si­dies on daily items in­clud­ing petrol and su­gar. That’s made af­ford­able hous­ing a key voter is­sue for Prime Min­is­ter Datuk Seri Na­jib Tun Razak ahead of a gen­eral elec­tion that must be held by mid-2018.

“It’s a tricky sit­u­a­tion,” said Wan Saiful Wan Jan, chief ex­ec­u­tive of­fi­cer of the In­sti­tute for Democ­racy and Eco­nomic Af­fairs here.

“I don’t think it’s right to say that there’s no prob­lem with fi­nanc­ing. But lend­ing rules have to be both strict and bal­anced at the same time, oth­er­wise we’ll have more non-per­form­ing loans and that is not good for any­one in the coun­try.”

The me­dian house price in Malaysia was 4.4 times the me­dian an­nual house­hold in­come in lat­est avail­able data, mak­ing the hous­ing mar­ket “se­ri­ously un­af­ford­able” com­pared to global stan­dards, ac­cord­ing to a 2015 re­port by state-run Khaz­anah Re­search In­sti­tute. The re­port classed an af­ford­able mar­ket as one with a me­dian mul­ti­ple of 3 times.

That still makes Malaysia cheaper than many other mar­kets, with af­ford­able hous­ing in key cities some­thing of a rar­ity in the 21st cen­tury.

In the lat­est De­mographia study, Kuala Lumpur had the eighth best hous­ing af­ford­abil­ity out of 18 metropoli­tan re­gions around the globe, with Hong Kong homes cost­ing 19 times in­come and Bei­jing 14.5 times.

The cen­tral bank is seek­ing to strike a balance: its hous­ing web­site aims to show trans­parency in the mar­ket while the len­der also stands firm on stricter fi­nanc­ing rules in­tro­duced since 2010 to curb spec­u­la­tion, as well as mea­sures to pro­mote re­spon­si­ble lend­ing amid el­e­vated con­sumer debt.

House­hold debt as a pro­por­tion of gross do­mes­tic prod­uct fell to 88.4% last year from 89.1%. It’s still one of the re­gion’s high­est and the nation needs to be care­ful of such lev­els, cen­tral bank Gov­er­nor Tan Sri Muham­mad Ibrahim said in July. The cen­tral bank has left bor­row­ing costs un­changed at 3% since July last year.

Just 20% of new Malaysian hous­ing launches in the first quar­ter were priced be­low RM250,000, down from 33% be­tween 2010 and 2014, ac­cord­ing to the cen­tral bank’s “Hous­ing Watch” web­site.

The bulk of new homes cost be­tween RM250,000 and RM500,000. The me­dian an­nual house­hold in­come is es­ti­mated at around RM63,000.

“It is an is­sue of not hav­ing enough in­come and houses be­ing too ex­pen­sive,” Muham­mad told a con­fer­ence in Au­gust, re­it­er­at­ing that “the prob­lem is not about ac­cess to credit” and the len­der “must have the courage to say it loudly and clearly to the pub­lic.”

Only about half of peo­ple liv­ing in Kuala Lumpur own a home, while na­tion­wide the num­ber was 72.5% at the last cen­sus in 2010. De­mand is set to rise: the me­dian age of Malaysia’s 31.7 mil­lion peo­ple is 28 years and the nation’s ur­ban pop­u­la­tion is grow­ing at an av­er­age 4 per­cent a year, among the fastest pace in East Asia, ac­cord­ing to the World Bank.

Na­jib has pledged to fo­cus on boost­ing liv­ing stan­dards when he tables next year’s spend­ing plan in par­lia­ment this month. He may an­nounce an in­crease in the num­ber of af­ford­able homes built by state-linked com­pa­nies, tax re­lief for pri­vate devel­op­ers and sub­si­dies for af­ford­able home buy­ers, RHB Re­search In­sti­tute Sdn said last month. — Bloomberg

Ris­ing prices: A view of houses at Da­mansara Heights and its sur­round­ing ar­eas. The lat­est avail­able data re­veal that the me­dian house price in Malaysia is 4.4 times the me­dian an­nual house­hold in­come.

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