Home own­er­ship – need for al­ter­na­tives

> Bank Ne­gara says this in­cludes a well­func­tion­ing rental mar­ket

The Sun (Malaysia) - - SUNBIZ -

PETALING JAYA: Bank Ne­gara Malaysia (BNM), which has in­sisted that in­creas­ing ac­cess to fi­nanc­ing is not the way to re­solve the af­ford­able hous­ing is­sue, said yes­ter­day de­vel­op­ing al­ter­na­tives to home own­er­ship, in­clud­ing a well-func­tion­ing rental mar­ket, should be a pol­icy pri­or­ity.

“The sug­gested need for al­ter­na­tives high­lights the ad­verse con­se­quences that poorly de­signed in­cen­tives to in­crease home own­er­ship can have on hous­ing af­ford­abil­ity over the longer term.

“It also pro­vides a vi­able route to help low-in­come and early ca­reer in­di­vid­u­als onto a path to­wards even­tual home own­er­ship. Bet­ter en­force­ment is also crit­i­cal to pre­vent the abuse of schemes in­tended to as­sist spe­cific house­hold seg­ments to own or rent homes,” it said in a state­ment yes­ter­day.

The mat­ter was dis­cussed at its fourth Eco­nom­ics Re­search Work­shop themed “The Hous­ing Mar­ket: Is­sues and Pol­icy Op­tions” held on Mon­day.

BNM said a broad con­sen­sus was that pol­icy con­sid­er­a­tions need to bal­ance the ob­jec­tives of pro­vid­ing a min­i­mum qual­ity stan­dard of hous­ing for all Malaysians, while pre­vent­ing a buildup of im­bal­ances in the hous­ing mar­ket.

It added that pol­icy mea­sures to en­sure ac­cess to credit must there­fore be pur­sued with con­cern for the pro­tec­tion of home buy­ers from fi­nan­cial hard­ship lead­ing to fore­clo­sure and poorer wel­fare.

It has been widely spec­u­lated that Bud­get 2017, which will be tabled on Oct 21, will fea­ture mea­sures to in­crease ac­cess to fi­nanc­ing for first-time and af­ford­able hous­ing buy­ers. A re­cent pro­posal by the Ur­ban Well Be­ing, Hous­ing and Lo­cal Gov­ern­ment Min­is­ter to al­low more prop­erty de­vel­op­ers to pro­vide fi­nanc­ing to house buy­ers is aimed at boost­ing ac­cess to fi­nanc­ing.

“Dis­cus­sions noted that in­cen­tives for in­creas­ing home own­er­ship should be care­fully con­sid­ered so as not to blunt the ef­fec­tive­ness of mar­ket mech­a­nisms, which work to cor­rect hous­ing im­bal­ances.

“The need to en­sure that price thresh­olds adopted for af­ford­able houses are ap­pro­pri­ate was high­lighted, not­ing that house prices re­main out of the af­ford­able reach for many low- and mid­dle-in­come house­holds,” said BNM.

The con­fer­ence, at­tended by rep­re­sen­ta­tives from fi­nan­cial in­sti­tu­tions, gov­ern­ment agen­cies, prop­erty de­vel­op­ers, academia and think tanks, was held to ex­am­ine key is­sues in Malaysia’s hous­ing mar­ket, draw­ing on cur­rent re­search con­ducted on hous­ing af­ford­abil­ity, de­mand and sup­ply mis­matches and the driv­ers of prop­erty prices.

Six re­search pa­pers were pre­sented at the con­fer­ence, con­clud­ing with a pol­icy di­a­logue on pri­or­i­ties and strate­gies to pro­vide af­ford­able hous­ing to Malaysia’s house­holds.

Among the key find­ings of the re­search pa­pers were that key de­ter­mi­nants of house prices were in­come and credit, with both vari­ables closely linked as in­come is the main cri­te­ria for ac­cess to fi­nanc­ing.

It high­lighted that ag­gre­gate house prices had risen be­yond lev­els that were con­sis­tent with macroe­co­nomic sta­bil­ity and the coun­try’s eco­nomic fun­da­men­tals dur­ing the 2013-2014 pe­riod and that tar­geted pol­icy mea­sures were ef­fec­tive in sta­bil­is­ing prices in the hous­ing mar­ket by 2015.

The third find­ing was that hous­ing im­bal­ances fea­ture more promi­nently in se­lected lo­ca­tions and price seg­ments, which wors­ens hous­ing af­ford­abil­ity and drives higher house­hold debt in these seg­ments.

BNM said sev­eral par­tic­i­pants at the con­fer­ence cau­tioned that the 2007 global fi­nan­cial cri­sis had its ori­gins in sub-prime mort­gage lend­ing, which should serve as an im­por­tant les­son on fac­tors that can in­crease risks in hous­ing mar­kets, with far-reach­ing con­se­quences for fi­nan­cial and macroe­co­nomic sta­bil­ity.

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