Un­der­sup­ply of af­ford­able houses seen to worsen

The Star Malaysia - StarBiz - - News -

PE­TAL­ING JAYA: The un­der­sup­ply of af­ford­able homes in the lo­cal prop­erty mar­ket is ex­pected to worsen, go­ing for­ward, due to de­mo­graphic fac­tors and cur­rent in­come trends.

Since 2012, the in­crease in house prices in Malaysia has out­stripped the rise in in­come lev­els, ac­cord­ing to Bank Ne­gara’s Fi­nan­cial Sta­bil­ity and Pay­ment Sys­tems Re­port 2016.

“Con­se­quently, pre­vail­ing me­dian house prices are be­yond the reach of most Malaysians. This is pri­mar­ily at­trib­ut­able to a gross mis­match be­tween hous­ing sup­ply and de­mand amid di­verg­ing ex­pec­ta­tions be­tween house­holds and de­vel­op­ers.

“The is­sue has been com­pounded by the fact that the dis­tri­bu­tion of new hous­ing sup­ply has been con­cen­trated in the higher-priced cat­e­gories.”

The cen­tral bank said the is­sue of af­ford­able hous­ing, which re­flects the sup­ply-de­mand im­bal­ances in Malaysia, wors­ened dur­ing the 2012 to 2014 pe­riod.

“Dur­ing these years, new hous­ing sup­ply fell short of the in­crease in de­mand (av­er­age sup­ply of 85,000 new units ver­sus the for­ma­tion of 118,000 new house­holds).

“This is in con­trast to the 2007 to 2009 pe­riod, when the new sup­ply ex­ceeded the de­mand for hous­ing.”

The cen­tral bank added that the ef­fect of the sup­ply short­fall on hous­ing af­ford­abil­ity was ex­ac­er­bated by the slower in­crease in house­hold in­comes (12.4%) rel­a­tive to house prices (17.6%).

An­other fac­tor which wors­ened the hous­ing af­ford­abil­ity is­sue was the trend of higher prop­erty launches in the price cat­e­gories above RM250,000, it said.

“While there were more launches dur­ing 2012 to 2014, the num­ber of new af­ford­able hous­ing units for house­holds earn­ing the me­dian in­come (be­low RM250,000) was fewer by 16,200 units per year since the 2008 to 2009 pe­riod.

“The over­sup­ply of higher-end prop­er­ties be­yond what house­holds can af­ford re­sulted in a sig­nif­i­cant por­tion of these non-af­ford­able prop­er­ties re­main­ing un­sold.”

On the sup­ply side, Bank Ne­gara said the hous­ing mar­ket has not pro­vided an ad­e­quate sup­ply of af­ford­able hous­ing for the lower and mid­dle-in­come house­holds.

“In 2014, the short­age of af­ford­able houses was es­ti­mated to be 960,000 units. This gap is ev­i­dent across most states, with Sabah and Sarawak hav­ing the high­est deficit, ac­count­ing for 50% of the to­tal short­age in Malaysia.

“Among the four states with the high­est con­cen­tra­tion of ur­ban pop­u­la­tion, the short­age of af­ford­able hous­ing was largest in Kuala Lumpur, fol­lowed by Pe­nang and Jo­hor. On the other hand, Se­lan­gor was found to have a sur­plus of af­ford­able houses.”

Go­ing for­ward, Bank Ne­gara said a care­fully-de­signed strat­egy of pol­icy in­ter­ven­tions is re­quired for the hous­ing mar­ket to en­sure that it is able to ac­com­mo­date house­holds of all in­come groups.

“Meet­ing the de­mand of af­ford­able hous­ing units, go­ing for­ward, will re­quire the com­mit­ment of both the Gov­ern­ment and the pri­vate sec­tor. The es­tab­lish­ment of a cen­tral agency to con­sol­i­date the pro­vi­sion of af­ford­able hous­ing as well as a cen­tral repos­i­tory is key.

“Ad­di­tion­ally, re­duc­ing costs as­so­ci­ated with the de­vel­op­ment of af­ford­able hous­ing through the im­ple­men­ta­tion of cost-sav­ing and pro­duc­tiv­ity-en­hanc­ing tech­nolo­gies would in­crease the speed and scale of de­liv­ery of af­ford­able hous­ing projects, go­ing for­ward.”

On the de­mand side, the cen­tral bank said the de­vel­op­ment of the rental mar­ket to bridge the af­ford­abil­ity gap could re­lieve some of the pres­sure on the Gov­ern­ment to build all of the af­ford­able hous­ing needed.

“This should be com­ple­mented by more in­no­va­tive schemes to fund the de­liv­ery of af­ford­able houses. As for end-fi­nanc­ing, as in other coun­tries, the cen­tral bank has in­tro­duced macro-pru­den­tial mea­sures to de­ter spec­u­la­tive ac­tiv­ity in the hous­ing mar­ket and to avoid over-bor­row­ing be­yond one’s means.

“It is im­por­tant to note that these mea­sures do not in any way ham­per ac­cess to fi­nanc­ing for el­i­gi­ble bor­row­ers, in­clud­ing those who are first-time buy­ers.”

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