What will be done to tackle Malaysia’s housing issues?

Bernama pic.

Housing and Local Government Minister Zuraida Kamaruddin is expected to release the much anticipated National Housing Policy this month.

Key areas likely to be addressed in the policy are the incorporation of three categories of affordable housing as well as the streamlining of five housing entities, namely Perbadanan PR1MA Malaysia, 1Malaysia Civil Servants Housing Programme (OOA1M), UDA Holdings Bhd, Syarikat Perumahan Negara (SPNB) and the Hardcore Poor Housing Programme (PPRT).

Other areas likely to receive focus include the option of rent-to-own (RTO) schemes where tenants will be given the option to plan and buy their house after five years of renting.

These areas have been identified as cornerstones in the Pakatan Harapan (PH) government’s execution of its manifesto to address the following issues confronting the market:

A surplus in the supply of expensive houses worth more than RM500,000 but a severe shortage of houses below RM250,000;

• Difficulty in developing new land due to land hoarding by some giant developers and GLCs, causing land prices to surge;
• Exploitation by crony developers who obtain government land at discounted prices but then reap high profits by building just a small number of affordable houses;
• Difficulty in securing home loans among first-time homebuyers.

To counter this, the PH government in its election manifesto looked towards:

• Widening the RTO scheme nationally;
• Setting a time-limit for the completion of construction to avoid land hoarding;
• Giving incentives to smaller developers to create a level playing field;
• Encouraging and simplifying the processes of building affordable houses on land owned by state Islamic authorities, including Waqf land;
• Aiding land status conversion if developers want to build affordable houses;
• Increasing the quota for affordable houses;
• Encouraging developers to use the latest, cheaper technology such as the Industrialised Building System;
• Coordinating with the banking sector to widen access to housing loans;
• Taking over the maintenance of low-cost houses to reduce the burden on consumers;
• Setting up a National Affordable Housing Council to maintain focused attention on the affordable housing agenda.

While announcements from the minister and her deputy, Raja Kamarul Bahrin Shah Raja Ahmad, in addressing key affordability issues as well as the setting up of a comprehensive property industry database have been encouraging, it remains to be seen what concrete policies and measures will be taken to address issues affecting the industry.

With an industry already reeling from the effects of a market correction, the government now has to balance increasing the supply of mid-to-luxury homes where demand has been slowing against the low supply of affordable housing in urban areas where a chronic demand continues to grow.

It is clear that the government is attempting to counter this by mooting specific policies and measures that address both these segments separately.

Extending the tenure of loan repayments, especially RTOs, are certainly creative ways to increase home ownership, but it invariably saddles buyers with larger debts with longer repayment times. With salary growth increasingly outpaced by inflation, this has the potential to trap the B40 and to an extent the M40 segments in a self-perpetuating debt trap.

To ensure that Malaysia does not suffer a similar “developing nation” fate as China and Vietnam where rapid urbanisation has resulted in spiralling housing costs, leaving many households under pressure and communities marginalised, the government has to address the elephant in the room. Fixing the land banking issue as highlighted in the manifesto is likely the long term solution to our current conundrum.

While there are short-term issues that require fixing, the challenge is for the government to ensure it does not create a two-speed property market in the process.

Thor Joe Hock is CEO of MyProperty Data