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The distorted housing market structure

  • The government should focus on the supply of affordable homes in a bid to stabilise market prices, instead of helping developers clear their unsold high-end property stock.

By Ten Kiat Loong

The biggest problem of Malaysia's housing market lies with its serious structural distortion and the lack of a housing policy geared towards buyers' own occupation instead of speculative investment.

Even though Bank Negara has over the past few years repeatedly reminded the government citing research and analytic reports to seriously look into the issue of house ownership for Malaysians and propose that more stringent measures be taken to curb speculative buying, the government has apparently acted quite passively in regulating the supply of housing stock. This can be largely attributed to stronger influences from property developers when it comes to land planning and housing policy. While their view have strongly dictated the direction of the government's housing policy, they have also given rise to irregularities and scandals with regard to land sale.

Malaysia's property prices have risen the most during the past decade, with developers focusing on the construction of high-end properties for better returns. Nevertheless, we are now facing serious property glut with supply far outstripping demand.

According to CBRE-WTW's Real Estate Market Outlook 2019, Iskandar Malaysia in Johor alone saw a 50% high-end property vacancy rate.

In the meantime, we also see an acute shortage of affordable housing and public housing projects.

Although the previous BN administration promised to increase the stock of affordable housing, Bank Negara's 2017 survey report showed that only 25% of properties launched in that year were affordable homes, with the remaining 75% being high-end residences, showing that the government was helpless in regulating housing supply in the country.

In addition, the waiting list for DBKL people's flats application has topped 40,000 names, meaning some 40,000 households unable to afford private housing are waiting to move into government flats.

More shockingly, those who have already moved into government flats have defaulted on rents in excess of RM58 million.

There are so many people waiting anxiously to move into government flats while there are others who have moved into the flats but are unable to pay their rents.

As a matter of fact, speculative buying is the culprit for skyrocketing property prices beyond the reach of ordinary citizens. This will have an indirect impact on the country's economy as well as widening wealth gap.

The income gap between T20 and B40 rose sharply from RM1,935 in 1989 to RM10,148 in 2016, while real estate price-to-income ratio surged eight to nine times during the period, against the normal three to six times.

Meanwhile, due to property prices rising far more rapidly than incomes, many households are forced to bear increasingly higher housing mortgages, hence significantly reduced disposable incomes and compromised quality of life.

Other than exorbitant housing mortgages, newcomers to cities and towns also find themselves facing the dilemma of expensive house rents.

The Shared Prosperity Vision 2030 briefing shows that almost 75% of Malaysians are unable to come up with RM1,000 for emergency need. Among the 15 million in job market, only three million have saved enough for their retirement.

Taiwan's Deputy Minister of the Interior Prof Hua Ching-chun, who is also a real estate researcher, has said the core concept of the government's housing policy is to ensure a safe, hygienic and high quality living environment for the people, especially the underprivileged families, and provide them with affordable homes meeting specific quality requirements. On top of that, the government's housing regulation policy should be one that pursues stable housing market development as its objective, not to encourage speculative buying.

In view of this, to rectify the severely distorted housing market structure within a short period of time, it is imperative that the government focus more on the supply of affordable homes in a bid to stabilise housing prices, instead of helping developers clear their unsold high-end property stock.

((Ten Kiat Loong is Ampang Jaya Municipal Councillor.)

 

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