The Affordable Housing Conundrum and Skyrocketing Property Prices
Weighing available options for affordable homes with an upcoming Budget 2017
Budget 2017 is on the verge of being unveiled soon. The numerous provisions for the property sector and the real estate industry often focus on the issue of affordability of housing. There has been great interest with respect to low-cost housing projects and the various financing schemes associated with them. House prices, within urban communities, continue to escalate and skyrocket without much control or restraint. The never-ending hype with regard to affordable housing will only serve to benefit a small percentage of Malaysians who have the means to finance the exorbitant pricing of homes, which only appear to be affordable on paper. In reality, affordable homes are not so affordable after all.
With more stringent lending regulations imposed by commercial banks upon buyers, applying for bank loans for their first home is becoming increasingly difficult. As we are all aware, a house is by far the largest single investment anyone can make during their lifetime. The central bank regulations which were meant to curb speculative activities in real estate investment have somehow led to the financial stifling of prospective first-time homebuyers. Abandoned housing projects and shabbily-built houses continue to persist till today with no real solution in sight. A string of prominent and high-profile cases continue to pervade the media as shoddy works and corrupt practices are being highlighted daily.
Home buyers continue to be at the losing end of this dilemma or conundrum. For starters, the federal government could propose a long-term plan for countering the dwindling homeownership market in the country. Increasing the supply of affordable homes and enabling smart financing should be seriously considered. The delivery of affordable housing within states such as the Projek Perumahan Rakyat (PPR) is an ideal place to begin with as any. As for the government, having good intentions alone may not be sufficient, particularly in relation to those in the lower and middle-income segments. If so, empty promises and plain rhetoric will not suffice in appeasing the suffering of these community groups. Having a roof over our heads is a basic right and essential necessity of all Malaysians period.
Controlling property pricing requires a delicate balancing act between keeping prices in check and cowing to the will of real estate developers. There is also the question of market forces and free enterprise to uphold, as well as safeguarding business transactions and enabling home ownership. A practical framework for curbing property inflation and clamping down on property speculation would serve us well since residential prices will remain stable and not propel through the rooftop. Since housing is considered a basic necessity like all essential goods, a policy for curbing price hikes can be easily initiated and readily enforced. Over the past decade, many of the so-called affordable homes have been built. Many more remain unsold, resulting in a glut of unoccupied houses in the residential market.
Demand for properties naturally outstrips supply, especially in urban townships and metropolitan cities. Over the course of the decade, when the 1Malaysia Housing Programme was first conceived by the Prime Minister himself, almost 100,000 low-cost houses have been built and sold at way below the market price. Malaysian households with income brackets of between RM2,500 and RM7,500 are duly eligible for the PR1MA homes. This begs the question: how much more affordable can they get? Notwithstanding drastic moves and desperate measures, capping the profit margin of property developers could be the answer to our prayers. What is more, developers generally pay low property taxes, but they make obscene profits by hiking up property prices. The incumbent interest rates levied by banks for first-time house buyers must be reviewed and scrutinized. Waiving them altogether might be a godsend to potential future homeowners.
The single biggest hurdle or obstacle for the average Malaysian home purchaser is not necessarily the maximum 35-year loan repayment period, but the sheer lack of affordable houses to begin with in the first place. Financial access is not only the primary problem of purchasers of affordable homes. Core issues that need to be resolved pertain to the lacking in affordability as well as the shortage of reasonably priced homes. House prices ultimately plunge when loans are defaulted and mortgages forfeited. This is obviously not an optimistic scenario for budding homeowners as many Malaysians have a poor track record in prudent financial management, let alone servicing their loans or settling outstanding debt. An impending doom & gloom is gradually making its presence felt in the market.
Unlocking and utilizing the government’s vast land banks would be the way to go for the development of cheaper homes. The price of land, especially in the urban areas, has always been a prohibitive factor for developers to keep their housing projects affordable to the general public. Bureaucracy must be kept in constant check & balance. Spiraling costs normally reflect upon house prices. It is an open secret for those who have dealt closely with the Land Office department, corruption remains rampant and widespread. Unfortunately, it is also one of the few government agencies still mired with gross inefficiency and embroiled in utter incompetence. We can learn a thing or two from our neighbour Singapore on how they are managing community housing for the people and maintaining the cost of their HDB units at affordable rates. As Vision 2020 dawns upon us, the welfare and livelihood of all Malaysians citizens should remain our fundamental concern as well as our utmost priority. And housing should be no different. After all, home is where the heart is. So if you can own it, you definitely can live it! – HFM