PETALING JAYA: With the housing market at the crossroads, where house prices have been moderating but remain severely unaffordable, there is a strong consensus to push for a well-functioning rental market in the country as a policy priority.
Various industry players and think tanks expressed their support to have a rental market, especially for the low-income group as an alternative to home ownership at a recent conference held at Bank Negara.
Towards this end, Real Estate and Housing Developers Association deputy president Soam Heng Choon told StarBiz that the Government should provide more homes for rental purposes for those who genuinely cannot afford them or for the low-income group.
“There is Projek Perumahan Rakyat (PPR) for those who cannot afford homes. More of such schemes are needed for rental purposes. It’s the duty of the Government to provide this and to ensure its success as an alternative to home-ownership,” he said.
The secretary-general of the National House Buyers Association Chang Kim Loong said that to ensure there is a well-functioning rental market in the country, it is critical to step up enforcement to prevent the abuse of schemes intended to assist households to own or rent homes.
Chang said various government schemes such as the low and medium-cost housing, including the PPR, had been abused by applicants who were not qualified to own or rent such housing projects.
He agreed that buying and owning a house was a riskier proposition for households compared with renting. There is also a risk of greater foreclosures.
“CIMB’s list of properties up for public auction, a couple of years ago, showed 35 units of properties in Selangor at a reserved price of less than RM42,000, ie, the price of a new low-cost unit. Unfortunately, there are no official statistics on how many low-income earners have lost their homes or have not been able to finance their purchase promptly.”
At the same time, Chang said renting was less burdensome, as the tenant is not bogged down with loan repayments and other expenses like insurance, sinking funds, maintenance charges and taxes.
According to the National Property Information Centre, the Malaysian House Price Index growth has been moderating since 2014. The index had eased to 7.2% in the fourth quarter of last year, down from a 7.4% expansion in the previous quarter. It was the fifth consecutive quarter of a slower pace of growth. A report entitled “Making Housing Affordable” by Khazanah Research Institute showed that the overall Malaysian housing market was “seriously unaffordable”.
Using the “median-multiple ratio” standard by the United Nations Centre for Human Settlement at the World Bank, a housing market is considered “affordable” if the house price to household income ratio is below three times.
The study conducted by Khazanah Research Institute, following the latest available data by the Department of Statistics, indicated that the overall Malaysian median-multiple in 2014 was 4.4 times. More worrisome, the median multiple ratio for Kuala Lumpur (5.4 times), Penang (5.2 times), Terengganu (5.5 times) and Sabah (5.1 times) was considered to be “severely unaffordable”.
At the conference held on Monday, industry players also proposed other policy options as broader alternatives to home ownership, as well as a viable route to help low-income and early career individuals to own houses.
Better enforcement, according to them, was also critical to prevent the abuse of schemes intended to assist specific household segments to own or rent homes. Factors that influenced the efficiency with which house prices were adjusted were also examined.
There were discussions 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 were appropriate was also highlighted.
The conference was attended by representatives from financial institutions, government agencies, property developers, academia and think tanks. Its purpose was 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.
There was a broad consensus that policy considerations for housing the nation would need to balance the objectives of providing a minimum-quality standard of housing for all Malaysians, while preventing the build-up of imbalances in the housing market.