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Lack of Affordable Housing for First-Time House Buyers

Lack of Affordable Housing for First-Time House Buyers

Houses listed up to RM165,060 are considered to be affordable to a median family household in Malaysia, according to the Deputy Minister of Finance 1, Datuk Othman Aziz.

He explained that the figure was calculated using the Demographia International methodology named the “median multiple” technology recommended by the World Bank and the United Nations for the evaluation of urban housing markets.

The methodology defines that if a household can finance the house with less than three times its annual household income, the house is considered affordable.

According to Bank Negara Malaysia in its Annual Report 2016, 50% of Malaysian households earned a monthly income of RM4,585 and below in 2014, thus suggesting that houses valued up to RM165,060 are affordable to them.

“However, only 21% of new housing launches in Malaysia were priced below RM250,000 in 2014, while developers are attracted to build higher-end properties priced above half a million,” claimed Othman.

There is no equality between what is offered by property developers and what is affordable to prospective buyers, said the National House Buyers Association (HBA) honorary secretary-general, Chang Kim Loong.

The HBA classifies “affordable properties” as those between RM150,000 and RM300,000 with a minimum built-up space of 800 sf with at its least, 2 bedrooms. However, most developers’ understanding of ‘affordable properties’ are; houses valued up to RM500,000 for ‘first-time house buyers and up to RM1 million for ‘second-time house buyers’ or ‘upgraders’.

The lack of affordable housing has been an on-going problem in recent years as new developments are becoming increasingly less affordable.

“The decline in housing supply reflected the inequality between the supply of new houses and the increase in the number of households, especially these past five years,” said Othman at the 2017 Budget Focus Group Meeting on “Accelerating the Supply of Affordable Housing”.

Othman also noted that the government initiatives to build affordable household has started to gain momentum, though not at a rate fast enough to meet current demands.

Perbadanan PR1MA Malaysia (PR1MA) by the Malaysian Government is one such initiative. Its purpose is to plan and develop quality homes in-line with certain lifestyle concepts catered to the middle-income households in key urban areas.

According to Prime Minister Datuk Seri Najib Razak, houses by PR1MA are going for 20% below the market price while PR1MA’s website states that registration is open to all Malaysians with a monthly household income of between RM2,500 and RM10,000.

PR1MA’s website also revealed that five out of the seven of its developments in the central region are valued from RM267,000 to RM315,000 and is opened for balloting, whereas the other two developments are set at launch prices of around RM235,000.

This, however, still defeats the purpose of PR1MA’s affordable houses for the median Malaysian household as it is priced well above the affordable range of RM165,060 or less.

Chang from HBA said that initially, PR1MA was well on their way to provide “affordable housing” to the public. However, at some point, PR1MA began straying from that idea and began collaborating with private developers to offer homes and “lifestyle living”.

There is also the issue of ‘second-time house buyers’ being allowed to ballot and purchase PR1MA properties when supply is still insufficient to meet the demand of ‘first-time house buyers’. There is no logic for such schemes to take place when the supply is already low to begin with.

On the other hand, Chang said that Projek Perumahan Rakyat (PPR) is not part of the initiatives to provide “affordable housing” as PR1MA’s goal is to develop houses for low-income households, not the median population. Hence, for PPR to succeed, screening through the applicants and strict selection criteria is vital.

“Periodic checks must also be conducted to ensure that the PPR units are not rented out, especially to foreign workers, and action must be taken against any PPR occupant who is caught renting out the PPR unit,” Chang added.

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