THE STAR. 16TH DECEMBER: Two leading property developers have called for a new affordable housing model that would incentivise the development of affordable homes in strategic locations, at a time when property players are hit with increasing construction costs.
Malaysian Resources Corp Bhd group managing director Mohd Imran Tan Sri Mohamad Salim said Malaysians should be able to enjoy affordable housing within the vicinity of a city.
“It is also not economically-friendly for the city because a city needs to have multi-tiers of the workforce,” he said during a virtual discussion hosted by Malaysian Rating Corp Bhd yesterday.
The discussion was moderated by Star Media Group Bhd chief executive officer Alex Yeow Wai Siaw.
Mohd Imran pointed out that the town-planning process for urbanised areas must include the development of sufficient affordable housing projects.
“The question is at what price or is it going to be a rental model. I think everybody is working towards that and is trying to do that effectively,” he said.
In addition, Mohd Imran highlighted the need for an improved urban transportation system in creating more desirable townships.
“A lot of macro policies and planning have to be done on how to fit a city or urbanised areas effectively and how to move the population from one point to another without burdening or alienating them,” he said.
Another panellist, Sime Darby Property Bhd managing director Datuk Azmir Merican, noted that the “very high” cost for land and infrastructure has become a major challenge in supplying affordable homes.
Under such circumstances, Azmir said the development of affordable housing has become an “added cost” for developers.
“We need to look at what is the best model for affordable homes and who should build it.
“Maybe developers can pay the local authorities (to build affordable homes). I like the idea because it gives clarity,” he added.
The lack of affordable housing in good locations has been a persistent problem in Malaysia.
According to the PropertyGuru Malaysia Consumer Sentiment Study for the second half of 2022, about 51% Malaysians do not qualify for affordable housing schemes and cannot afford to buy a home without government assistance.
However, based on Sime Darby Property’s own experience, Azmir said the group’s properties priced in the range of RM400,000 to RM500,000 “sell quite well”.
It is noteworthy that the government considers affordable homes as those priced below RM300,000.
Azmir noted that developers would be inclined to supply property products only if they are profitable.
“That’s why we see developers gravitating towards homes that are priced around RM500,000 to RM700,000 per unit.
“That seems to be where developers make the most money,” he added.
Commenting on the outlook for the property sector, both Mohd Imran and Azmir concurred that the sector is likely to face increased challenges in 2023.
However, they also believe there will continue to be opportunities in the market.
Mohd Imran said property developers would “definitely” be affected by cost increases next year.
This could result in developers restrategising their business approach, including reducing the number of property developments in the short to medium term.
“Property developers are focusing on keeping their operational cost low. They are relooking at what sort of products to put out there.
“They are also looking into needs and ways on how many products to launch, because we have an oversupply of properties in certain sectors and certain locations,” Mohd Imran said.
Meanwhile, Azmir said the property market outlook next year may not be “as good as 2022”.
This is considering the sector underwent a significant recovery this year, driven by pent-up demand.
“If we see an aggressive hike in rates, that may slow down demand and I think developers will have to react to demand issues,” he said.
Nevertheless, Azmir believes the demand for properties is not expected to fall drastically in 2023, amid the expected slowdown.
He also pointed out that the demand for industrial property products will remain attractive.
“Sime Darby Property has decided to have more launches in industrial products, and that is about 50% of our launches.
“The average take-up rate is, in fact, quite good at 88%,” he said.
On the impact of interest rate hikes, Azmir said the market could still digest two more rounds of overnight policy rate hikes.
“But, if we go beyond that, it would be tough for the consumers,” he said.
Economist Mohd Afzanizam Abdul Rashid, who also spoke in the virtual discussion, noted that the impact from interest rate hikes will be one of the main challenges for 2023.
Mohd Afzanizam, who is the head of economics and research department at the Employees Provident Fund, also said China’s zero-Covid policy and geopolitical factors globally would add to the challenges.
“Next year is a year of dichotomy. We will see the real economy start to take a hit, following the monetary cycle.
“But, the financial markets – equities and bonds – might respond more positively because of the anticipation of possible rate cuts at some point in the future.
“Typically, financial markets would move ahead of the real economy,” he said.