THE MALAYSIAN RESERVE. 4TH OCTOBER: Over the past decade, the issue of housing affordability has escalated into a critical concern in Malaysia.
The swift escalation of property prices in urban hubs combined with stagnant wage growth has placed the dream of home ownership beyond the grasp of many ordinary Malaysians.
The disparity between incomes and housing expenses continues to widen, spurred on by various economic factors influencing the nation’s overall financial well-being.
This affordability crisis presents a multifaceted challenge, shaped by a blend of economic, social and regulatory influences.
While the government has introduced a range of measures and incentives aimed at bolstering affordability, their impact has been somewhat limited thus far.
Experts contend that a more comprehensive, well-coordinated and research-driven strategy is imperative to effectively tackle affordability issues spanning diverse regions and demographics.
FA Advisory Sdn Bhd CEO Bryan Zeng believes the fundamental mismatch between incomes and property prices is the root cause of driving the affordability issue.
He told The Malaysian Reserve (TMR) that the underlying issue is the average income level of Malaysians which has yet to keep up with inflation and the country’s development.
“While the cost of materials has risen, leading to higher housing prices, the average income of wage earners did not increase in tandem,” he explained.
Over the past decade, property prices have risen faster than incomes, creating an affordability gap, impacting lower-income groups.
This core imbalance has been further exacerbated by the currency depreciation and rising interest rates in recent years.
Regarding the government initiatives aimed at improving affordability, Zeng was critical of programmes focused narrowly on lowering housing prices without adequately addressing other factors important for meeting market demand.
He cited affordable housing projects developed far away from urban areas and lacking public transportation access as an example of this mismatch with demand.
“Many such housing projects ignore the liveability factor.
“They are located far away from economic centres, public transport networks and other amenities. This resulted in a lack of demand and property overhangs.
“While prices may be affordable, the locations are not aligned with what homebuyers need and want,” he said.
Therefore, Zeng suggested that instead of just lowering upfront pricing, the government should be taking a more holistic view of affordability like Singapore’s public housing model.
Moreover, he stated that besides the price, liveability factors such as accessibility (to public transport), proximity to amenities and other supporting infrastructure, size and layout are very important.
“Urban accessibility and location convenience are critical elements that need greater focus within affordability initiatives.
“Blanket incentives that bring down prices but ignore demand alignment run the risk of oversupply in undesirable areas,” he said.
Targeted Subsidies Versus Wide Incentives
Additionally, Zeng proposes targeted subsidies rather than broad-based incentives as potential remedies.
He gave an example, by providing low 1% interest rate loans through partnerships with banks specifically for qualified first-time homebuyers within certain income ranges.
“This focuses affordability support where it is needed most, without distorting the broader market,” he said.
Zeng also proposed innovating partnerships directly with developers and stakeholders to reduce various costs and inefficiencies in the process such as marketing, commissions and legal fees.
With this, he said the cost of savings could then be passed on to make home-buying more affordable for end purchasers.
This, he said, coupled with expanding affordability incentives like the limited-time Home Ownership Campaign’s stamp duty waiver to include resale properties, not just new developments, would allow more buyers to benefit beyond just those purchasing during the short window when such programmes are active.
In his view, any subsidies should be carefully targeted based on homebuyer needs rather than broad discounts which can lead to oversupply.
In addition, Zeng emphasised the importance of detailed research and feasibility studies for future affordable housing projects, learning from past oversupplies in undesirable locations lacking demand.
This is critical for policymakers to tailor strategies and solutions based on regional and property segment variances.
He stated that researchers need to “do more research and feasibility study” to support calibrated policymaking.
While Zeng believes the government has made efforts to improve affordability, he sees major room for improvement in implementation coordination across stakeholders such as policymakers, developers, contractors, financial institutions and various government agencies.
“A more centralised, holistic approach is required to align the various players and policies for maximum impact,” he noted.
Multi-faceted Approach Needed
Zeng also discussed how affordability challenges differ significantly between urban and rural areas, as well as commercial versus residential real estate.
Urban locales face more acute shortages given rapid price increases. Location factors like access to employment hubs and public transit are also more critical in cities.
He advised policymakers to tailor strategies based on the distinct issues faced in different regions and property segments. There is no one-size-fits-all solution for a diverse country like Malaysia.
Zeng advocates a multi-faceted approach to improving affordability focused on aligning housing supply solutions with actual home-buyer preferences and needs, not just lowering upfront pricing which as such requires in-depth market research, targeted incentives, partnerships for efficiency and centralised coordination across government agencies and industry stakeholders.
With the political will to calibrate policies based on demand factors and regional variances, Zeng believes Malaysia can make meaningful progress in closing the housing affordability gap in a holistic manner.
Mismatch of Property Prices and Income Growth
Meanwhile, Asiacap Valuers and Property Consultants MD Kit Au-Yong said the mismatch between rising property prices and slower income growth has severely impacted affordability, particularly for lower-income groups.
In Au-Yong’s point of view, rising housing prices and slower income growth has not been helping the affordability level, most significantly affecting the lower income groups in buying properties.
The affordability gap has widened over the past decade as prices climbed ahead of incomes.
On government initiatives to promote affordability, Au-Yong believes agencies have made efforts through various measures like taxes and housing schemes.
However, he sees major room for improvement in coordination and implementation.
“There has been talks about having a more centralised approach to tackle this issue but we have yet to see this yet in a holistic way,” he said.
In terms of solutions, Au-Yong advocates moving beyond piecemeal subsidies to a more thorough approach at the national level.
“Introducing a more thorough approach instead of piecemeal measures would increase the chances of better results,” he said, adding that this comprehensive strategy should coordinate federal, state and local agencies to manage housing supply and demand more effectively, especially for affordable segments.
On rentals, Au-Yong noted cultural biases in Malaysia favouring homeownership over renting. He suggested working to shape societal perspectives while also addressing the market imbalance of rental supply and demand.
“Any solutions need to account for engrained social attitudes as well as economic factors,” he said.
Au-Yong also emphasised tailoring solutions based on regional and property segment variances, stating that affordability challenges are not uniform nationwide.
“As with urban versus rural divergences, the commercial and residential real estate markets each have their own distinct dynamics related to demand, supply, revenue potential and macro-economic factors.
“Policymakers need to take a targeted approach with bespoke strategies suited to each area’s circumstances,” he said.
Concurring with Zeng, Au-Yong also believes improving Malaysia’s housing affordability requires a coordinated effort aligning stakeholders under a comprehensive national framework.
This should follow tailored strategies for different regions and market segments based on rigorous data analysis. Alongside subsidised pricing, factors like location, accessibility and shaping social attitudes are critical pieces of the puzzle.
“With tight implementation monitoring and a willingness to course correct based on research, Malaysia can make headway on this complex, multi-faceted challenge.
“Housing affordability is a pressing challenge driven by the mismatch between property price inflation and income growth over the past decade,” he said.
While the government has taken steps to promote affordability, experts contend that there has been a narrow focus on pricing without sufficient coordination.
A comprehensive approach is imperative, one that takes into account factors contributing to quality of life, tailored subsidies to the specific needs of homebuyers, cultivates innovative industry collaborations and adapts strategies to accommodate regional and demographic differences.
As underscored by Zeng and Au-Yong, a centralised, research-backed approach that aligns stakeholders within a holistic national framework is crucial.
With political determination and policies finely attuned to market dynamics, Malaysia can make significant strides in addressing this intricate issue.
However, it will necessitate a shift away from fragmented measures towards the implementation of inclusive, demand-responsive solutions that cater to individuals of all income brackets and demographics.