The national budget will be announced in two days and one of the top topics of the day would be affordable housing.
Much has been said about affordable housing, with many proposals put forth by various stakeholders and interested parties. One of them is the National House Buyers Association (HBA), who proposed that the stamp duty for the third and subsequent property to be increased progressively according to the number of properties held, instead of the current flat rate. Its general secretary, Chang Kim Loong, said the proposed rate aimed to reel in reckless property speculation.
HBA has been very persistent in urging the government to bring down house prices. The increase in stamp duty is not the first proposal HBA has made for the national budget. In its proposal for the 2014 Budget, HBA successfully urged for the Real Property Gains Tax (RPGT) to be raised. The progressive rate proposed by HBA was accepted and is in place until today.
Since the rally on house prices began about five years ago, various policies have been introduced to curb the unbridled escalation of house prices. Policies on the fiscal side sought to stave off speculation and increase affordable housing stock, both at the national and the state levels.
On the monetary side, Bank Negara Malaysia has done a commendable job ensuring that a housing bubble is neither created nor burst. Apart from the review in RPGT, we have witnessed the rolling out of the My First Home Scheme, the setting up of the 1Malaysia People’s Housing Programme, the ban on various permutations of the developers’ interest bearing scheme and finally, the tightening of the loan-to-value ratio and eligibility requirements.
Simply put, we are never short of initiatives, yet after more than five years, we are still singing the same old song. Demand for affordable housing has never subsided, but the prices of these houses simply don’t fit the masses’ pocket.
Khazanah Research Institute director Dr Suraya Ismail recently urged the government to focus on the supply side. The market, she said, was flooded with luxury homes with too few mid-range affordable ones. The solution should lie in jacking up housing supply to meet the huge demand in this latter segment. To do this fast, she called for greater adoption of modern construction methods, such as the pre-fabricated Industrial Building System (IBS), to speed up construction and keep costs down.
IBS can reportedly reduce development time by up to six months for a two-year project. Modern methods that lead to reduction of the reliance on unskilled workers, less wastage, less volume of building materials, increased construction site cleanliness and better quality control should benefit the housing market.
On paper, the above proposals make sense. “Undesirable” demand must be kept in check to make way for “genuine buyers”, although what constitute these terms are still open for debate.
Extra care must be given when introducing quick remedies such as downpayment assistance and easier housing loan schemes. Sky-high prices cannot be brought down by further boosting demand.
As Suraya has argued, the supply side must be urgently addressed. Clearly, there is a need to review the means to encourage housing developers to offer more affordable houses and less lux. At the same time, financing policy needs to continuously protect potential homebuyers from impulse buying or falling into long-term regret.
It is worth it to dig deeper into some serious suggestions to revisit the system of housing provision. From a largely private developer driven market with the government playing a complementary role in social housing, perhaps there are other models that we can explore.
In addition, non-conventional, non-quick fix ways of financing home ownership, such as the rent-to-buy scheme or shared ownership, should be more seriously looked into.
Housing affordability is neither a new issue nor exclusive to our country. Many other countries, including developed ones, are struggling with keeping home prices in check, and this shows how non-simplistic any good solution should be.
In the run-up to the announcement of the 2017 Budget on Friday, an important principle must be kept in mind — any policy to assist homebuyers should not lead to harmful consequences in the long run.
Mazlena Mazlan is an independent researcher