ONE established developer is selling 30ft by 75ft five-plus-one bedroom link houses in the federal administrative capital of Putrajaya from RM1.58 million apiece (before Bumiputera discount).
Another major developer, building a township near Sungai Buloh, is offering 20ft by 70ft 2-storey link houses with a built-up area from 2,001 sq ft from RM683,888 a unit (before Bumiputera discount).
It said some 70 per cent of the 187 units were taken up during one weekend in October when the particular phase was launched.
Generally, the perception among consumers across the country is that home prices are out of reach of the ordinary Malaysian.
Thus, it was no surprise to us when Bank Negara, our central bank, declared that houses in Malaysia, as a whole, are “seriously unaffordable”.
It went on to say that within Malaysia, house prices range from “affordable” in Melaka (affordability ratio of 2.98 in 2014) to “severely unaffordable” in Terengganu, Kuala Lumpur, Penang and Sabah. Terengganu? Yes. Terengganu.
Well, how do you define housing affordability? For that matter, there is no standard definition of what is “affordable homes” since the benchmark varies from developer to developer.
Bank Negara, however, tends to use an international benchmark when it comes to defining affordability of home ownership.
According to the Median Multiple (MM) methodology developed by Demographia International to evaluate urban housing markets, a house is considered affordable if it can be financed by less than three times a household’s median annual income.
The median multiple of 3.0 is based on the historical trend
in six nations where housing
affordability ranged between
2.0 and 3.0 until the 1980s or 1990s.
While the accuracy of the MM in indicating an affordable housing market may vary between countries, it is a useful broad measure for comparing housing affordability.
Bank Negara data showed that using the MM approach, the ratio of median house price to the median household income in Malaysia has consistently exceeded 3.0 since 2004.
By 2014, the housing affordability ratio was 4.49, putting houses out of reach of many ordinary people.
According to Bank Negara, the issue of affordable housing reflects mainly the supply-demand imbalances in Malaysia, which worsened during the 2012-2014 period.
During these years, new housing supply fell short of the increase in demand (average supply of 85,000 new units versus the formation of 118,000 new households).
This is in contrast to the period 2007-2009, when the new supply exceeded demand for housing.
Analysts said the sudden “gold rush” by developers, shifting from the lower- and medium-end home categories into the high-end market, is also causing the supply shortfall.
We are seeing the impact now. There is a huge overhang of high-end residences as developers struggle to find buyers. Worst-hit areas are Johor and Kuala Lumpur.
The central bank said in a report that the slower rise in household incomes relative to house prices (see charts) is also adding to the problem.
Not unlike the overall cost of living issue, one of the burning issues as we approach the general election is not about cost but income level.
Household income has not moved up in tandem with the overall living costs.
Companies must gradually raise wages and salaries but it must be based on the productivity and competency of their workers.
A more startling fact is that 89 per cent of the working population earn less than RM5,000 a month, according to the Employees Provident Fund (EPF).
“In terms of contribution rates in mandatory saving, Malaysia is the world’s fifth highest, but the salary structure does not translate into a high savings amount,” EPF Head of Strategy Balqais Yusoff was quoted by Bernama as saying.
“So, we need to constantly review the wage structure and the minimum wage also needs to be aligned with the rising cost of living,” she said.
The government must be given some credit for putting more emphasis on building more affordable homes, especially through agencies such as PR1MA.
Yet there are still some concerns raised by young and potential buyers, who feel that the PR1MA units are quite limited and prices generally steep.
One economist, who declined to be named, said PR1MA, unfortunately, was just about picking friendly developers and contractors (who allegedly recommend their own land) and ending up building houses which are not so cheap after all.
Kinabatangan MP Datuk Bung Mokhtar Radin stirred a fresh debate on PR1MA when he said in Parliament that the agency, tasked with building affordable homes, was selling houses that were unaffordable to many Malaysians.
Federal Territories Minister Datuk Seri Tengku Adnan Tengku Mansor has issued a strong rejoinder, saying that the ministry had approved more than 70,000 units of PR1MA homes costing between RM188,000 and RM300,000 each.
By the way, the government needs to have better oversight and control of agencies and developers providing affordable homes.
As such, the statement by Second Finance Minister Datuk Seri Johari Abdul Ghani that the government was looking at setting up a single entity to manage affordable housing issues in Malaysia was timely.
Speaking at Invest Malaysia 2017, Johari acknowledged that there are certain ongoing complications when it comes to affordable housing, brought on by property developers themselves.
“The problem is that there is no single body to oversee the property sector in Malaysia and that is why we have the definition of what is ‘affordable’ differing significantly from one property developer to another,” said Johari.
“Yes, there is an oversupply of high-end properties, especially in the Klang Valley.
“Properties are even being built in places that they should not,” he said.
Johari’s move is laudable. He should also get UDA and state economic development corporations to go back to basics and provide public housing, not private housing.
The writer feels in a digital world, the winner does not always take all