After 14 years, report shows little progress made to make homes affordable

Syed Jaymal Zahiid
Khazanah Research Institute said in its latest report on housing that little has improved to make housing affordable between 2002 and 2016. — Reuters pic

KUALA LUMPUR, April 25 ― Homes have persistently remain out of reach for the wider population as policymakers came nowhere near solving the nation’s housing quandary despite the litany of policies churned out in the last 14 years, a new study found.

Khazanah Research Institute (KRI) said in its latest report on housing that little has improved to make housing affordable between 2002 and 2016, which the think tank said partly stemmed from the market’s inability to respond to the supply drought.

And the root of the problem, the “Rethinking Housing: Between Market, State and Society” report concluded, are dated policies.

“A comprehensive housing agenda needs to move towards guiding and managing the housing sector as a whole, recognising housing as a basic need and a base for asset accumulation,” KRI said.

“A narrow focus on either the welfare aspects of housing or the asset accumulation is inadequate, possibly resulting in imbalances and mismanagement of the housing sector.”

KRI’s study, prepared as a background research for the National Housing Policy (2018-2025), showed prices for affordable homes continued to rise, with the market median-3 price averaging at RM188,000 in 2016 compared to RM165,000 just two years before.

The NHP, unveiled by the Pakatan Harapan (PH) government earlier this year, is meant to be the new government’s action plan for housing reform.

Despite persistent demand for such homes, newly launched housing units priced below RM200,000 made up less than 20 per cent of total units launched between the same period, the report noted.

In Penang, KRI noted, all properties launched in 2016 were priced above RM250,000, with the bulk of newly launched properties situated between RM500,000 and a million ringgit.

The median multiple for Malaysia hovered between 4.0 and 5.0 from 2002 and 2016, exceeding the 3.0 threshold for housing affordability.

Given the magnitude of the problem, housing became a key election issue.

PH vowed to tackle the affordability crisis by pledging to build a million affordable homes in ten years, but analysts said any chance of success will hinge on the coalition’s ability to revamp the entire housing sector.

But to achieve that is no easy feat. Many of the problems dogging the property market are structural and require time and thorough reform at every level.

For a start, KRI said a database is needed to enable the right policy framework. At the moment, the report’s lead author Suraya Ismail said many existing policies are built around patchy information taken from silo sources.

KRI also recommended that the government focus on policy solutions for poor households so resources will be allocated only to the most needy. Extending policy coverage for medium-income earners would only waste funds that could otherwise be used to maintain and regenerate social housing.

“The trade off is less resources available for lower income group in terms of new construction, neighbourhood rejuvenation and maintenance,” the report said.

KRI proposed that housing for the middle class be left to the market sector, with the government playing the role of facilitator to spur competitiveness.

This role discipline is important to ensure policy solutions are more focused and yield the best value, the report stressed.

This lack of clarity in policy target, KRI noted, have led to leakages, best exemplified in cases where rich speculators can access government financing meant for poorer households.

The number of affordable homes, defined as RM250,000 and below, dropped abruptly since 2007 as developers turned to the higher-end market in hope to cash in on the property boom that lasted nearly five years.

Aided by easy loans, speculation thrived in this period to spike property prices up.

KRI said among the reasons causing the sudden drop in affordable homes was the government’s My2ndHome programme to attract wealthy expatriates, leading to a spurt of construction for properties priced half a million ringgit above.

The think tank also found that developers remained resistant to newer technologies, preferring to rely on slow and labour-intensive construction methods. Supply shortage is seen as the chief reason driving house prices to skyrocket for the last ten years.

“This reinforces the need for the housing delivery ecosystem to support technological upgrade through firstly, a consolidation of the supply chain through a new procurement route that enables technology absorption,” it said.

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