Holistic solutions needed to address the shortage problem.

BY ANGIE NG
angie@thestar.com.my

S P Setia Bhd's Seri Baiduri Apartments in Setia Alam, Shah Alam, is a good model of a well-planned, affordable housing project. The apartments were sold for RM205,000 a unit when the project was launched in August 2012.

WITH house prices having risen beyond the affordability of many average Malaysians, the need for well-planned, quality and affordable housing projects to meet the needs of a growing number of new households cannot be overemphasised.

This situation is especially noticeable in the urban areas where the price increase is most obvious.

Having a roof over the head is a basic necessity for security and for families to thrive. The high price of housing has rendered buying a house an unaffordable proposition for the lower income and even the middle-income groups, which further underscores the urgency in the need for more affordable housing projects to be built to prevent a social crisis of “house-less Malaysians”.

As a gauge, the level of affordability for housing can be measured as a multiple of annual median income to the median house price.

An affordable market is one where the median house price is three times the annual median household income.

Khazanah Research Institute (KRI) in a report revealed that Malaysia’s housing market is considered to be “seriously unaffordable”, with a median house price of more than four times the median annual household income.

The situation has contributed to a growing number of Malaysians who are unable to afford their own home as many average Malaysians continue to be locked out of the housing market.

The supply mismatch situation in the housing market needs to be remedied, as the price of houses in the urban areas, including the Klang Valley and Penang, continued to be beyond affordable levels as most of the new launches were priced at more than the affordable price of up to RM300,000 a unit. The public and private sectors need to come up with urgent workable solutions to prevent the mismatch problem from worsening.

Although there are developers that are building compact-sized homes of less than 1,000 sq ft with high density approvals to enable the projects to be built economically and priced in the range of RM300,000, such housing units are still in severe short supply.

Industry observers concurred that one of the priority measures that should be implemented is to set up a dedicated housing board or agency that has the statutory power to undertake the masterplanning and implementation of the affordable housing policy at both the Federal and state levels.

Currently, a number of agencies have been tasked to build affordable housing. However, there is no single dedicated entity that is empowered to draw up the blueprint of the big picture on the actual needs and supply situation of affordable housing, and to arrange for the necessary resources, principally the land for the projects, to expedite the planning and building process.

Among the government’s affordable housing programmes include PPA1M houses under the 1Malaysia Civil Servants Housing Programme, People’s Housing Programme (PPR), Syarikat Perumahan Nasional Bhd‘s (SPNB) Rumah Mesra Rakyat programme, Housing Aid Programme (PBR) and Federal Territories affordable housing projects.

DTZ Malaysia executive director Brian Koh said instead of having too many agencies doing the same thing, SPNB and Perumahan Rakyat 1Malaysia or PR1MA should be amalgamated to be more effective in spearheading the affordable housing needs of the people.

“Given that the free market forces are unlikely to provide the solution, the government will need stronger and more effective clout to fulfil the role, and in cases where government land is available, priority should be for affordable housing projects, instead of building more commercial developments.”

Knight Frank Malaysia managing director Sarkunan Subramaniam said a long-term policy that also rope in the private sector developers in building affordable housing schemes would work better.

It is worthy to draw from the experience of other countries, including Singapore and South Korea, which showed that a dedicated agency on affordable housing has alleviated the demand/supply mismatch in those countries. Singapore’s Housing and Development Board (HDB) is a good model to show that consolidating various affordable housing entities under one agency has resulted in effective resource planning and lowered development costs through economies of scale.

The adoption of the Industrialised Building System (IBS) for affordable housing programmes by Singapore’s HDB has contributed to labour cost savings, shorter construction time and improved quality, compared to the conventional construction methods.

Bank Negara in its Annual Report 2015 highlighted an acute shortage in the affordable housing sector, noting that while affordable housing initiatives by the Federal and state governments, SPNB and PR1MA, have gathered some momentum, the current level of house-building in the affordable housing segment has not been sufficient to meet demand. This is despite a substantial amount of affordable housing units that are currently under various stages of construction.

A substantial increase in the supply of affordable housing is necessary. An estimated 202,571 new houses will be required annually between 2016 and 2020 to match the estimated growth in households during this period, approximately 2.5 times the number of houses being built annually in the previous five years.

The shrinking size of households, combined with continued growth in income level and population, as well as rapid urbanisation, are expected to remain as important drivers of the overall demand for houses, especially in the major urban areas.

A matter of priority and collaboration

Consistent with the underlying demand, especially in the major urban and employment centres, it is crucial to formulate a holistic planning and implementation system to provide sufficient quality housing that is affordable for the low- and middle-income households.

A comprehensive and carefully designed national planning policy for the property market will help support the government’s affordable housing policy, while managing oversupply of commercial properties.

CH Williams Talhar & Wong’s (WTW) Property Market Report 2016 stated that Malaysia’s home ownership as a whole stood at 72.5% in 2010 and urban home ownership fared relatively poor at 69.1%. In Kuala Lumpur and Selangor, the figures dropped to 53.5% and 66.9% respectively.

Compared to WTW’s estimate of 406,620 affordable houses that are needed, the government has targeted the construction of 653,000 units, and the problem will be aggravated by changing demographic factors. While the population will reach 38.6 million by 2040, urbanisation is increasing, households are getting smaller, increasing family units from 182 to 250 per 1,000 people by 2020.

The WTW report pointed out that generally affordable homes are defined as houses priced below RM300,000, and only PR1MA and PPA1M have offerings at this price benchmark, which made up only 5% to 10% of the total units offered.

Data from Department of Statistics showed that the population of Malaysia was 30.1 million in 2014 while average and median household income were recorded at RM6,141 and RM4,585 respectively. Applying broad ratios, WTW estimated a total need for 406,620 affordable houses for first-time buyers. It calculated the overall affordability level by states based on the respective household income level of each states. (Refer to the tables)

Overall, six states are within the severely unaffordable category, three classified as seriously unaffordable, four as being moderately unaffordable and only Malacca is deemed to be affordable.

Sabah and Sarawak lead the list being the top two most unaffordable states in the country, followed by Kuala Lumpur.

However, at the individual level, latest data from the Department of Statistics estimated that in 2014, median monthly salaries or wages was RM1,700. This was consistent with the data from EPF showing that 75% of active EPF members earned less than RM2,000 per month and about 15% earned between RM2,000 and RM5,000 a month.

It said high housing prices are often blamed on land costs but the causality actually runs in the opposite direction; rising house prices result in rising land prices.

CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen said while the programmes for affordable housing were to address the requirements of first-time homebuyers, the plans must be matched by actual deliveries.

The actual number of affordable houses to be constructed may fall far below target. Demand for affordable homes still exceeds the current supply. With most of the new residential schemes that were launched being priced between RM500,000 and RM1mil, the population at the bottom 40 income bracket will still find these new properties unaffordable.

To involve the private sector developers, the government needs to look into new incentives for it to develop affordable housing.

“Private developers have found it challenging to build affordable homes without the government’s support, with land cost, construction cost and compliance getting expensive. Hence, the government may need to look at additional incentives for new affordable housing supply, such as sale of state land at low price to the developers to build such housing,” he added.

S P Setia Bhd acting president and CEO Khor Chap Jen said one of the biggest challenges facing developers is the availability of suitable and reasonably priced land and also the ever-increasing compliance cost.

Some of these issues can be overcome with better engagement between the government and the private sector. As for quality, developers are always looking at ways to improve the quality of affordable housing projects but it is a matter of balancing the cost of construction.

“At S P Setia, we utilise the Industrialised Building System, which is a construction process that uses techniques and building systems that involve prefabricated components and on-site installation. With the benefit of economies of scale, our construction cost can be maintained or even reduced while achieving a better quality finish for our affordable housing projects,” he disclosed.

The developer plans to launch approximately 3,500 affordable housing units, which include flats, apartments, Rumah Mampu Milik and Rumah Selangorku across its townships.

>> Angie Ng is the content editor of StarProperty.my. She can be contacted at editor@starproperty.my.