Khazanah says its latest report housing in Penang is also severely unaffordable
KUALA LUMPUR: While housing in some states in Malaysia are more affordable than others with a well-functioning median multiple of three times, Kuala Lumpur and Penang are “severely unaffordable”, Khazanah Research Institute (KRI) said.
It said in its latest research report “Making Housing Affordable” the areas had a median multiple of 5.4 times and 5.2 times respectively with the affordability factor depending on location (see chart).
“The median multiple is a measurement of how affordable the housing market as a whole is performing.
“It is not a measure of what any particular household can afford, which would depend on the household’s circumstances,” its programme research director Suraya Ismail said in a press conference here yesterday.
The report showed that in aggregate, new “cheap” launches dropped from 36.4% out of total launches in 2004 to only 19.7% in 2014, and that 72.5% of the Malaysian population owned a home.
“While the report reads that the 72.5% of home ownership is relatively high compared to developed countries which were below 70% - besides Singapore – this is rather misleading as home ownership includes informal housing, or “TOL” (temporary occupation licence),” she said.
A better indication would be the 53.5% home ownership in Kuala Lumpur, as it was a city.
“For Kuala Lumpur, given the median household income, an ‘affordable house’ should be RM280,000,” KRI managing director Datuk Charon Mokhzani (pic) said.
However, this wasn’t the case as KRI found inefficiencies in the housing supply sector stemming from the fragmented nature of the Malaysian construction business system.
“It is generally perceived that high housing prices are a direct result of high land and construction costs but this is not the case. It is because developers are willing to pay for increased land prices as the market price for housing increases, that ultimately causes housing prices to increase,” Charon pointed out.
Even construction costs were not the problem, he said, as they had been falling with no consequent drop in house prices.
Charon urged property developers to take inspiration from the Philippines, which was “able to provide two-bedroom houses with a swimming pool for RM53,000”.
“If they can do it, why cant we?” he said.
The report said urban areas tended to face a bigger challenge with urban home ownership reported at 69.1% compared to Malaysian home ownership as a whole, at 72.5%.
“The problem will become more acute with population growing at 2%, urbanisation continuing to increase and households getting smaller – with four persons per household in 2020 compared with six persons for every household in 1970,” Charon said.
“Prices are also heavily dependent on location.
“So far, intervention in the market has been largely on the demand side through the provision of attractive housing financing or home-buyer subsidies.
“On the supply side, intervention has been more direct in terms of provision of low-cost houses or housing cost subsidies,” Suraya said.
Seeing as a large percentage of the population was still living in informal housing or “TOL” , Charon said the arrangement needed to be sorted out in order to tighten and improve the housing system in the country.
“It is not a problem that high end housing is being sold.
“What we need is for developers to sell a wide spectrum of housing aimed at all quarters of the population,” he said.
Ultimately, he said there needed to be cheaper housing for the population at large.
He added that KRI was currently in talks with the Government to implement policies to tighten up and improve the matter.