THE demand for housing was underpinned by the rising number of households which have increased from 6.6 million in 2010 to 7.4 million in 2015 and a high proportion of young working age population between 24 and 39 years old. The demand is particularly strong especially among the low- and middle-income groups for affordable housing as a result of urban migration as more people leave for the cities in search of economic opportunities.
Because affordability is determined by income and price, many of these households are unable to get on the home ownership ladder. Between 2009 and 2014, average house prices rose at a compounded annual growth rate (CAGR) of 7.9%, exceeding the growth in average household income of 7.3% during the same period, according to Bank Negara.
According to the International Housing Affordability survey, an affordable housing market is one where house prices are three times the annual household median income. This means a household with a monthly median income of RM4,000 will be able to afford a RM144,000 house (RM4,000x12x3).
Malaysia’s median monthly income is RM4,585 while the bottom 40% household income group, or B40 households, has a median monthly income of RM2,629.
The Government has implemented the National Housing Policy and set up the National Housing Council to address the issue to tackle both demand and supply issues. It has introduced access to financing and subsidy schemes on the demand side. On the supply side, the government is increasing provision of affordable housing through several programmes.
As as December 2015, a total of 183,755 units (17%) of affordable houses has been completed, with 214,011 units (19.3%) under construction and 309,571 (27.8%) at the planning stage.
At the same time, in order to deter speculation, the government has abolished the developer interest bearing scheme (DIBS) which has resulted in higher prices because the loan interest - absorbed by developers - are ultimately factored into the price of the house.
It is also encouraging build-then-sell (BTS) concept where the financing loans do not commence until the properties are completed. House buyers are not liable for any losses should the project be abandoned during the construction period.
The government has also introduced a 10-year moratorium on 1Malaysia People’s Housing (PR1MA) and 1Malaysia Civil Servants Housing (PPA1M) programmes which does not allow owners from selling, renting or transferring ownership of their units.
Additionally, it has also revised upwards the Real Property Gains Tax (RPGT) as a tax chargeable on the profit gained from the disposal of a property less than five years and imposed a maximum loan-to-value ratio of 70% for the third house to curb speculation.
Despite these various measures, challenges continue to face the affordable housing segment due to overwhelming demand, scarcity of suitable land and escalation of construction material prices.
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