For every 1,000 affordable houses launched in the Klang Valley, it is said that there are between 10,000 and 60,000 applicants for the homes. There is a clear shortage of such housing, especially in urban areas.
It is no secret that the prices of properties have soared several times in the past 20 years while salaries have not kept up. According to the government’s own reports, starting salaries (after adjustment for inflation) has actually declined since 2010, even for those with university education. This has been worsened by the economic slowdown related to the Covid-19 pandemic.“Although I graduated with an engineering degree, I have no choice but to work as a delivery rider. There is no way I can afford to buy an apartment in the city,” lamented Azlan M, who was shy to give his full name.
“Even if I can find a walk-up flat of say RM250,000, I can’t come up with the 10% deposit as whatever I earn is all used up by month’s end.”
Lecturer Irene Kiew commented: “For the M40, often we have parents helping with the down payment because the kids haven’t worked long enough to save that lump sum.”To compound the problem, over 600,000 households from the M40 group have fallen into the B40 group, as reported by Bernama.
“It’s not easy for the younger generation to buy a property nowadays. They are mostly renting a flat or some even just a room,” said banker K.S. Wong.
Indeed, will we end up like Hong Kong where the young are forced to rent for the rest of their lives because they can’t afford the ever-rising home prices?
To address such concerns, Prime Minister Datuk Seri Ismail Sabri Yaakob said Bank Negara will need to review financing models to make home ownership much easier for the B40 and M40 groups in line with the “One Family, One Home” target. This was one of the decisions taken at the National Affordable Housing Council (MPMMN) meeting on Feb 10 which he chaired.
“This is to ensure financial institutions allow easier financing for the B40 and M40 groups to own People’s Housing Projects (PPR) units and other affordable homes. The focus will be on direct purchase and rent to own (options),” Ismail Sabri said.
He added that the MPMMN meeting also discussed strategies to build 500,000 affordable homes nationwide during the 12th Malaysia Plan. This will involve the federal government, state governments and private developers.
“The government is committed to ensuring the provision of adequate and quality affordable housing to meet the needs of a growing population,” he said.
Many ideas have been proposed before and it is timely that the government is now actively exploring how to reform the system.
For example, in May 2021, the Better Malaysia Foundation proposed that lenders provide 100% financing to remove the burden of big down payments. About 60% of B40 buyers are rejected for bank loans due to poor credit scores, said the foundation. Thus, it suggested that the government guarantee those loans to overcome this issue.
Malaysia University of Science and Technology economics professor Dr Geoffrey Williams suggested recently that banks offer two generation loans (to lower instalments) that consider family members’ ability to pay, rather than a fixed loan repayment schedule.
Last November, Putra Business School Economic Analyst Associate Prof Dr Ahmed Razman Abdul Latiff urged the government to offer alternative Islamic financing options which are not profit-oriented.He proposed a financing concept called Musharakah Mutanaqisah which has no interest charges. Under this, a cooperative or government agency will jointly acquire a property with a house buyer.
As they pay monthly rentals, their ownership share of the house will increase. Unlike bank loans, if the buyer defaults on payments, the sales proceeds of the property will be divided between the cooperative and the buyer according to their respective share of ownership.
“This allows people to pay the rent little by little which will end with them owning the house,” explained Ahmed Razman.
Another issue is that of getting to work. Dr Rosli Said of the Faculty of Built Environment at Universiti Malaya said in December 2021 that houses in the far outskirts of urban centres are cheaper. But people are reluctant to move there because of the distance from where they work.
Ismail Sabri said new PPR projects will look into connectivity, both of public transport and broadband internet access. He said the Housing and Local Government Ministry (KPKT) has introduced the Home Ownership Programme (HOPE) to ensure a more comprehensive ecosystem for housing development and financing as well as programmes that can help Keluarga Malaysia (the Malaysian Family) own homes.
The government is also committed to having more affordable housing units for the younger generation, and for the M40 group in the suburbs and smaller towns, he said.
Other concerns raised at the MPMMN meeting were the rising costs of construction materials and cartels controlling the construction industry. Ismail Sabri said KPKT and the Real Estate and Housing Developers’ Association Malaysia (REHDA) have been directed to look into these issues.
The Prime Minister added that the Federal Government will provide subsidies, while state governments will allocate land to ensure that PPR and affordable homes are sold at reasonable prices.