THE recent suggestion by Urban Well-Being, Housing and Local Government Minister Tan Sri Noh Omar on allowing developers to obtain money lending licences so they can offer loans to potential homebuyers has drawn flak from a number of quarters.
The suggestion has, however, brought to light a long-standing problem, especially for those who hope to purchase their first home.
Many want to buy homes but are unable to obtain loans, or the loans offered are significantly lower than the price of the home.
According to the global property guide, the average price (Quarter 3 2015) of a terraced house is RM 278,223. High-rise residential properties' averaged RM 296,826. While detached house averaged at RM 524,260 and a semi-detached house averaged at RM 469,823.
On the face of it, the average prices look affordable but it differs from city to city, and urban and rural areas.
In fact I only purchased my first home at the age of 28 with the help of my parents.
The Government has been acutely aware of this problem as well.
Malaysia has a successful low cost home scheme called the People’s Housing Scheme (PPR) and this has allowed low-income Malaysians to have a roof over their heads.
However, the PPR is confined to those who are in the bottom-40 (B40) income bracket. To address the concerns of middle-income earners, especially younger Malaysians, the PR1MA scheme was introduced where the Government allocates land for homes to be built thus keeping the cost law.
In the meantime, the myDeposit scheme was introduced to assist first-time homebuyers who could obtain loans to purchase their homes but could not come up with the deposit.
So there is an array of options available for Malaysians who wish to buy a home.
However, there are still a number of Malaysians who want to buy their first home but are unable to do so.
After the sub prime mortgage crisis that led to the great recession of 2008, banks have been subjected to the Basel III requirements, and amongst other things they have to reduce their risk profile to ensure a new sub prime crisis does not happen and also ensure they are sufficiently capitalised to absorb any shocks within the financial system.
Simply put, banks cannot give out loans as they used to pre-2008 because they have to be responsible. This is a good thing because there is no use giving someone a loan they are unable to pay back.
However, a point that has been missed in this whole debate is what can developers do. Should they build more affordable housing that will reduce their profit margins?
I believe the answer is a resounding “yes”.
Between the year 2000 and 2015, according to the property price index, homes have doubled in price. But the irony of this is that there are fewer homes built today than in 2000. So there is demand but not enough supply.
A good example is Penang. Between 2008 and 2015, many new developments have come up in Penang but they remain unaffordable to Malaysians. Developers have built homes that are beautiful but thoroughly expensive.
Even factoring in inflation and the Goods and Services Tax, home prices have sky rocketed. The Government cannot do much and intervene in the market because economics is governed by demand and supply.
PR1MA will cure this anomaly but it will take time. Until then, developers also have a duty to ensure they build more affordable homes in line with what Malaysians can afford and not solely rely on foreigners and property speculators to purchase the properties they develop.
If not, in the long term, this will hurt our economy and create a generation of Malaysians who will not be able to own homes.
Developers must also look to their corporate social responsibility. The Government can encourage this by offering tax incentives to developers who build affordable homes or insist in mixed developments with both luxurious and affordable homes.
In the end, this will be a win-win for all Malaysians and it is a practical solution to our housing problem.
> The views expressed are entirely the writer’s own