POOR market sentiment in the past three to four years has resulted in a notable shift to affordable housing, which, going by the present trend, could present problems of its own in the not-too-distant future.
An increasing number of developers are incorporating affordable housing components into their launches, according to the Real Estate and Housing Developers’ Association’s Property Industry Survey 2H2017 and Market Outlook 2018.
The findings echo the Finance Ministry’s data, which shows demand for residential property remains strong at price points below RM200,000, with the segment accounting for 45% of transacted volume last year.
But the shift to affordable housing does not resolve the existing overhang. Indeed, it could cause a different problem several years down the road, an analyst observes.
“You’ve got an increasing overhang and a growing number of launches, but demand is relatively flat, and now the market is being flooded with affordable housing products. So, what will happen to the unsold inventories?”
The pivot towards the affordable housing segment raises the spectre of another oversupply and overhang problem once the planned supply is completed, particularly as the federal and state governments have also entered the fray.
As developers compete with various federal and state government-driven affordable housing schemes, the potential for another serious overhang cannot be discounted.
To illustrate, Kuala Lumpur accounted for 28.36% (or 22,112 units) of new home launches last year, all high-rises and mainly from the 1Malaysia Civil Servant Housing Scheme (PPA1M) and the Federal Territories Affordable Home Programme (RUMAWIP).
About 26% of the new launches were priced between RM400,000 and RM500,000 while another 25.9% were between RM250,000 and RM300,000, according to the Finance Ministry’s report, which did not state the number of units launched under PPA1M and RUMAWIP.
However, while the new home launches in KL were of affordable housing, the sales performance was a dismal 19.5%, according to the ministry.
“So, a potential question down the road is whether there is a need to regulate affordable housing supply,” the analyst muses. “Right now, there is no control on supply.”
The question of supply control is underscored by the number of such programmes in the country.
As at last October, Jones Lang Wootton (JLW) highlighted nine principal affordable home programmes that are federal or state-driven, including PR1MA, and targeted at middle-income earners in urban areas.
In an article on affordable homes, Malathi Thevendran, JLW executive director for research and consultancy, points to the wide range of targets, purchaser eligibility, selling prices, types of homes and various conditions placed on purchasers, which are confusing to the public.
She also observes the definition of an affordable home varies among the various professional associations and federal and state governments.
In order to tackle some of the issues, Malathi suggests the establishment of a single housing authority along the lines of the Singapore Housing Development Board to coordinate public policies, as well as the setting up of a central organisation or agency “to streamline the provision of affordable homes”.
The myriad of programmes and lack of a central agency aside, the analyst says structural issues in the industry are compounded by the fact that the power over land matters is fragmented across state governments and not concentrated in any single authority.
“It’s a quandary to deal with. How do you come up with a cohesive strategy on affordable housing when each state has control over land matters?”