Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly, on March 6 - 12, 2017.

 

BY 2020, eight million homes will be needed to house over 33 million people, but there will only be about 6.5 million houses, says 1Malaysia People’s Housing Programme (PR1MA) CEO Datuk Abdul Mutalib Alias, citing in-house projections based on official data. The supply of new houses needs to grow by about 200,000 units a year until 2020 due to rapid urbanisation, the shrinking size of households and continued population growth, official estimates show. PR1MA’s estimate is 400,000 a year.

While that implies there is a need to build more houses, a sizeable number of completed and residential units under construction currently do not have takers. Some 14,193 completed residential units worth RM8.27 billion remained unsold in the third quarter of 2016, National Property Information Centre (Napic) data shows. At the same time, 58,300 unsold residential units under construction and another 13,576 launched but not constructed residential units were unsold. This overhang was higher than the numbers at end-2015 and end-2014.

The devil is in the details, as highlighted by Bank Negara Malaysia a year ago in its 2015 annual report — the property market lacked a supply of affordable housing (priced below RM250,000) and had an oversupply of higher-end homes (priced above RM500,000) as house prices rose faster than incomes between 2009 and 2014. “Since 2010, new house launches in Malaysia have been increasingly skewed towards houses priced above RM500,000,” the central bank notes.

Only 21% of new houses were priced below RM250,000 in 2014, when more than half of Malaysian households needed houses to be priced at RM165,060 and below, being the three times median annual income affordability threshold. Only 5.4% of the population could afford to buy houses priced above RM500,000, where 36% of new house launches were priced at, the central bank report says.

It is perhaps no surprise that in 3Q2016, 38% of unsold completed residential units were priced above RM500,000 each. Together, these units were worth RM6.13 billion, making up 74% of the value of unsold completed residential units in the quarter, Napic data shows. Even so, houses priced above RM500,000 (5,427 units) made up 40% of total completed units in 3Q2016 (80% sold).

It is heartening to see that 38%, or 23,849 of the completed residential units, were priced below RM250,000 in 3Q2016 and these were 80% sold (4,646 units unsold). Houses priced between RM250,001 and RM500,000 were 22% of total completed units and saw a 70% take-up rate (4,120 units unsold).

Still, the home affordability situation is especially acute in Kuala Lumpur, Selangor and Johor, where demand for affordable housing is high. According to data from a recent PR1MA presentation, 55% of the 1.38 million registered interested PR1MA house buyers as at January this year were from Selangor (22%), Kuala Lumpur (21%) and Johor (12%).

Among those earning RM2,501 to RM10,000 a month, there were about 630,000 households in Kuala Lumpur, Selangor and Johor that do not own a house — implying a pent-up demand, even in Johor where the property overhang is the largest nationwide owing to unsold condominiums and apartments.  

While over 60% of PR1MA homebuyers had problems with home loan approvals last year (before the step-up financing plans were introduced, which allow lower-income borrowers to take on more debt), the average subscription rate for projects launched was “at least double” the number of units offered. “PR1MA is well received. More than 12,000 units worth RM3.3 billion have been booked and 85,000 units at various stages of approval,” Prime Minister Datuk Seri Najib Razak said last October when tabling Budget 2017.

Of the 17,000 PR1MA homes that are to be delivered by the end of this year and priced below RM400,000 each, 2,617 units are in Kuala Lumpur and 1,640 units in Johor. For Selangor, 47,312 PR1MA homes have been approved and are under construction. They are part of the 132,352 units being built nationwide to be delivered by 2020.

While these numbers are short of the 500,000 affordable homes that PR1MA is tasked with delivering, they do help reduce the shortfall in the supply of affordable homes. In Kuala Lumpur, for instance, none of the residential units launched in the first nine months of 2016 were priced below RM500,000, Napic data show.

That said, if indeed Malaysia needs eight million homes by 2020 — at prices Malaysians can afford to buy (and comfortably service the mortgage) or rent — a lot more affordable houses need to be made available within the next three years.

 

 

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