By Professor Dr Ismail Omar
In the next Budget 2021, the government has to consider announcing more access to the rental market as well as the capital market. For example, the Rent-to-Own (RTO) financing scheme to make it easier for the people to purchase houses instead of two or three-time house buyers.
Under this scheme presented in the past Budget 2020, financing of up to RM10 billion will be provided by financial institutions. It is also with the support of the government via a 30% or RM3 billion guarantee. The facility is offered by several banks and agencies, including Prosma Homes Berhad which will prepare a financial portfolio for 2.5 million rent-to-own housing units worth RM400 billion in the near future.
As such, the review of performances of this accessibility needs to be re-evaluated to see its effectiveness. Complete homework has to be done anyway.
A prominent property researcher, Professor Michael Ball of Salford University, England, financial and banking structures govern the housing market tightly. If we can make it a little flexible, the house prices can be monitored and re-evaluated. However, there is a need to replace the conventional financing approach with a more contemporary one such as, for example, a wakaf funding model like sukuk and property unit trust.
This seems to be impossible without any changes from related government agencies. After more than 60 years, it appears that the wakaf related agencies are still looking at wakaf as a religious instrument and not an economical way of solving the problem of the ummah. This has to change definitely. They have to learn from Turkey, Singapore, Indonesia and other successful countries in developing wakaf.
Beside that, we also need to have accurate data on residential properties. Inaccurate data may lead to problems which cannot be resolved even with the use of the best techniques and practices.
Land developers are looking forward to establishing linkages between rail infrastructure and houses prices and the way this may affect housing development in real sense. The modern rails such as MRT2, MRT3, ECRL, HSR, RTS, West Coast Highway and the like will affect the development of new housing schemes and lifestyles of the people.
However, the big question to land developers is not about how do they fully capitalise the transportation networks but rather are they willing to allow a little reduction in house prices in the market?
Land developers are concerned with changes in dealing with segregating the housing sub-markets, housing the poor and the needy, overhang and unsold, problems with high rise residential and land available for housing. Of course, the way forward is about digitalising life and to what extent it affects the new concept of unit size, layout of buildings and development models.
The National Property Information Center (NAPIC) collects data on sale and purchase of properties. It also computes the Malaysian House Price Index that measures the demand and supply patterns of residential properties and their market prices.
It is time to extend the real estate data to the transportation system and it affects the values, facilities and amenities such as supermarkets and hypermarkets and its relationship that affect values and rental and so on. Again, this is a requirement for a Real Estate Big Data.
For example, Gamuda Land is ready for the adoption of a smart city, smart planning and safety of the community. The future, therefore, should be a fairer house price in the market due to the availability and assistance of the big data.
In the 1980s, the European Economic Countries (EEC) had created a collaborated research to look at how efficient is their real estate structure in relations to valuation system and methodologies, land and real estate laws and the possibility to standardise the laws and institutions in relations to real estate.
The main findings are that there are lots of ambiguities in land administration that affect the sustainability of the real estate market in Europe that need to be solved. A study by the Department of Director General of Land and Mines (JKPTG) in 2019 indicated that the use of e-land administration might improve the efficiency of land administration in the country.
As such, the future direction of housing administration should incorporate an element of e-housing land administration systems. More importantly, with the electronic system in place, the house price in the market will be reduced as a result of improved efficiency.
Similar to the requirement for professionals such as architects, engineers and urban planners, we also need to have professionals who have expertise in housing administration, development and management.
For a long time, only Universiti Sains Malaysia produced graduates holding a bachelor’s degree in housing, building and planning. There are many universities overseas that produce various levels of graduates in the field of real estate. The government and institutions of higher learning must look into this matter in view of the need for more housing professionals to beef up the Housing Development (Control and Licensing) Act.
It is frustrating to learn that most of the officers in charge of housing are not really housing professionals in real terms. Verily, the future direction of housing is about digital life, internet of things (IoT), smart city and smart planning, sharing economy and hence, we do need smart housing officers.
The residential property segment’s demand-supply patterns influence market prices. According to Professor Barry Needham, a housing price researcher in the United Kingdom housing supply plays a very important role in the market. In view of this, the role played by government agencies tasked with planning and approving housing projects deserves due attention.
In this context, land developers have to address the oversupply of houses in the market. To solve the problem of overhang, the government may buy the unsold property or allow for renting purposes.
The integrated effort played by Federal and State Governments is vital for effective planning and incentives, escalating delivery and improving financing models to lower the house prices in the market. As such, an in-depth review of the National Housing Policy is needed.
This could be due to the unsuitable location of the housing projects. Land developers need to rethink about having too much land bank with high maintenance costs. Or perhaps most of the unsold units are luxury homes meant for foreign buyers. It is, therefore, important to pay attention to data on housing supply and the total number of housing units to be completed in the future.
Strangely, housing developers are not required to carry out a market study before the authorities concerned grant approval for their project. It is timely to make the property market report compulsory to be prepared by a land development consultant prior to the approval of any housing and development projects.
The authorities must be allowed to proceed with activities involving land conversion, merging of land lots and subdivision of land after completing an in-depth study on what would happen to the property market if the housing projects are approved. Really, the future of the housing industry is about smart marketing and the smart housing market.
A detailed study on data related to housing must be carried out from time to time to avoid an oversupply of houses in the market. In respect of this, a special institute – which can be called the National Housing Research Network Institute (i-Housing) should be created to carry out housing-related research and development activities.
To make it more effective, the institute should also involve the relevant government agencies and universities either local or overseas. This institute, then, will be attached to any international research centre such as the Lincoln Institute of Land Policy in the United States of America and so on. With a smart research and development institute in the housing industry, we are able to chart the way forward for a smart way of housing the nation.
Professor Dr Ismail Omar PPERT is the president of the Land Professionals Association of Malaysia (PERTAMA) since 2014 and lecturer in real estate management at Universiti Tun Hussein Onn Malaysia.
This is part 3 of Prof Dr Ismail’s opinion series. To read parts 1 and 2, click on the links below.