Houses priced beyond the regular wage earner have been a problem even before the pandemic but have become more pronounced over the last year, with unemployment, income loss and a weak economy converging to make home ownership a distant dream for many.
According to the Malaysian House Price Index from the National Property Information Centre, the average property price in Malaysia has nearly doubled since 2010, increasing by 99.3%.
For many who do not qualify for government-supplied housing such as People’s Housing Project (PPR) flats and PR1MA homes, their only option is the increasingly expensive private market, leaving many in the upper B40 and the M40 in limbo between the two.
The factors at play largely fall into two categories: builders and banks. Varying one of these has a knock-on effect on how the other reacts. Without a plan to manage each of them, the end cost of a completed property can far outstrip what people can, or are willing, to spend on it.
Melaka-based developer Anthony Cho said that as developers want to make profit, the extra costs they have to bear are added to the selling price of the unit.
As land becomes scarce and more sought after, costs increase to meet demand, with developers all bidding for the same pieces of real estate.
Builders are responsible for the infrastucture costs to supply utilities to their properties, such as electricity and water supply.
Developers are also tasked with building affordable units as a condition of construction approval, with a cap on their sale price. As such, whatever profit they lose on these cheaper units, they make up by raising the prices of units they can control.
This is on top of development charges levied by local and state governments, such as land premiums and planning approval fees.
Cho said that when the government adds costs to builders, they are actually passing them on to buyers. Property developers are profit-driven businesses. The more it costs for them to produce, the more they have to charge to protect their margins.
Most people cannot buy a house with cash and, as such, need to take out a home loan, which will inevitably be affected by the pandemic. When approving a loan, banks want to be sure that the buyer has a stable income to service the repayments.
According to Lee Heng Guie, executive director of the Socio Economic Research Centre, the pandemic has made this criteria difficult to meet, as high unemployment numbers mean many lack the stability to satisfy the banks.
“Post-Covid, we will be reeling from the impact to the labour market, with plenty of people still left behind. Even if house prices come down, it won’t matter if people who want to buy them can’t get financing,” he said.
This is compounded by income levels not increasing in proportion to housing prices, thus even those who do have stable employment may not be able to get the necessary financing for a home near their workplace, especially in urban hubs.
Noor Rosly Hanif, dean of the faculty of built environment, surveying and real estate at Geomatika University, says past attempts to fix these issues have largely been unsuccessful, as “policies on housing were made to win over people for election purposes with no strong and sound plans to overcome affordability problems”.
He said most attempts have been “cosmetic”, such as making government-built homes like PR1MA units larger or including better amenities, which does little to impact the wider housing market.
“If the system isn’t fixed, people will be unable to afford homes and will become perennial renters, which will affect largely the urban Malays,” he said.
“We could also see the rise of ‘ghost towns’, as seen in many developed countries such as China and many parts of the West, where richer people buy investment properties and would rather leave the housing unit vacant and wait for capital appreciation.” – FMT