Bank Negara: Affordable Housing Shortage May Exceed 1 Million Units By 2020

Bank Negara: Affordable Housing Shortage May Exceed 1 Million Units By 2020

PETALING JAYA, 24 March: By 2020, the deficit of affordable housing could exceed one million units, said Bank Negara Malaysia’s 2016 Annual Report.

The report defines affordable housing as being priced between RM248,000 and RM261,000 as at 2014.

The issue of affordable housing reflects mainly the supply-demand imbalances in the country, which worsened during the 2012-2014 period.

The supply shortfall was exacerbated by the slower increase in household incomes (12.4%) relative to the rise in house prices (17.6%).

The housing market has not provided an adequate supply of affordable housing for lower and middle-income households, despite efforts by the state and federal governments through multiple programmes.

While the problem persists in all states, Sabah and Sarawak according to the report accounts for 50% of the total shortage of affordable housing supply in the country, which totalled to 960,000 in 2014. Given that the stock of houses in the affordable range is not readily available, the estimation is based on the assumption that households can only buy properties they can afford.

Affordability crisis seems to persist, despite the continuous availability of bank financing for housing purchases. Hence the share of affordable housing transactions is used as a proxy for the share of affordable houses in the market.

The difference between the stock of affordable houses (supply) and the number of low and middle-income households would then determine the shortage of affordable houses.

The demand for affordable housing had supported the expansion in end-financing by banks for residential property purchase. As at end-2016, about 56% of loans outstanding were for houses priced below RM250,000, while loans for houses priced between RM250,000 and RM500,000 accounted for another 25%. Rejection rates for housing loan applications also fell further to 23.6% in 2016.

To counter this, the report suggests four proactive measures – increasing supply and reducing cost of affordable housing; establishing a central repository to monitor and manage demand and supply; developing a thriving rental housing market by making rental a viable option instead of a last resort by enforcing tenancy protection; and diversifying sources of financing through innovative financing schemes.

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