Pakatan Harapan’s policies and programmes as outlined in The People’s Manifesto provide great anticipation for homebuyers, developers and investors alike. If done right, these strategies will go a long way in curbing the housing affordability conundrum.
The 14th Malaysian General Elections (GE14) on 9th May 2018 will go down in history as one of the most memorable days for millions of locals nationwide. The majority voted in favour of the opposition alliance to serve as the country’s new government – the Pakatan Harapan (PH) coalition trumped Barisan National (BN), which has been in power for 6 decades.
We are all excited to see how PH will bring forth positive change; the new government has promised a reformation of Malaysia’s administration and politics as well as sustainable growth and economic development. On a more micro level, the rakyat is banking for a reduction in the cost of living in line with PH’s aim to build a more inclusive and moderate nation.
Various programmes and policies have been outlined in the new government’s manifesto, of which the Malaysian housing and property market at large received its fair share of attention. These promises mostly centre on combating the homeownership issue and systematic provision of affordable homes.
Proper definition of affordable housing required
We sought the opinion of industry heavy-weight and the champion of Malaysian homebuyers, Chang Kim Loong to share his thoughts on the overall manifesto.
A home is not just a physical asset but also a form of financial security in our golden years. It is the aspiration of every citizen to have a roof over their head and HBA hopes that the new Housing Minister will always put the interest of the rakyat and Country first before the interest of housing developers and does not become a “Minister for Housing Developers”. – Chang Kim Loong, Secretary-General of HBA –
HBA views PH’s manifesto on affordable housing and home ownership with high optimism and anticipation. If implemented right, the well-thought-out proposals can go far towards increasing the supply of affordable housing and reducing the “Homeless Generation” threat.
What does proper implementation look like anyway?
According to HBA, there is a need to define what is affordable housing to ensure that this term is not abused by unscrupulous developers. HBA’s definition of affordable housing must meet the following 3 criteria:
- Price– Affordable housing comprises of properties priced between RM150,000 – RM300,000 and must also be differentiated from “Social Housing Units” such as Low-Cost Housing or Medium Cost Housing priced below RM100,000 such as PPR units. According to Bank Negara Malaysia, the maximum price of an affordable home is estimated to be only RM282,000, given the median household income of RM5,228 in 2016 as published in the Household Income and Expenditure Survey by the Department of Statistics, Malaysia. HBA’s proposed price range falls within BNM’s recommended price.
- Built-up – Affordable housing must be conducive for family living and have a minimum size of 800 sq ft (excluding balcony), with at least 2 bedrooms.
- Location– Affordable housing must be located in areas that are accessible and served by good public transportation links such as buses and rail links (LRT, MRT, KTM) and located in areas with good public amenities including government schools, public hospitals, hypermarkets, etc.
Chang also commented on the specific game-changing policies/programmes as outlined below:
Short-term policies (Promised to be implemented within a 100 days of PH taking office)
1) The Goods and Services Tax (GST) would be cancelled and replaced with the Sales Services Tax (SST).
HBA: We do not have the data to compare the impact of GST versus SST but if this policy can help reduce the cost of construction of properties, HBA is in full support of such a move.
2) Allowing federal study loan PTPTN’s borrowers to delay repayment until they earn RM4,000 monthly, and no more blacklisting of defaulters.
HBA: This will certainly help to reduce the burden of young/millennial borrowers’ as they cope with the rising cost of living and stagnant wages.
However, the government must ensure that these PTPTN borrowers’ repay their loan amount in full. Also, we would disagree with the halting of blacklisting the defaulters. Should this be allowed, with no action being taken,
- It will reduce the ability of the government/PTPTN to provide loans to future borrowers.
- These borrowers could also default on other loans in the future such as housing loans.
Long-term policies (Over a span of the next 2-5 years)
1) To build 1 million affordable homes across Malaysia within two terms of the PH administration. 150,000 affordable homes in the low-cost category (below RM75,000) and medium-cost category (between RM150,000 and RM250,000) will be built in the first term.
HBA: This target is achievable as it aims to spread the supply of new affordable homes to meet the masses’ demand throughout a consistent and sustainable period. The proposal aligns with our views that affordable housing must not be viewed as an end-game target but rather as a mission or a journey that is continuously adjusted to accommodate current trends.
2) To create a special housing loan scheme tailored for youths who want to buy their first property.
HBA: Good move – Some of the loan’s favourable terms could include a lower interest rate or a ‘step-up’ loan repayment scheme whereby the monthly repayments payments for say the first 5-years are lower than usual. These can be increased gradually in line with the (expected) rise in income level of the borrower. However, this must strictly be for:
- First-time house buyers only
- Affordable properties
- Homes meant for “owner’s occupation” and not to be rented out or for investment purposes.
3) Work with state governments to convert land status if developers want to build affordable houses. The quota for affordable houses will be increased.
HBA: Definitely a step in the right direction as both land and religion matters (considering Malay Reserved Land) fall under the purview of the respective State Governments. For the affordable housing agenda to succeed, both the Federal and State Government must work hand in hand to achieve this one goal.
4) Tax incentives will be given to companies that focus on affordable housing, especially to encourage them to use the latest cheaper technologies such as the industrialised building system (IBS) so that cost to buyers can be reduced.
HBA: Thums up to this initiative, as the best channel to deliver affordable homes to the rakyat is private developers. HBA has in fact provided a similar suggestion in the past for the government to provide more incentives such as a ‘special tax scale’ and ‘fast track approvals’ to facilitate the building of such affordable homes.
However, HBA believes that such incentives should not only be restricted to IBS, etc but should cover building affordable housing as a whole.
5) Widen the rent-to-own scheme nationally through cooperation with commercial banks by enabling such a scheme to be introduced in primary and secondary markets. Enable those who are currently renting to have the opportunities to migrate to a rent-to-own scheme if they qualify.
HBA: HBA supports such a move and had in the past suggested the introduction of a wider rent-to-own scheme that extends beyond the low-income earners to include the middle-income group as well, who are struggling to purchase their first house.
Current “rental housing schemes” are catered towards the lower income group in the form of social housing such as PPR units. Meanwhile, their middle-income counterpart who find it challenging to qualify for a traditional housing loan has no other option to fall back on.
6) Prevent landbank hoarding activity through setting a time limit for companies to complete their construction so no corporate giants can hoard land without developing them.
HBA: A great proposal as land left idle for a long period of time will not benefit the society. However, a reasonable period must be given to developers to launch their units as pressuring the developers to build too many units within a short period of time can adversely affect the property market.
7) Incentives will be given to the smaller Bumiputera and non-Bumiputera developers so that they can compete with others on a level playing field.
HBA: It is not necessary for the government to provide such incentives. Housing development is considered as a “big capital business” and only financially sound companies should venture into them.
Instead, smaller developers should be encouraged to seek commercial and mutually beneficial partnerships among themselves in order to compete with larger developers. The former could merge or set up a consortium to embark on projects. They should not explore property development unless they are financially sound; otherwise, these developers risk abandonment of projects which will incur the wrath of house buyers.
8) Reform the PR1MA programme so that there is no more exploitation by crony developers who obtain government land at discounted prices but then reap high profits by building just a small number of affordable houses.
HBA: This is a must for the rakyat’s sake – HBA has strongly criticised PR1MA for deviating from their original vision of delivering affordable Housing to the public. PR1MA is now partnering with private developers whereby only 50% of the allocated land area is reserved for affordable properties with the balance reserved for commercial and “lifestyle properties”.
9) Set up a National Affordable Housing Council, chaired by the PM, to bring together the work of the various agencies under one roof. This council will be tasked with overseeing affordable homes construction matters, coordinating a unified and open database on unsold affordable homes and organise a rent-to-own scheme for the B40 and M40 groups. It will ensure the sustainability of the national housing industry by ensuring fairness to the buyers and developers, including implementing the ‘build and sell’ concept more extensively.
HBA: We support this measure and have in the past called for a national task force to drive the affordable housing agenda, comprising of both federal and state government representatives as well as key regulators and agencies such as Bank Negara Malaysia and the Employees Provident Fund Board, etc.
In regards to the “build and sell” concept, HBA strongly urges the new government to make the build-then-sell (BTS) 10:90 system mandatory for all new housing projects to safeguard the interest of the rakyat and to eliminate the scourge of Abandoned Housing Projects
Under the BTS 10:90 system, house buyers only need to fork out the initial downpayment of 10% when booking a house and do not need to make any further payment until the vacant possession of the property is delivered to them. As such, the servicing of the end-financing loans do not kick in until the houses are completed with all the certifications obtained and keys with vacant possession are presented to the buyers. Perhaps, the government could consider a gradual ‘phase-in’ period, i.e:
- BTS 10:90 mandatory for affordable housing category in 2019.
- Subsequently, BTS 10:90 concept to be adopted for 50% of housing developments by 2020.
- By 2022, all housing developments mandatorily adopt the BTS 10:90.
10) Remodelling the planning of the Klang Valley public transportation system from being MRT-centric, to an integrated plan involving MRT and buses to improve the existing network and access.
HBA: The public transportation system can only be successful if it is seamless and properly integrated. The key to this is having an efficient feeder bus system. Taking Singapore as an example, there are feeder buses that run at a frequency of every 10-15 minutes during peak hours which ferries commuters from their houses to the MRT stations. Commuters are only charged minimal fares too.
Another issue that should be rectified is the MRT fares – it is currently pretty expensive and it is actually more economical for families to drive instead of taking the MRT. Although the MRT does offer discounted fares for senior citizens and children, the process of applying for such concession cards is just too troublesome as the application can only be submitted at selected MRT Stations. MRT fares must be reduced in order to encourage higher ridership and to reduce traffic congestion. An improvement in urban mobility will in turn, boost the quality of living in cities and the rakyat‘s well-being.